Unaffordable California – It Doesn't Have To Be This Way

March 2016 Update:  Here’s a documented comparison of California taxes and economic climate with the rest of the states. The news is bad, and getting worse. But it doesn’t have to be this way! The state and local government policies that created an unaffordable California can be reversed.

PERSONAL INCOME TAX: Prior to Prop 30 passing in Nov. 2012, CA already had the 3rd worst state income tax rate in the nation. Our 9.3% tax bracket started at under $50,000 for people filing as individuals. 10.3% started at $1 million. Now our “millionaires’ tax” rate is 13.3% – including capital gains (CA total CG rate now the 2nd highest in the world!). 10+% taxes now start at $250K. CA now has by far the nation’s highest state income tax rate. We are 34% higher than 2nd place Oregon, and a heck of a lot higher than all the rest – including 7 states with zero state income tax – and 2 more that tax only dividends and interest income. CA is so bad, we also have the 2nd highest state income tax bracket. AND the 3rd. AND the 4th! http://taxfoundation.org/sites/taxfoundation.org/files/docs/ff2013.pdf  Ref. Table #12 http://tinyurl.com/CA-income-tax-graph and http://tinyurl.com/CA-2nd-CG

IncomeTaxGraph

SALES TAX:  CA has the highest state sales tax rate in the nation.  7.5% (does not include local sales taxes). Two 2015 bills sought a combined $10 billion++ CA state and local sales tax increase (failed to pass that year).
http://taxfoundation.org/article/state-and-local-sales-tax-rates-2011-2013

GAS TAX:  CA has the nation’s 5th highest “gas pump” tax at 59.0 cents/gallon (January, 2016). But add in the unique 10-12 cent CA “cap and trade” cost per gallon, and CA is #1 (about the same as Pennsylvania). National average is 48.0 cents. Yet CA has the 6th worst highways.
http://www.api.org/statistics/fueltaxes/   (CA has nation’s 3rd highest total diesel tax) and http://reason.org/news/show/21st-annual-highway-report

PROPERTY TAX:  California in 2015 ranked 14th highest in per capita property taxes (including commercial) – the only major tax where we are not in the worst ten states.  But the 2014 average CA single-family residence (SFR) property tax is the 8th highest state in the nation. Indeed, the median CA homeowner property tax bill is 93% higher than the average for the other 49 states.
http://tinyurl.com/go89o6u and  http://tinyurl.com/hf6phjz and http://linkis.com/blogspot.com/Yq6cx

“IMPACT FEES” ON HOME SALES:  Average 2012 CA impact fee for single-family residence was $31,100, 90% higher than next worst state. 265% higher than jurisdictions that levy such fees (many governments east of the Sierras do not). For apartments, fee averaged $18,800, 290% above average outside state. The fee is part of the purchase price, so buyer pays an annual property tax on the fee!
http://www.newgeography.com/content/003882-california-homes-require-real-reach

“CAP AND TRADE” TAX:  CA has now instituted the highest “cap and trade” tax in the nation – indeed, the ONLY such U.S. tax. Even proponents concede that it will have zero impact on global warming.
http://tinyurl.com/WSJ-CA-cap-and-trade

SMALL BUSINESS TAX:  California has a nasty anti-small business $800 minimum corporate income tax, even if no profit is earned, and even for many nonprofits. Next highest state is Rhode Island at $500 (only for “C” corporations). 3rd is Delaware at $175. Most states are at zero. http://tinyurl.com/CA-800-tax

California small businesses failed in 2011 at a rate 69% higher than the national average — the worst state in the nation.
http://money.cnn.com/2011/05/19/smallbusiness/small_business_state_failure_rates/index.htm (based on Dunn & Bradstreet study)

CORPORATE INCOME TAX:  CA 2016 corporate income tax rate (8.84%) is the highest west of Iowa (our economic competitors) except for Alaska.
http://www.taxfoundation.org/sites/taxfoundation.org/files/docs/CITmap.png
Ref. Table #15   – we have the 8th highest rate in the nation.

BUSINESS TAX CLIMATE:  California’s 2015 “business tax climate” ranks 3rd worst in the nation – behind New York and anchor-clanker New Jersey. In addition, CA has a lock on the worst rank in the Small Business Tax Index – a whopping 8.3% worse than 2nd worst state.
http://taxfoundation.org/article/2015-state-business-tax-climate-index http://www.sbecouncil.org/wp-content/uploads/2014/04/BTI2014Final.pdf

LEGAL ENVIRONMENT:  The American Tort Reform Foundation in 2015 again ranks CA the “worst state judicial hellhole” in U.S. – the most anti-business. The U.S. Chamber of Commerce ranks CA a bit better – “only” the 4th worst state in 2015 (unfortunately, sliding from 7th worst in 2008).
http://www.judicialhellholes.org/2015-2016/california/ http://www.instituteforlegalreform.com/states/california

FINES AND FEES:  CA driving tickets are incredibly high. Red-light camera ticket $490. Next highest state is $250. Most are around $100.
http://reason.org/blog/show/red-light-cameras-and-the-enigmatic

CA needlessly licenses more occupations than any state – 177. Second worst state is Connecticut at 155.  The average state is 92. But CA is “only” the 2nd worst licensing state for low income occupations.
http://cssrc.us/publications.aspx?id=7707  
http://bit.ly/1ff0OGu

CA has the highest/worst state workers’ compensation rates in 2013, up from 3rd in 2012. CA rates 21.3% higher than 2nd highest state, 88% higher than median state. Yet we pay low benefits — much goes to lawyers.
http://riderrants.blogspot.com/2014/10/california-has-worst-workers.html

OVERALL TAXES:  Tax Foundation study ranks CA as the 4th worst taxed state. But if counting ONLY in-state and local taxes, we are arguably the 2nd highest.
http://tinyurl.com/Tax-Foundation-CA-rank

UNEMPLOYMENT:  CA is tied for the 8th worst state unemployment rate (December, 2015) – 5.9%. National unemployment rate 4.9%.  Nat’l rate not including CA is 4.8%, making the CA unemployment rate 23.9% higher than the average of the other 49 states. NOTE: We were at 4.8% in Nov, 2006 – vs. national 4.6%.
http://www.bls.gov/web/laus/laumstrk.htm

Using the lagging but arguably more accurate 2015 U-6 measure of unemployment (includes involuntary part-time workers), CA is 3rd worst – 13.3% vs. national 10.8%. National U-6 not including CA is 10.5%, making CA’s U-6 27.2% higher than the average of the other 49 states.
http://www.bls.gov/lau/stalt.htm

EDUCATION:  CA public school teachers the 3rd highest paid in the nation.  CA students rank 48th in math achievement, 49th in reading.
http://www.lao.ca.gov/reports/2011/calfacts/calfacts_010511.aspx  (page 36) http://www.nea.org/assets/docs/NEA_Rankings_And_Estimates-2015-03-11a.pdf

California, a destitute state, still gives away community college education at fire sale prices. Our CC tuition and fees are the lowest in the nation.  How low?  Nationwide, the average community college tuition and fees are more than double our California CC’s.
http://trends.collegeboard.org/college-pricing/figures-tables/tuition-and-fees-sector-and-state-over-time

This ridiculously low tuition devalues education to students – often resulting in a 25+% drop rate for class completion.  In addition, because of grants and tax credits, up to 2/3 of California CC students pay no net tuition at all!
http://tinyurl.com/ygqz9ls

Complaints about increased UC student fees too often ignore key point — all poor and many middle class CA students don’t pay the UC “fees” (our state’s euphemism for tuition).  There are no fees for most California families with under $80K income. 55% of all undergraduate CA UC students pay zero tuition, and another 14% pay only partial tuition. http://www.universityofcalifornia.edu/blueandgold/
http://tinyurl.com/UC-zero

WELFARE AND POVERTY:  1 in 5 in Los Angeles County receiving public aid.      http://www.latimes.com/news/local/la-me-welfare22-2009feb22,0,4377048.story

California’s real poverty rate (the new census bureau standard adjusted for COL) is easily the worst in the nation at 23.4%. We are 57.3% higher than the average for the other 49 states (up from 48.8% higher last year). Indeed, the CA poverty rate is 17.0% higher than 2nd place Nevada. http://www.census.gov/content/dam/Census/library/publications/2014/demo/p60-251.pdf
(page 9)

California has 12% of the nation’s population, but 33% of the country’s TANF (“Temporary” Assistance for Needy Families) welfare recipients – more than the next 7 states combined.  Unlike other states, this “temporary” assistance becomes much more permanent in CA.
http://www.utsandiego.com/news/2012/jul/28/welfare-capital-of-the-us/?print&page=all

California ranks 48th worst for credit card debt and 49th worst for percentage of home ownership.
http://riderrants.blogspot.com/2013/02/more-dismal-california-economic-rankings.html

GOVERNMENT INSOLVENCY:

California has the 2nd lowest bond rating of any state – Basket case Illinois beat us out for the lowest spot. We didn’t improve our rating – Illinois just got worse. http://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2014/06/09/sp-ratings-2014

Average California firefighter paid 60% more than paid firefighters in other 49 states. CA cops paid 56% more. CA 2011 median household income (including gov’t workers) is 13.4% above nat’l avg.
www.tinyurl.com/CA-ff-and-cop-pay www.en.wikipedia.org/wiki/List_of_U.S._states_by_income

HOUSING COSTS:  Of 100 U.S. real estate markets, in 2013 CA contained by far the least affordable middle class housing market (San Francisco). PLUS the 2nd, 3rd, 5th, 6th and 7th. San Diego is #5 (with “middle class” affordable homes averaging 1,056 sq. ft.)
http://riderrants.blogspot.com/2013/10/the-us-least-affordable-housing-market

TRANSPORTATION COSTS:  CA has 2nd highest annual cost for owning a car – $3,966. $765 higher than the national average.
http://tinyurl.com/lmxnucs

WATER & ELECTRICITY COSTS:  CA residential electricity costs an average of 40.7% more per kWh than the national average. CA commercial rates are 66.5% higher.  For industrial use, CA electricity is an astonishing 94.4% higher than the national average (Sept, 2015). The difference is growing between CA and the national average. NOTE: SDG&E is considerably higher. http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_06_a

A 2015 U-T survey of home water bills for the 30 largest U.S. cities found that for 200 gallons a day usage, San Diego has the 3rd highest cost – 73.7% higher than the median city surveyed. At 600 gal/day, San Diego was again 3rd highest – 81.7% higher than the median city.
http://www.sandiegouniontribune.com/news/2015/jul/27/drought-water-prices-rise/

BUSINESS FLIGHT:  In 2012, our supply of California businesses shrunk 5.2%. In ONE year. NOTE: That’s a NET figure – 5.2% fewer businesses in CA in 2012 than were here in 2011. Indeed, in 2012, CA lost businesses at a 67.7% higher rate than the 2nd worst state!
http://riderrants.blogspot.com/2013/07/in-2012-ca-lost-businesses-at-677.html

The top U.S. CEO’s surveyed rank California “the worst state in which to do business” for the 11th straight year (May, 2015)
http://chiefexecutive.net/2015/05/07/best-worst-states-business/

From 2007 through 2010, 10,763 manufacturing facilities were built or expanded across the country — but only 176 of those were in CA. So with roughly 12% of the nation’s population, CA got 1.6% of the built or expanded manufacturing facilities. Stated differently, adjusted for population, the other 49 states averaged 8.4 times more manufacturing growth than did California.
http://www.cmta.net/20110303mfgFacilities07to10.pdf — prepared by California Manufacturers and Technology Association

OUT-MIGRATION:  California is now ranked as the worst state to retire in. Easily the lowest percentage of people over age 65. We “beat” ’em all – NY, NJ, etc.
https://www.fidelity.com/insights/retirement/10-worst-states-to-retire-2014 http://riderrants.blogspot.com/2015/12/kiplinger-ranks-california-as-worst.html

The median Texas household income is 10.9% less than CA. But adjusted for COL, TX median household income is 31.6% more than CA.
https://www.census.gov/hhes/www/income/data/historical/household/2014/h08.xls https://www.missourieconomy.org/indicators/cost_of_living/index.stm

Consider California’s net domestic migration (migration between states).  From 1992 through 2014, California lost a NET 3.7 million people to other states.  Net departures slowed in 2008 only because people couldn’t sell their homes.  But more people still leave each year — in 2014 we lost 79,340. Again, note that these are NET losses. Sadly, our policies have split up many California families.
https://twitter.com/SenTedCruz/status/464827967747526656/photo/1 http://riderrants.blogspot.com/2015/04/were-california-real-estate-prices.html

It’s likely that it’s not the welfare kings and queens departing.  They are primarily the young, the educated, the productive, the ambitious, the wealthy (such as Tiger Woods) – and retirees seeking to make their nest-eggs provide more bang for the buck.

*   *   *

Richard Rider is the chairman of San Diego Tax Fighters, a grassroots pro-taxpayer group. Rider successfully sued the county of San Diego (Rider vs. County of San Diego) to force a rollback of an illegal 1/2-cent jails sales tax, a precedent that saved California taxpayers over 14 billion dollars, including $3.5 billion for San Diego taxpayers. He has written ballot arguments against dozens of county and state tax increase initiatives and in 2009 was named the Howard Jarvis Taxpayers Association’s “California Tax Fighter of the Year.” Rider updates this compilation of statistics on California every month; they are updated here quarterly.

19 replies
  1. Richard Rider says:

    Tammy Tisher, to be more accurate, “more culpable are the voters who VOTED for Jerry Brown and the Democrats.” As you know, many of us definitely did NOT.

  2. Richard Rider says:

    Chris, I’d move, but it would make too darn many of you liberals happy. Besides, for me, CA is a delightful “target rich environment” — given my wont to critique Big Government, which I do with relish..

    So I’ll stay and put out info that’s not to your liking. Stay for now, at least.

  3. James says:

    The silver lining, lots of good paying government jobs in Cali. I’m a small business owner and I’m directing my children into those lucrative public union jobs. From a natives perspective of the last 50 years, Cali is never ever ever going to get any better. The state will collapse under its own fiscal deficit long before any earth quake hits. Lots of blame, no leaders.

  4. Richard Rider says:

    James, when I give one of my dreary talks about California, I often conclude with this question — “What is the ONE thing you need to know when you leave here tonight?” After the usual expected but sadly “wrong” answers, some wag gets it right — “GET A GOVERNMENT JOB!”

    You are correct.

    BTW, if you are not cut out to be a government worker, do the next best thing — MARRY ONE! I did. Great pay, solid gold benefits, rock solid job security. Turns out my public school teacher bride became the love of my life. Who knew? 😉

  5. Bob Richmond says:

    It doesn’t help that in the last 3 years the number of registered republicans in the state of California has fallen by 487,000 voters. The previous 14 years it fell by 13,000 voters.
    Read the full story at eliserichmond.com

  6. Ray says:

    I was born and raised in this state. I am 79 yrs. old next month. This is not the state I grew up in any longer. Check this out. Every state that has been dominated by the democratic party is in trouble in one way or another. I use to be a democrat. No longer, they are ruining the country. I will never again vote for a democrat. Don’t get me wrong, the republicans are only a little bet better. The demos are heading for the cliff at 100 mph and the republicans are going about 80 mph toward the cliff. I never vote for any person that has been in politics for more then 2 terms. I don’t care how good of job they did. Almost all voters vote for a person because they recognize their name. Almost all voters are to darn lazy to do the homework or put any effort checking out what the senator or congressperson did or did not do in office. That’s why we get the same old crooks year after year. I often wonder what are they going to do when they run out of other peoples money. This was a wonderful country back in the 40’s and 50’s. We never had to lock our doors and you could take a Sunday drive out in the country and have a picnic with your kids almost anywhere. Now there is not much country left and what is left is posted because the way people have become. I have been in about 40 states in my life and California use to be number one in my book but no longer.
    Out of the fifty states I rate California down from number one to about forty five. Our State Gov. has done a number on this state and it will never be the same,never.
    Like I said. I will soon be 79 and I am seriously considering selling out and leaving the state that I use to love so much. It has become a crap hole and it makes me so sad.

  7. Ow.ly says:

    Most recently, the Monetary Services Authority called upon UK organisations to check their business continuity planniing in the ligght
    of thee Swine Flu outbreak.

  8. talltalk says:

    richard, i like your attitude! why should conservatives have to leave just because we don’t want to pay for a bunch of stupid stuff that doesn’t benefit us?

  9. talltalk says:

    what amazes me most about california people is their trance. i guess since its so nice here people get mesmerized by it. people in california talk and act like people on tv. they are not real, for the most part. not all of them, of course, but most people in california are just trying to figure out the next thing to say, what’s my line? they are not coming from their own core or their heart.

    its pretty shocking really…..anyway, in the trance state, the cost of all the stuff the state is doing….that’s not part of the trance, that exists somewhere else. the benefits are here and now, but the cost….it doesn’t matter….

    this is how people act when they are in a trance.

  10. S Moderation Douglas says:

    California – It Could Be Worse

    I have a senior citizen exercise class this morning, so I don’t have the time to look up all these numbers again. Readers digest version: CA has the highest income tax *rates*, yes. But not the highest per capita taxes, because of higher deductibles and exemptions. Moreover, if you earn the average income in California, you probably pay less state income tax than the national average. In fact, in *total* state and local taxes, the average taxpayer in CA pays less than the national average.

    SALES TAX: Yes, again, highest state rates in the nation! (does not include local sales taxes). Why not? If you include local tax, CA drops to tenth place for highest *rates*. Moreover, in per capita sales tax collected, CA is number 17. (Because of the mix of taxable items; some states tax services and/or groceries.)

    The total state and local tax burden for the average income earner in CA is actually lower than the national average.

    If you are unfortunate enough to be among the highest income earners in CA, of course, it’s a different story. California is one of the most progressive tax states. In that income group, you probably pay a higher share of your income in state and local taxes than any other state. It’s a blessing and a curse.

    Is this “bad” for California? Meh. Damn statistics. TaxFoundation says the State-local tax burden as a share of state income is 11%. ranked 4th highest in the nation with a total tax burden per capita of $5,237 (2012) The US average is $4,420. Would you move to another state to save $817 dollars a year in taxes? (Hint, if you are in the lower income bracket, you likely would save nothing, or even end up paying higher taxes in another state. If you are one of the five percent, you could save much more than $817. Phil Mickelson or Tiger Woods, yes, definitely a big tax saving. But a physician with a lucrative practice in San Diego? Or a successful real estate broker in LA?)

    http://taxfoundation.org/sites/taxfoundation.org/files/docs/FF16_FINAL.compressed.pdf

  11. S Moderation Douglas says:

    “California has 12% of the nation’s population, but 33% of the country’s TANF (“Temporary” Assistance for Needy Families) welfare recipients….”

    Thank you Meg Whitman (Actually, I think she borrowed this catchphrase and popularized it.)

    I am shooting from memory here, but I believe Californias total “welfare” (state plus local) costs are about $80 billion a year. The TANF program is under $4 billion (It’s a moving target, changes significantly from year to year.)

    If I may present an analogy:

    I spend $80 a week on groceries.

    You spend $80 a week on groceries.

    I like peanuts. Of that $80, I spend $4 on peanuts. You spend only $1.33.

    Does that make me a bad person? Not Saying TANF is “peanuts” but it’s a state decision as to the “mix” of of the welfare expenditures.

    Truth in advertizing: I actually spend $82 a week, metaphorically speaking. California total welfare costs per capita are slightly higher than average. Last data I saw, eight states paid higher per capita welfare costs than California, but not nearly as high as the “12% of the nation’s population, but 33% of the country’s TANF…” would lead one to believe.

    “12% of the nation’s population, but 33% of the country’s TANF…” is “truish”

    It Doesn’t Have To Be This Way

  12. S Moderation Douglas says:

    Richard,

    I was given these words of wisdom by “Soquel by the Creek”:

    “For example, the average human being has one testicle and one ovary.”

    (The rest of the quote, apropos to this article, was “The bottom 50% of taxpayers (and possible voters) pays between $0 and $500 in TOTAL California income tax.”

    Advice to James “I’m a small business owner and I’m directing my children into those lucrative public union jobs.”

    Now there is the conundrum. Or maybe the dilemma, or both. The “average” paradox.

    All the major economic studies agree that at the lowest skilled/educated levels, state and local workers earn more (total compensation) than they would in the private sector. Mainly due to pensions and retiree health benefits.

    The opposite is true at the highest educated or professional level. Even considering the pensions and OPEBs, doctors, lawyers, MBAs, etc. earn much less than those in the private sector. And the difference at those levels is dramatic.

    Do you tell your kids to be a $30,000 a year janitor (because he gets retiree healthcare plus $25,000 pension, which the private sector janitor doesn’t.) Or become a state lawyer making $130,000 a year, realizing the average private sector lawyer will make 30% more in total compensation?

    https://www.aei.org/wp-content/uploads/2014/04/-biggs-overpaid-or-underpaid-a-statebystate-ranking-of-public-employee-compensation_112536583046.pdf

  13. S Moderation Douglas says:

    Interesting factoid, FWIW:

    I haven’t verified this, but it seems plausible. And on the surface, it’s scary enough that I’m sure we will see it again:

    One out of three Californians over fifty is receiving a government pension (not SS).

    As I recall, the basis of this statement is that approximately ten million Californians are over fifty, and the website Transparent California lists over three million pension recipients. As far as I know, TC does not list federal pensions, so the total may be more than one out of three.

    Keeping in mind, of course, that many of these “pensions” may be for those who worked as little as five years, or for pensions based on salaries thirty years ago.
    _____________________________________________
    The smallest pension listed is $1.44 (a year) for a beneficiary.
    Smallest employee pension is $4.92 for an eleven year employee who retired in 1990.
    _____________________________________________________________________________________

    Here’s the rub: Most California public workers aren’t really public workers in any true sense. They may have worked five to ten years in a government job at some point in their careers, then moved back to private. If they work long enough to be vested (usually five years), they may leave their contributions in the system and begin to draw a pension at age 50 (usually 1% times final salary per year) or wait till age 60-62 and draw 2%+ per year. They will usually not qualify for retiree health insurance unless they work at least ten years immediately prior to retiring.

    Only about twenty percent of public employees are “career” employees (thirty years or more). And only about half work long enough (five years) to vest.

    The rest of the time, they are just your average taxpaying private sector worker. It’s hard to tell the player without a program.

    “We have met the enemy and he is us.”

  14. some guy says:

    A guy who lived in California his whole life said something to me. Although he was talking about the company we were working for and not the state of California, I have come to realize that it’s all related. He said, “Everyone smart has already left. The only ones still here are the idiots.” And you know what? That just about sums it up.

    Here, let me help you idiots who think California is a great place to live understand:

    Living in California costs this much: $$$$$$$$
    The most you’re gonna make is this much: $$$

    The number of people who need a job is this many: ##################################
    The number of jobs in the current economy is this many: ########

    How much your job pays in another state: $$$$$$$$$
    How much illegal aliens will do it for: $

    Some more useful factoids:

    Workforce Make-Up:
    White: 15%, Mexican: 80%, Asian: 5%

    Chances of getting hired at a job if you’re not the same race as the boss: 0%

    Price of Gas in California: $$$$$
    Price of Gas NOT in California: $$$

    —–

    At this point, California has realized something… mexicans will work for cheap and if they get lippy, you can threaten to deport them. White guys can complain all day about wanting to get paid better, but in the end… you can just turn around and hire another mexican to replace him.

    California is a clusterfucktastrophe of rich people dancing on the backs of the poor.

  15. Nick says:

    CA is doomed and that is why after 27 years I sold my house and rentals properties in OC and left last year. Looking back it was the single best decision I have ever made. It is only a matter of time before CA is only the ultra rich and everyone else left is a servant class to support them. Leave while you can.

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