How California Destroyed its Middle Class (A Cautionary Tale)

How California Destroyed its Middle Class (A Cautionary Tale) | Victor Davis Hanson, Founding Values

It's an excellent video, and I like the guy speaking, but I mostly disagree with his explanation.
The biggest factor, in that state, has been the large amounts of foreign immigration (half of it illegal immigration). That caused overcrowding, led to housing shortages, and drove up cost of living.
Many of the wacky Progressive Democrat policies in that state have not helped, of course.
However, I don't want debate the issue of immigration in this discussion. Let's focus on the issues raised in the video.

 

Nonsense. The overcrowding, high cost of living, and housing shortage were caused by Proposition 13. TX has also had huge immigration, much of it illegal, yet still has plenty of affordable housing because it has high property tax rates. Prop 13 means that it is very profitable to own land in CA, but very unpleasant to live there.

No, let's focus on the actual problem: Prop 13, which forces the state and all local governments in CA to give landowners exorbitant, growing, and unsustainable subsidies, as proved, repeat, PROVED by the astronomical value of vacant land.

 

Texas also has much more space for people to live. I have discussed this before. Due to California's unique geography and climate, most of the population is squeezed along a narrow strip of coast close to the ocean, where the good climate is. If you go a little east further inland, it gets dry and very hot desert-like for half the year.

 

Wrong. Drive -- or better yet fly in a small plane -- around CA (not just in the middle of LA and SF) and observe all the empty land.

No, you have evaded how the only relevant fact -- Prop 13 -- has driven CA down as otherwise-similar TX rises.

You mean like TX is all over...?

I suggest you actually visit CA. Most of the state has a rather pleasant year-round climate -- just as it did before Prop 13, when housing was affordable, cost of living low, and public services and infrastructure among the best in the country.

 

the whole country and the world is suffering after 4 years of Trump... coincidence?

we are starting to see signs of recovery, but some want to put him in office for 4 more years

I do also agree, we have too much immigration right now, immigration is good, but not too much

 

Texas has about as much immigration from rats deserting California's sinking ship as they do from people fleeing Mexican drug cartels. It balances out in the long run.

 

It seems you clearly do not understand what I meant, if you are saying that.

Texas is only extremely baking hot and desert-like in its western half, away from the coast. And guess what? Not a lot of people live there.

Now it's true of course that almost nowhere in Texas has quite as good of a climate as California along the coast, from about around the San Francisco Bay Area down to the south. But if you're going to talk about California even 40 miles away from the coast, that is a different story.

Here's one comparison. The high temperature in Dallas (Texas) is 2 degrees warmer than Bakersfield (California) for the month of July, and Dallas might have 4 rainy days that hot month, whereas Bakersfield has none. Dallas has slightly more mild temperatures (not as hot or cold) for much of the year (despite temperatures sometimes getting much lower during winter). You will also find Dallas to be a little more lush green than Bakersfield, since there is some rain, and the summer humidity levels are not as low. (Dallas has on average 43% humidity at 2 p.m. in July)
Admittingly maybe not a gigantic difference, but it does demonstrate that climate is one factor.
Austin (Texas) has even better weather.

Keep in mind Texas is 68% bigger than California, yet California currently has 33% more people.

Property taxes do not raise home prices. If you disagree, please explain.

 

Look at a climate map.

Not really. Drive around it, or fly over it in a small plane.

Did Prop 13 change the climate?

Because its climate is better.

LOW property taxes raise home prices by increasing the subsidy to idle landowning. In state comparisons, home prices are clearly inversely related to property tax rates.

 

The initiative in California that we are talking about was called Proposition 13. It limited property tax to 1 percent of the property's assessed value, and banned the assessed value from increasing by more than 2 percent each year (as an inflation factor), although the property value can be reassessed when the property is sold.

That seems mostly reasonable to me. The only problem was that property values in the state were dramatically increasing due to overcrowding and increase in population. And the other problem was that the average inflation rate has been above 2%.

The Left is responsible for both of those. Part of the drive behind Proposition 13 seems to have been to "punish" government for inflation, and also to make sure tax rates would not go up as the property was increasing in cost.
And actually, both of those are understandable considerations.
Although Proposition 13 has resulted in some dysfunction and economic distortion (which most any economist could tell you).

 

Because you hate justice, and prefer privilege and increasing subsidies for idle, parasitic landowners.

No, because the assessments were not keeping up with the subsidy.

... but well below the average increase in location subsidy.

Garbage.

No. It was to ensure that the rate would go down, increasing the subsidy to idle landowning.

I.e., plausible rationalizations for injustice.

It has destroyed CA, making it more profitable to own land there, but less desirable to live there.

 

Why don't we start with this: Do you not think that a 1% (annual) tax on property is a very fair and reasonable level of taxation?

(That might be more like a 1.5 or 2% tax if you choose to view it as a tax on just the value of the land and not the structure built on it)

 

No. When the value of a property all comes from the community, as unimproved land value does, then it should all be recovered for the purposes and benefit of the community that creates it.

Why pretend that value the owner creates is as appropriate a base of taxation as value the community creates?

 

Oh please, you don't understand what I was trying to say?
Your argument is that the value of the land should be taxed. So if the property tax is also including the value of the structure, then that should partially help compensate for the tax percentage being too low of a number, in your opinion. Isn't that at least partially correct?

 

Better than you, obviously.

No, because it ignores how much of the value was created by the owner vs the community.

 

As a matter of principle yes, but I am talking about a practical matter.

Surely you are capable of seeing that?

If not, I'm not going to waste my time.

 

As a practical matter, every professional appraiser separates them just fine every working day of his life.

 

You ignore the point and are just being difficult.
You apparently complain that a 1% tax on land is too low. I countered by explaining that since the property tax also taxes the structure on the land, it mostly fulfills the sort of function that a 1.5% of 2% tax on land would.
So that counters what you said.

This makes it difficult for you to try to complain that California's problems are due to not having high enough land taxes.

 

No.

No, because the incentive is completely different. The amount of a tax is largely irrelevant to its incentive structure.

Wrong, as proved above.

 

I think you are being very unrealistic. For the majority of people, the additional part of the tax on the building structure is not really going to have a great impact on what they choose to build on that property. (Bear in mind the total property tax is limited to 1% here, so that may only be equivalent to about a 0.5% tax on the structure in the higher cost of living areas)

I understand the theoretical difference, but for the majority of people owning personal residences, normal houses, a 1% tax on property, land and building, is not really going to be very different from a correspondingly higher but equivalent tax rate on just the land.

 

The fact that the tax rate is so low makes it more profitable to hoard vacant and under-utilized land.

The interesting effects occur at the margin.

 

I think that's mostly a moot point, because in the high cost of living areas in California there's very little vacant land; rather they have the opposite problem.
In the rare cases there is open land, it's due to intentional open space preservation (and usually owned by government).

It seems like you're trying to apply your theory to a problem when your theory does not fit very well.
I'm not saying your theory is not true, but just that it mostly does not apply to this situation so much; it's definitely not the main explanation for the problem.

 

Nope. There are thousands of privately owned vacant lots in such areas. Most of those lots have been vacant for years, many of them for decades.

Nope. But it's true that when governments don't think about the cost of vacant lots, they leave a lot vacant.

My theory is facts, and they always fit.

That depends on what you think the problem is.

 

Something that a lot of people underestimate is the hidden, indirect cost of "government". If added up the direct and indirect levies you would be astounded.
You know when you pay income tax, sales tax, etc. but everything you consume is taxed from the farm to you and your life.
The government is already taking a "value added tax", as each step incurs various levies: roads tax, weight fees, waste mitigation fees, association dues.
I am beginning to think it is the way of the world for economies to collapse and then start rebuilding its web of ways to skim the economy until it freezes up.... again.

 

Over time, taxes and laws keep piling up. That just is an inevitable tendency, it seems. In the case of a state like California, it might be laws that felt like a good idea superficially but were not very well thought out. (As they say, the road to hell is paved with good intentions)
I do think you may be right. There is a build-up of various things over time in any empire that eventually start making things difficult to function. Eventually it gets to the point that the only way to throw off those things off is to start anew with a fresh slate, with a new government, sweeping away the old institutions. Usually results in a collapse of that empire.
We can disagree over exactly what type of things those things are and what things are the biggest factors, yet still agree that there are those type of things that exist.

 

I was born in the Bronx and lived all over the USA due to the military. I ended up living in California for twenty years before retiring in Texas six years ago. There's a lot more to consider than weather. I lived in San Diego for twenty years. The weather there is absolutely wonderful. But having awakened in a sleeping bag under a foot of snow in Germany, low crawled through a sand storm in Iraq, and slept in the crook of a tree in Panama to escape the roiling waters below, my view of weather is a little more tolerant. I live on the Texas coast. In six years we have had five days of freezing weather, four of them last year. It rains more here than in San Diego, but that's good for the garden.

Property values are important. In San Diego we lived in a tiny, three bedroom hovel valued at $750,000. When we moved here we got a house 30 years newer with four bedrooms and a large storage shelter for about a quarter of that. In San Diego it was getting difficult to go for the evening walk recommended by my doctor due to all the homeless living on the sidewalks. That's not a problem here at all. Did you ever watch "Leave It to Beaver"? This ton looks a lot like that. Both the adults and the children routinely say, "Yes Ma'am" and "No Sir". We moved here using "PODS". Our town in California charged us $200 to park each one of the six we used on the street as we loaded up. When we got to Texas, I called the town to find out how much parking on the street would cost. The guy on the phone laughed and said "nothing" then offered to send a crew over to help us unload... for free.

Services are great here. Large items like old furniture, TV's and such will be picked up by the town for free. Just ask.

Violent crime here is practically nonexistent, although dope smokers do still get arrested here (as we prefer).

Kids here play freely. Its fun to watch them having fun just as we did so long ago... free and safe without worry.

My immediate neighbors are a great group of families and include a variety of different sorts of folks... Protestant, Catholic, Jewish, Black, Hispanic, and more. My immediate neighbor is a Hispanic college professor with two sons that attend the local college, both studying engineering. Their family was here for a couple of hundred years while my own was still searching for scraps in Ireland... a stark contrast to the illegal immigrants camped out on the sidewalk in front of my old house in California.

My town of about 80,000 is a far cry from way blue staters think of Texas. We have two HUGE medical complexes in addition to a major university medical center. I can walk around the corner from my house to great restaurants (a wonderful steak house, as well as Italian cuisine, Chinese, a crab shack and lots more). A mile north is a fine mall with all the large stores you'd expect. A mile south is the center of town. In between are all the stores, services, etc. that you'd expect in any American town. But less than a mile east is a farm where you can buy fresh eggs and produce. We joke that while blue states get their meat and produce with haul trucks, our supermarkets get all their fresh food right of the local farms.

There are too many great things about Texas to list here. Our great Governor outlawed all the China Virus Tyranny in March 2021, so we missed most of the mandatory masking, mandatory separation, business and school closings. We still brag that our kids will be doctors and astronauts (NASA-Houston is here) while their blue state counterparts are still trying to read.

We have no state income tax here and still managed to have a $30 Billion state budget surplus. While California, with some of the highest state income taxes in the nation suffers under a burdensome $30 Billion deficit.

When I lived in California, it was oppressive. There seemed to be restrictions on everything from parking (as noted above), to the outlaing of shark fin soup, to so much more. Here in Texas we don't even have to put deposit down on bottles and cans!

And the future is bright! We're building new nuclear power plants and also some new refineries. We'll drill Texas oil, refine it in Texas, and sell the gas in Texas... free of much federal regulation because it never crosses state lines!

Then, of course, there is freedom. Freedom of speech is encouraged here, unlike in blue states where conservative speakers are routinely interfered with. (Just ask Reilly Gaines about experience at Stanford University!) And, of course, we have "Constitutional Carry" gun rights here wherein any legal gun owner can carry open or concealed (as the forefathers envisioned) without any of the Draconian restrictions encountered in California like permits/registration, waiting periods, magazine capacity limitations, and such.

So when you discuss the relative merits of California and Texas... understand that there's a LOT more to talk about than the weather.

TEXAS!!! WHERE FREEDOM LIVES!!!