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It's no secret that California is having some serious financial problems. Last week, the state started issuing IOUs (aka registered warrents) in lieu of tax returns to individuals and checks to companies contracted with state agencies. A handful of those companies are based in the Pacific Northwest. The global recession hasn't been kind to Californians who migrated to Oregon during the boom years, either.
A recent editorial cautions Oregonians who may be feeling smug about our local economy in light of California's crisis, arguing that the Oregon tax structure could put us in a similar predicament in the not-so-distant future.
Do you do business in California? Did you move to Oregon from there? How is California's economy affecting you?
GUESTS:
- Shane Goldmacher: Staff writer for the LA Times based in Sacramento covering California government
- Philip J. Romero: Dean of the College of Business and Economics at California State University, Los Angeles, former advisor to governors in Oregon and California
- Jeff Barger: CEO of CTS LanguageLink
- Blanche Cates: Owner and broker at Cates Properties in Grants Pass and Ramona, California
Tagged as: business · california · real estate
Photo credit: zolierdos/ Flickr /Creative Commons
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"State governments are no different than the rest of us; their people put their pants on one leg at a time. They need to budget and cut back on expenditures just like the rest of us."
Stop it. Governments are nothing like the rest of us. This notion that "the government needs to sit at its kitchen table and budget just like the rest of us" is ridiculous.
It is all fine and good to say that the answer is simple: just stop spending more money than you have. But a government represents people...many people...all of whom have conflicting definitions of "necessary" spending.
As far as the stability of sales taxes goes, I am pretty sure your are just quoting FairTax talking points. However, I will give you the benefit of the doubt by acknowledging that there are many academic papers saying sales taxes are more stable and I have not read any papers on either side. That said, there are many academic papers saying all kinds of crazy things.
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Hmm. Washington state has a sales tax but is having budget problems. California has sales taxes, even higher I think, and it has even more budget problems. Ergo, sales taxes aren't the solution, are cyclical just as bad or worse than income taxes. Sales taxes are regressive, where poor consumers pay a higher portion of their wealth/income than the wealthy. Unstable revenue is not a problem if it is spent in a stable way.
I too object to your notion that state governments are like the rest of us.
If one knows anything about economics and Keynes, government needs to spend more during recessions, at the least there is greater demand on the safety net, and then (arguably) there can be tax cuts and stimulus spending; it is an excellent time for government to spend money on infrastructure.However, too many forget what should happen during booms: the government should restrain spending, increase taxes and pay off their debt. Even for those who disagree with Keynes, if you were to ask if a massive infrastructure project is needed, when would be a better time to build it, when unemployment is 3% or when it is 10%, I think all would agree it would be better to build during the time of higher unemployment.
The stupidity is that most state governments don't save up during the boom times, and aren't allowed to borrow during busts. When they cut their budget during a recession, it effectively nullifies the Federal stimulus and prolongs the recession.Bob in Salem
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Having a war budget of $680 billion a year doesn't help California and other states become solvent.
One thing that might help would be a state bank. North Dakota has had a state bank for 90 years. It allows North Dakota to issue its own bonds without having to pay interest to commercial banks.
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A state bank.
That is an interesting idea.
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What is the point of the guest from Cates properties? That buying and flipping properties doesn't add value to the economy, is unsustainable, and is now dead? That is a good thing. Unfortunately the swing is so hard that construction workers are hurt, but at some point there will be normal demand for homes again.
In the long term, something of value, and over time better value, needs to be produced in a sustainable way in order to increase standards of living.
Bob
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Comments are now closed.
One effect of having a two year budget cycle in Oregon is that we have to plan and project for a longer period, unlike California which has year by year budgets. So that's one stability inducing advantage Oregon has.
It would take an entire tax overhaul to plan for more economically efficient and more stable tax revenues i.e. switching from income based tax to consumption tax. This will not happen in Oregon because politicians want both! Oregonians eschew sales taxes no matter how rational.
State governments are no different than the rest of us; their people put their pants on one leg at a time. They need to budget and cut back on expenditures just like the rest of us.