Saturday, October 10, 2020

On Leaving California, Connecticut, Illinois, New Jersey and New York

Thirty four homes are on our tract in Orange County, California. Three families left California in the past two months; two decamped to Arizona and one to Colorado. The house across the street went for $1 million cash two months ago. $1 million buys a lot of house and land in Colorado Springs. Our next door neighbors rented for 1½ years. They were unable to find an affordable house in the area. They left Thursday for a three year-old, 2600 square foot house on a 10,000 square foot lot for $560,000 with a 3.1% mortgage in Mesa, Arizona. Their electric bill was averaging between $400-500/month. It will be substantially lower in hot Arizona, as will be income taxes, gas sales, sales taxes, and the hassles of California. Three solid middle class, tax-paying families bailed on California. The children next door were a non-stop, care-free bundle of energy. There is emptiness on the street. There is certainly emptiness in California. And in Connecticut, Illinois, New Jersey, and New York as taxpaying voters flee these states. Hello Texas. Hello Florida. Hello Utah. Companies have left San Francisco and California. One estimate is that 13,000 companies with $77 billion in capital said goodbye to the Golden State in recent years. The increasingly uninhabitable San Francisco has lost Bechtel, McKesson’s, Charles Schwab, Chevron, and Core-Mark Holding Co. California said adios to Aeromax, Buck Knives, California Casualty, Carl’s, Jr., Da Vita, Fluor, Hilton Hotels, ICEE, Jacobs Engineering, Jamba Juice, Kubota, Nestles USA, Nissan, Northrop Grumman, Occidental Petroleum, Parsons, Premier, Inc., SAIC, Star Kist, Toyota, and a host of others. Even companies that stayed have closed plants, reduced employment, and expanded outside California. Illinois lost over $12.4 billion in adjusted gross income in 2017 and 2018. The average AGI of those leaving Illinois was $85,000. The AGI of those moving into Illinois was $66,000. Taxes keep rising in Illinois while 218,00 left Illinois. The IRS studies show New Jersey lost a net of 27,000 households between 2015-2016 with adjusted gross incomes of $3.5 billion, or averaging $131,000 each. New York lost a net 1.4 million residents to other states since 2010. $2.6 billion left Connecticut in 2016. Persons moving into Connecticut only earned 55% of the expatriates. 2,015 residents with adjusted gross income of $200,000 left between 2015 and 2016. Studies show the obvious. High income earners can be more mobile than others. Connecticut’s politicians continue to rise taxes. Five investors with a combined net worth of $68 billion moved out of Connecticut between 2012 and 2016. The demographic problem for these high tax states is that when tax paying, middle class and wealthy voters leave the state, they change the politics of two states. The remaining population is increasingly dependent on the government for jobs, pensions, and transfer payments. The new constituency becomes the public employee unions. Many of the low-income residents pay little or no income tax and only indirectly property taxes. They have no problem voting to raise taxes on others. They believe wealth comes from the government rather than the sweat of one’s brow. They are susceptible to promises of pie in the sky. Property taxes, income taxes, sales taxes, gas taxes, and now proposals for wealth taxes! Some politicians are economically illiterate, but others understand the economics, and especially the politics. The second change is in the new domicile. They leave the bad economics behind, but often carry with them the same progressive views from the old state, changing the demographics of the new home. Thus, Arizona and Colorado are increasingly purple, turning to blue. California’s teachers are the highest paid nationally while prison guards earn over $100,000 annually. The public employees often receive generous pensions, which are a crushing burden on cities and states. Politicians no longer run on economic growth and infrastructure, but on redistribution. The emigres voted with their feet; no longer voting at the state’s polls. Thus the cry: “Tax the rich; they should pay their “fair share,” which is never defined. The political candidates’ ads are against corporations, insurance companies, and PACs by candidates who claim they take no campaign contributions from the evil corporations all the while they are in thrall to the public employee unions. Representative Alexandria Ocasio-Cortez is an example of this phenomenon. Her 14th New York Congressional District in Brooklyn and Queens is not the poorest in the City, but is poor. The per capita income in her district is $27,908, about third quarters of the City’s average. 13.8% are below the poverty line, including 19% children under 18 and 16% seniors. 78.2% graduated high school, but only 27.5% bachelors or higher. 52% are Hispanic, 46.2% foreign born, and 67.6% with language other than English spoken at home. She represents her Congressional District, not America, the America we grew up in, an America of greatness. Jorge Carro was a Cuban lawyer, a classmate of Fidel Castro. Jorge, his wife Edy, and daughter (little) Edy were allowed to leave Cuba in 1967. The condition was that they, and the others legally allowed out, had to sign over their assets, homes, jewelry, money, you name it. Cuba was poorer. The Carros left with only one asset, their most important, their minds. The wealth of a nation is not physical assets, but its human capital. I met Jorge when he joined the faculty of Ohio Northern University as Law Librarian in 1972. He later became the Law Librarian and then Dean of the University of Cincinnati School of Law. Jorge is the story of America. Immigrants come to America fleeing oppression or poverty in their homeland. The penniless immigrant build a new life in the freedoms of America. Generations of immigrants from Italy, Scotland, Ireland, Italy, Western Europe, Northern Europe, Eastern Europe, Southern Europe, China, Japan, Armenia, Germany, Greece, Poland, Lebanon, Palestine, the Mideast came to America for freedom and opportunity. More recently, Cubans like Jorge, the Vietnamese, and Persians fled oppression for America. Somalis came to Minnesota. Sadly some of them were looted and burned out during the Minneapolis riots as they were achieving success in their new home. New Jersey just imposed a millionaire's tax of 10.75%. California and Illinois have tax measures on the ballot that will accelerate the exodus from those states. The savings grace to Illinois profligate government is that the state constitution allows only for a flat rate income tax. Illinois voters are being asked to approve a progressive tax system. California’s Prop 13 limits property tax increases to 2% annually on the purchase price of the property. The voters are being asked to allow commercial properties to be taxed at their market value; yet another economic blow to business. California, Illinois, and New Jersey politicos and public employee unions are salivating over the $billions that will flood into the staes' coffers, ignoring the companies and entrepreneurs that will leave and the small businesses that will eiher shut down or never open. California, Connecticut, Illinois, New Jersey, and New York, like Cuba, are poorer every time businesses and residents flee their high tax, high cost states. Line up the moving vans.

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