Wednesday, July 18, 2012
Suppressing competition, or why the Civil War is finally, truly over...
I can't say if working in financial aid has made me cold, suspicious, and cynical, or if working here simply brought out the the darker side of my personality. I suppose the answer is a bit of both; cynicism is the hallmark of Gen-X, but the coldness and inability to believe what people tell me is relatively new. According to Myers-Briggs, my personality has changed from an ENFP to an ISTP, which took me from an idealistic "Crusader" type to an accountant. I quipped that one should not take personality tests after 13 hours of financial aid counseling.
Personality reassignments not withstanding, perception is the constant, and according to MB, that means that I follow theoretical trails fairly easily, and am comfortable with a lack of closure. Couple that with my new found inability to take what people say at face value, and I felt I was hot on the trail of a sinister hidden agenda in Obamacare: eliminating economic differences (and by extension, advantages) between the States.
While this is not the forum for debating the merits for or against federalism, it is worth noting that state in America are sovereign, i.e., they cannot have their law-making power usurped. "States rights" is the favorite phrase for those looking to maintain a state's ability to make it's own rules. The Supreme Court has weakened this principle when it comes to federal regulations and laws, but otherwise it applies. This is the reason states can't declare bankruptcy, as the power to tax, budget, spend money, etc. would be transferred from an elected body and executive to an unelected judge.
With each state having it's own culture, the ability to make it's own choices concerning spending and priorities, and resources, every state had pluses and minuses when attracting businesses, population, etc. Some advantages could be duplicated, while others such as oil deposits or climate, could not. Economists and pundits concentrate on the outliers, e.g, California, Texas, New York, etc. Most of America's population is located in these states, so the attention is warranted.
Amongst these jurisdictions is a (less than) friendly rivalry, with everyone competing for everything from people, to corporate headquarters, to federal spending, to military bases. One of the more humorous examples was the attempt by Nevada to take businesses from California by emphasising the Silver State's main advantage: low taxes. I'm not sure it was really successful, as Las Vegas is too small to support the needs of the companies large enough to make a serious impact on the city's economy. Another example, and a much more successful one, is the on going fight between Connecticut and New York. Since Stamford, CT is very close to Manhattan, companies have either moved from New York or used the threat of moving to extract concessions on taxes or regulations. The move isn't automatically all that difficult on the employees, either. If I live in White Plains, and instead of driving 20 minutes to the train station, fighting for a parking space, taking a 30 minute train ride to Midtown, then a 20 minute subway ride to Downtown, then have to do it again at the end of the workday, you tell me I now can drive for 25 minutes to Stamford and park for free, sign me the fuck up. There are tax considerations, but can it be worse than paying a parking fee, buy a Metro-North pass, and a Metrocard as well as losing 90 minutes of your day each way? Of course, if you live on Long Island, it could be a pain crossing the Whitestone Bridge everyday. Ironically, using this website: http://taxfoundation.org/article/2012-state-business-tax-climate-index you can see that Connecticut is the 10th worst business climate, but New York is 2nd worst. The cliche holds true: in the land of the blind, the one eyed man is king.
This works for individuals as well, and the best example is the fight for population between New Hampshire and the rest of New England. People are moving primarily for economic reasons, specifically taxes. The data is a little inconsistent, but by using http://tinyurl.com/cgrszyr I find Mass is the 11th. most taxed state, Vermont is 8th, Rhode Island is 5th and Connecticut is 3rd.. New Hampshire is the 6th least taxed. If you were a retiree living in White River Junction, VT., and by moving 6 tenths of a mile to Lebanon, NH you could save 2% of your income, would you do it?
I've tried to demonstrate with real figures, rather than anecdotal evidence, that serious differences exist among America's states, and people can and do take advantage. New Yorkers have been moving to Florida for decades, with a smaller number moving to formally-up-and-coming locations such as the Poconos, Las Vegas, North Carolina (a friend quipped that Cary, NC is the Containment Area for Relocated Yankees), and Texas. It's worth nothing that many of the above areas have imploded with the housing crisis and are losing people in droves, with one notable exception: Texas.
Texas has major advantages in terms of climate and natural resources, but so does California, and people are fleeing the state like it's on fire. (Oh wait, it is...). No, the Lone Star State has major economic advantages as well. It's tax burden (using the above site) is 6th lowest in the Union, and the business climate is 10th best. The best recommendations I can give is that various survival sites I browse give Texas a thumbs up for the ability to live cheaply, own guns, start a business, remain isolated in the event of a national disaster, etc. In fact, its the only area of the USA mentioned as possible safe haven by the expat blogs and sites I frequent. Both mentions are serious endorsements, considering the sources. I do wonder if they expect Texas to try and secede again. We saw how well that worked last time, people.
This does not mean Texas is the reinvention of Shangri-La. It's economic placings have come with costs. 25% of the population lacks heath insurance (tops/worst [?] in the nation), the schools are uniformly terrible, and pollution reaches dangerous levels. Also, you stand a better chance of being executed than in any other state. Essentially, the state does not spend money on progressive social improvements the way New York or California does. Ironically, Texas faces a whopping 25 billion dollar deficit over the next two years despite the lack of social programs. Well, it's about to get worse.
Alaska, New Hampshire, Tennessee, Florida, South Dakota, Washington, Nevada, Texas, Wyoming all have something in common: they do not have an income tax. With the exception of Washington, all are also in the top 10 for low overall tax rates, with Washington a pedestrian 22nd best. Better than New York, but that's damning with faint praise. No income taxes means these states cannot provide the same governmental services, since they simply don't have the money. I gather Washington has found other revenue sources, since it's tax burden is so much higher than the others, and that money must get spent somewhere. Florida is especially hamstrung, since state income tax is banned under the state constitution, and property taxes are similarly limited via the homesteading clause. New Hampshire makes up for a lack of income tax via relatively high property taxes, as an example.
Obamacare throws a massive monkey wrench into the system, though the numbers are hard to pin down. One study said Texas will have to pay 27 billion over ten years, but another put the tab at 16 billion. It doesn't sound like much, but almost every state in America is already running billion dollar deficits without Obamacare. No one really knows the real price, and for the moment Texas doesn't have to join the new Medicaid expansion program, though I expect that to change. The odd part of all of this is that states like New York won't really have any problem paying for Obamacare aside from the fact the state is bankrupt anyway. We were compliant prior to the law being passed.
Once the dust settles, and the true costs of this law are known, the low-tax states will have to collect more money, and if they do not begin collecting a state income tax, then gas taxes, sales taxes, business licencing fees, corporate taxes, etc. will have to increase. Increasing these levies is preferable to creating an income tax, since the framework for collecting and enforcing these charges is already in place. Adding an income tax where once wasn't one will also require a new bureaucracy to go with it. With this change, states will have much less opportunity to market themselves as viable alternative locations for internal migration. Florida and Texas will always be warm, (and if global warming reaches is worst case scenario, mostly under water...), but those seeking to better themselves financially won't have the same options within the US they did prior. Most people will simply accept this and stay put, much like the oft-mentioned frog in a pot of slowly heating water. By the time the water is boiling, you're already frog stew.
There's a personal lesson in all of this, but that's enough for now.
Personality reassignments not withstanding, perception is the constant, and according to MB, that means that I follow theoretical trails fairly easily, and am comfortable with a lack of closure. Couple that with my new found inability to take what people say at face value, and I felt I was hot on the trail of a sinister hidden agenda in Obamacare: eliminating economic differences (and by extension, advantages) between the States.
While this is not the forum for debating the merits for or against federalism, it is worth noting that state in America are sovereign, i.e., they cannot have their law-making power usurped. "States rights" is the favorite phrase for those looking to maintain a state's ability to make it's own rules. The Supreme Court has weakened this principle when it comes to federal regulations and laws, but otherwise it applies. This is the reason states can't declare bankruptcy, as the power to tax, budget, spend money, etc. would be transferred from an elected body and executive to an unelected judge.
With each state having it's own culture, the ability to make it's own choices concerning spending and priorities, and resources, every state had pluses and minuses when attracting businesses, population, etc. Some advantages could be duplicated, while others such as oil deposits or climate, could not. Economists and pundits concentrate on the outliers, e.g, California, Texas, New York, etc. Most of America's population is located in these states, so the attention is warranted.
Amongst these jurisdictions is a (less than) friendly rivalry, with everyone competing for everything from people, to corporate headquarters, to federal spending, to military bases. One of the more humorous examples was the attempt by Nevada to take businesses from California by emphasising the Silver State's main advantage: low taxes. I'm not sure it was really successful, as Las Vegas is too small to support the needs of the companies large enough to make a serious impact on the city's economy. Another example, and a much more successful one, is the on going fight between Connecticut and New York. Since Stamford, CT is very close to Manhattan, companies have either moved from New York or used the threat of moving to extract concessions on taxes or regulations. The move isn't automatically all that difficult on the employees, either. If I live in White Plains, and instead of driving 20 minutes to the train station, fighting for a parking space, taking a 30 minute train ride to Midtown, then a 20 minute subway ride to Downtown, then have to do it again at the end of the workday, you tell me I now can drive for 25 minutes to Stamford and park for free, sign me the fuck up. There are tax considerations, but can it be worse than paying a parking fee, buy a Metro-North pass, and a Metrocard as well as losing 90 minutes of your day each way? Of course, if you live on Long Island, it could be a pain crossing the Whitestone Bridge everyday. Ironically, using this website: http://taxfoundation.org/article/2012-state-business-tax-climate-index you can see that Connecticut is the 10th worst business climate, but New York is 2nd worst. The cliche holds true: in the land of the blind, the one eyed man is king.
This works for individuals as well, and the best example is the fight for population between New Hampshire and the rest of New England. People are moving primarily for economic reasons, specifically taxes. The data is a little inconsistent, but by using http://tinyurl.com/cgrszyr I find Mass is the 11th. most taxed state, Vermont is 8th, Rhode Island is 5th and Connecticut is 3rd.. New Hampshire is the 6th least taxed. If you were a retiree living in White River Junction, VT., and by moving 6 tenths of a mile to Lebanon, NH you could save 2% of your income, would you do it?
I've tried to demonstrate with real figures, rather than anecdotal evidence, that serious differences exist among America's states, and people can and do take advantage. New Yorkers have been moving to Florida for decades, with a smaller number moving to formally-up-and-coming locations such as the Poconos, Las Vegas, North Carolina (a friend quipped that Cary, NC is the Containment Area for Relocated Yankees), and Texas. It's worth nothing that many of the above areas have imploded with the housing crisis and are losing people in droves, with one notable exception: Texas.
Texas has major advantages in terms of climate and natural resources, but so does California, and people are fleeing the state like it's on fire. (Oh wait, it is...). No, the Lone Star State has major economic advantages as well. It's tax burden (using the above site) is 6th lowest in the Union, and the business climate is 10th best. The best recommendations I can give is that various survival sites I browse give Texas a thumbs up for the ability to live cheaply, own guns, start a business, remain isolated in the event of a national disaster, etc. In fact, its the only area of the USA mentioned as possible safe haven by the expat blogs and sites I frequent. Both mentions are serious endorsements, considering the sources. I do wonder if they expect Texas to try and secede again. We saw how well that worked last time, people.
This does not mean Texas is the reinvention of Shangri-La. It's economic placings have come with costs. 25% of the population lacks heath insurance (tops/worst [?] in the nation), the schools are uniformly terrible, and pollution reaches dangerous levels. Also, you stand a better chance of being executed than in any other state. Essentially, the state does not spend money on progressive social improvements the way New York or California does. Ironically, Texas faces a whopping 25 billion dollar deficit over the next two years despite the lack of social programs. Well, it's about to get worse.
Alaska, New Hampshire, Tennessee, Florida, South Dakota, Washington, Nevada, Texas, Wyoming all have something in common: they do not have an income tax. With the exception of Washington, all are also in the top 10 for low overall tax rates, with Washington a pedestrian 22nd best. Better than New York, but that's damning with faint praise. No income taxes means these states cannot provide the same governmental services, since they simply don't have the money. I gather Washington has found other revenue sources, since it's tax burden is so much higher than the others, and that money must get spent somewhere. Florida is especially hamstrung, since state income tax is banned under the state constitution, and property taxes are similarly limited via the homesteading clause. New Hampshire makes up for a lack of income tax via relatively high property taxes, as an example.
Obamacare throws a massive monkey wrench into the system, though the numbers are hard to pin down. One study said Texas will have to pay 27 billion over ten years, but another put the tab at 16 billion. It doesn't sound like much, but almost every state in America is already running billion dollar deficits without Obamacare. No one really knows the real price, and for the moment Texas doesn't have to join the new Medicaid expansion program, though I expect that to change. The odd part of all of this is that states like New York won't really have any problem paying for Obamacare aside from the fact the state is bankrupt anyway. We were compliant prior to the law being passed.
Once the dust settles, and the true costs of this law are known, the low-tax states will have to collect more money, and if they do not begin collecting a state income tax, then gas taxes, sales taxes, business licencing fees, corporate taxes, etc. will have to increase. Increasing these levies is preferable to creating an income tax, since the framework for collecting and enforcing these charges is already in place. Adding an income tax where once wasn't one will also require a new bureaucracy to go with it. With this change, states will have much less opportunity to market themselves as viable alternative locations for internal migration. Florida and Texas will always be warm, (and if global warming reaches is worst case scenario, mostly under water...), but those seeking to better themselves financially won't have the same options within the US they did prior. Most people will simply accept this and stay put, much like the oft-mentioned frog in a pot of slowly heating water. By the time the water is boiling, you're already frog stew.
There's a personal lesson in all of this, but that's enough for now.
