Hey, Californians: Go to Tahoe!
A few weeks ago my family and I went to Lake Tahoe for a little snow skiing. We had a great time, except for some obvious "grade deflation" that occurred with the ski slopes. I skied some intermediate slopes and fell many times, indicating that the slopes were probably really expert skiers. Either that, or the laughably improbable alternative that I am not in as good shape as I was only a few years ago, when I could ski down expert slopes without any problems.
But during the trip, we drove across the state border from California to Nevada and back several times. Except for the different-colored license plates and the fact that smoking is still allowed in restaurants in Nevada, we would have never known the difference between the two states we drove through. The roads were just the same, the restaurants were just as overpriced, and the scenery was the same...and the ski slopes were just as incorrectly graded. Yet the times when we drove from California into Nevada, we drove from the highest-taxed state to one of the lowest-taxed states.
In fact, California currently has the third-highest state income tax in the nation, and the nation's highest sales and gasoline taxes. Meanwhile, Nevada has no state income tax, a much lower gasoline tax, and a lower state sales tax of 6.85%.
With such a difference in state taxes, you would think that leaving California and entering Nevada would at least entail a huge change in scenery, like gold-plated roads with pampered, uniformly wealthy people on the California side and huddled masses living underneath highway overpasses, asking for handouts on the Nevada side. But no, things were pretty much the same.
So what gives? What accounts for the difference in taxes and indifference in the states? Essentially, a lack of leadership, and the lack of political will to make difficult choices. While Nevada makes do with its lower income, sales, and other taxes, California is mired in a huge budget deficit and has been for some time. Just this past week, California Governor Jerry Brown announced that California is in the hole not $9 billion as reported earlier, but closer to $16 billion. Of course, only $4 billion of this additional red ink was because of un-materialized revenues from state taxes, while the rest was increases in spending this year and next, but no matter. The governor is proposing a tax increase on November's ballot, and it is expected to raise $7 billion per year -- namely, by raising the state's sales tax even higher and its top income tax bracket to 13.3%, the nation's highest.
Another proposal facing California voters this fall will be the "Molly Munger's California State Income Tax Increase to Support Education Initiative," named after Molly Munger, daughter of Berkshire Hathaway billionaire Charlie Munger. (Question: what is it with Berkshire Hathaway? First Warren Buffett, and now his partner's daughter are pushing huge tax increases. Maybe there is something in the water at the Berkshire headquarters in Omaha.) If passed, the Munger initiative would raise an estimated $10 billion per year by raising taxes on all but the poorest Californians, with the windfall earmarked for education.
Other tax hikes for Californians are being proposed, making this November's ballot an orgy of tax hike proposals for Californians. Cumulatively, the proposed tax hikes could cost Californians almost $25 billion more per year, including an increased tax on out-of-state businesses, which will undoubtedly be passed along to California consumers. In one of the already highest-taxed states with an annual economy of $1.9 trillion, these new tax hikes could take a pretty big chunk out of the state's fragile economy.
Obviously, Californians need to reject these tax hikes and force the politicians in Sacramento to concentrate on cutting spending. This is what normal people do when faced with a shortfall in their income.
To any Californian who might be tempted to vote in favor of any of these tax hikes because of whatever state service or group of workers who are in jeopardy, let me give this simple advice: just go to Lake Tahoe and drive across the border into Nevada. As you drive into Nevada, you will notice a very similar state, except much lower taxes. No other difference. There is no reason why California needs such higher taxes when Nevada doesn't. Californians should vote "no" on all its proposed tax hikes and demand that the state government get its act together and cut spending.