- In 2005, I was paying over $12,000 in New Jersey property taxes a year for a typical northeastern suburban house, or about $4.00 per square foot. I had a volunteer fire department, no local police coverage (state police covered our area), no municipal garbage pick up, and no local library.
- In 2012, I am paying about $3,600 in Florida property taxes a year for a typical southern suburban home, or about $1.80 per square foot. An absolute difference in dollars of at least $8,400 a year or about $700 a month vs. New Jersey. For those dollars I get county police coverage, full time fire protection and numerous local libraries.
- Since 2005, the property tax bill for that New Jersey house has probably gone up dramatically, far exceeding the ridiculously high $4.00 per square foot I was paying in 2005.
- Since moving to Florida in 2005, my annual property taxes have actually gone down every year and future property tax increases, if and when they come, are capped at no more than 3%.
- New Jersey politicians tried to tell us that our property tax rates were so high because the state invested so much money in the public school system in order to create outstanding schools. However, according to the latest Newsweek annual analysis of the top 100 high schools in the country, 13 were from the state of Florida and only one was from the state of New Jersey.
- New Jersey has six state income tax rates with the top rate being a very high 8.97%.
- Florida has only a single income tax rate, 0%, for all levels of income.
This is another way of stating that people are not stupid and will look for ways to maximize their life's experiences, which many times means optimizing their financial status. Based on the 2010 Census, we now know that the population of New Jersey grew about 4.5% over the past ten years. This is a growth rate that is only about half of the national growth rate and is so slow that the state will be losing a Congressional seat in the next election.
Based on the 2010 Census, the state of Florida's population grew 17.6% over the past ten years and will be gaining Congressional representation in the next Congress. This population growth rate is almost double the national population growth rate over the past ten years. I have to think that lower government cost of living, via lower property taxes, no income taxes, and a cap to future property tax increases has a lot to do with these numbers.
Florida recently closed a major state government budget gap by cutting unnecessary state government costs and NOT raising taxes, while still adding about $1 billion to the education systems throughout the state. Pretty impressive. We still have police protection, fire protection, the libraries are still open, and the roads are still in good shape, all of the major functions you want an efficient government to provide in a cost effective manner. Not sure New Jersey can make those same claims.
Now, it is not a secret that Florida got hit hard by the recession. It went from a low unemployment rate of 3.3% in August of 2006 to a high of 11.4% in February, 2010, a more than threefold increase. This disaster was mostly the result of a collapsing real estate market and a drop in tourism as a result of the recession, the two main industries in the state.
However, since February, 2010, the unemployment rate has dropped 2.8 percentage points from 11.4% to 8.6% (about a 25% decrease). The unemployment rate in New Jersey has come down only .5 percentage points from its high of 9.7% in April, 2010 to its current 9.2% (about a 5% decrease). Florida's economic improvement, without raising taxes but cutting unnecessary government costs, has also dramatically beaten the national economic picture which has seen the national unemployment rate drop only 1.8 percentage points, from 10.0% to 8.2% (about an 18% decrease).
I know these are a lot of numbers but the approach that the Florida political class has taken, to their credit, seems to be working quite well: cut unnecessary government spending, do not cover up wasteful spending with higher taxes, invest in education, and simplify government's involvement in citizens' lives. It seems to be working quite well, based on the results cited above, numbers that will get considerably better when the real estate market turns around, a bread and butter staple of the Florida economy.
I have a high degree of respect for what New Jersey governor Chris Christie is trying to do in New Jersey. He gets it: minimize tax increases while reducing excessive and wasteful government spending. But he is battling decades of old political thinking where unnecessary, criminal, and wasteful government spending could always be covered up with higher and higher taxes. The fact that the state's unemployment rate has only come down half a percentage point relative to the nation and to states like Florida shows he has a long way to go.
At least he gets it. I am not sure if the political class in California gets it, based on some really sour economic data that has been coming out of that state over the past few months:
- According to a Bloomberg News report from May 12, 2012:
- The California budget deficit is worst than originally forecasted, expected then to be $16 billion.
- The original deficit was expected to be about 40% lower or $9.2 billion, an estimate from January, 2012.
- This new budget deficit is almost a full 20% of the proposed state government budget, indicating there will have to be a lot of action to close such a large gap.
- One of those actions is to place a tax question on the next ballot that would temporarily raise the state sales tax, already the highest in the U.S., to 7.5% from 7.25% and would also boost income tax rates on income starting at $250,000. The 10.3% levy on those making $1 million or more would rise to 13.3%, the most of any state.
- If the tax ballot initiative does not pass, the state will have to cut $4.8 billion more from state school budgets.
(Note: the Associated Press reported on June 15, 2012 that the state government legislature did eventually pass a budget of about $92 billion but did not include any plans on how to actually attain that budget number and their budget relies heavily on voters approving the mentioned tax hikes in November.)
- According to an article in the Orange County Register from May 10, 2012, only about 22% of California's eighth-graders tested on a national science test passed, ranking it among the worst states in the nation. California, home to Silicon Valley, tested better than only Alabama, Mississippi, and the District of Columbia. How embarrassing, such a low score but the one of the highest tax burdens in the ocuntry, and imagine how much worse it will get if another $4.8 billion comes out of the state government education budget.
- According to a June 9, 2012 Associated Press article, voters in San Diego and San Jose, the eighth and tenth largest metro areas in the country, overwhelmingly voted to reduce benefits currently given to both retired and current municipal employees simply because these cities can no longer afford the burden.
In San Diego, the city's payments to its employees' retirement fund went from $43 million in 1999 to $231.2 million this year, almost a fourfold increase and equal to 20 percent of the city's operating budget. Concurrently, the 1.3 million San Diego residents have seen roads deteriorate and libraries reduce hours. For a while, fire stations had to share engines and trucks. The city has reduced its workforce 14% since 2005.
San Jose is not in much better shape. Its pension payments jumped from $73 million in 2001 to $245 million this year, or 27% of its operating budget. Four libraries and a police station that were built over the past decade have never even opened because the city cannot afford to operate them. The city of 960,000 reduced its workforce 27% percent over the past 10 years.
These growth rates in pension and benefit payments are unsustainable, at some point you either go bankrupt as a city or you end up just being a collection agency for government employee benefit programs as you cut other vital government services due to lack of funding. Something has to give at some point.
- Something did give in Stockton, California where they already have or are about declare bankruptcy. Their expenses have gotten so out of control that bankruptcy may be the only alternative to fix the situation.
- An Associated Press report from July 12, 2012 indicates that San Bernadino, California is also about to declare bankruptcy, having less than $200,000 cash on hand to cover millions of dollars of pending expenses and costs.
- A comprehensive study by the Mercatus Center at George Mason University measured the degree of personal and economic freedom state-by-state along a whole host of variables and measurements. California ranked 48th worst in the latest edition of the study (New Jersey was 49th) while Florida was 11th. Given these three state options, where will freedom loving and tax averse people be most likely to want to live, on average, in the long term?
- A survey study by the Chief Executive Group found similar results when it asked chief executives which states had the best environment for business. California ranked 50th, New Jersey ranked 49th, while Florida ranked 11th. Most of the states that were viewed favorably in the survey cited low state tax levels and friendly business regulation environments (i.e. the government and political class get out of the way of business operations and growth) for their high ranking of the winning states.
Again, similar question: where will freedom loving businesses and tax averse people be most likely to locate their businesses in the long term?
The study results were especially critical of the politicians running California:
"California, once a business friendly state, continues to conduct a war on its own economy. According to the Pacific Research Institute, it has the fourth largest government of all U.S. states, with spending equal to 18.3 percent of GDP. The comparable figure for Texas is 12.1 percent. Survey respondents uniformly say the state’s regulators are hostile. “No one in his right mind would start a new manufacturing concern here,” said one California CEO.
Although California is not unique in pursuing policies that prompt wealth and job creators to expand elsewhere, (New York being a good example), the Golden State seems uniquely oblivious to the effect its labor and other regulations are having on its innovative and growth-oriented Silicon Valley. Job growth in the Valley has flatlined. Firms keep their HQs there, but pursue growth in friendlier states. Google, Intel, Cisco and other companies locate new plants in states such as Arizona, Utah, Texas, Virginia or North Dakota.
Sacramento seems to take perverse delight in job-killing legislation, of which the pair of bills known as California’s “Green Chemistry Initiative” that former Gov. Arnold Schwarzenegger signed into law in September 2008 serve as an example. The regulations mandated that “manufacturers seek safer alternatives to toxic chemicals in their products, and create tough governmental responses for lack of compliance.” When the 92-page final set of commands was issued, the “green community” demanded a rewrite with even tougher requirements. Writing in the Washington Examiner, Chapman University Law professor Hugh Hewitt said that the new rules will mandate testing and labeling changes on tens of thousands of products, likely triggering product recalls. “Take whatever you think is the worst regulatory regime out there, and expand it exponentially.”
Then there is the state’s carbon emission law (AB 32), which the Small Business Roundtable and PRI say will cost half a million in foregone jobs in 2011 and up to 1.3 million jobs by 2020. What’s more, it is by no means certain the law will reduce carbon emissions since it only applies to California."
Is it any surprise that people and businesses are leaving states where it is so difficult to do business.
- Consider some insights from Eric Laffer, author of the book, "Eureka! How To Fix California:"
"Firms, people, investments, and tax revenues are fleeing California, repelled by the most onerous antigrowth business environment in the United States. California’s after-tax rate of return for doing business lags so far behind other states’ (especially zero-income-tax competitors such as Texas, Tennessee, and Florida) that the exodus shouldn’t surprise anyone. Yet the state’s Democratic leadership is pushing a November ballot measure aimed at raising income and sales taxes in order to make up for lost revenue. Tax hikes, especially during trying economic times like these, make no sense. Economies don’t tax themselves into prosperity."
In the article I read online (http://www.city-journal.org/2012/22_2_california-taxes.html), Laffer explains in his book how the California political class can save their state by simplifying everything they do, from their tax code to business regulations to streamlining government.
I particularly love his line, "Economies don't tax themselves into prosperity." This is true at the state and national level. At the state level, people move, taking their wealth, families, and businesses with them to seek out the best financial and economic conditions, conditions that usually include minimal taxation and minimal intrusive government regulation. Usually, those moving are the wealthier families and the better run businesses.
At the national level, the Obama administration has added thousands of regulations to the U.S. business environment since it took office. It has come up with dozens of new taxes for both businesses and families. National economies also don't tax themselves into prosperity.
Maybe that is why the unemployment rate has been over 8% for a record 40 straight months, maybe that is why over 35,000 small businesses shut down last year, maybe that is why we have suffered our first national debt credit downgrade ever.
The California migration trend, leaving the state for a better live, may be starting to find its way into a broader United States migration trend. According to recent IRS reports:
- Last year, 1,800 Americans renounced their citizenship and moved out of the country.
- That's a record number since the Internal Revenue Service began publishing a list of those who renounced in 1998.
- It's also almost eight times more than the number of citizens who renounced in 2008 and more than the total for 2007, 2008 and 2009 combined.
We invite all readers of this blog to visit our new website, "The United States Of Purple," at:
http://www.unitedstatesofpurple.com/
The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.
The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.
Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.
Please visit the following sites for freedom:
http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/
No comments:
Post a Comment