Meathead Economics
February 28th edition of the Wall Street Journal had an article called “Meathead Economics”.
The said that 240,000 people left the state of California in 2005 because of high taxes. What BS! Just another example of reporters looking at data and drawing the wrong conclusion.
They left because of unaffordable housing. Would you pay $400k for an 800 sq ft condo with 1 parking spot when you can move to a neighboring state, get a job that pays the same and get a new house for $200k thats atleast twice the size?
Previously I posted an article about this being an issue and I believe it will only get worse. In 2006 I wouldn’t be surprized if that number doubled. Since 2001, 50% of jobs in CA have been real estate related. Once the housing market falters, a lot of people who’ve been used to making 6 figure incomes will find themselves without any source of revenue and no real skills. These people will be forced to move to other booming states, which will only add to the housing woes.
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March 3rd, 2006 at 4:37 am
It was not an “article” it was an editorial (I would link to it here if I knew how). Furthermore, the editorial does not state that taxes are the only reason people are leaving California, but rather identifies “taxes and a regulatory culture” as “a big part of the story”. A “regulatory culture” includes land-use restrictions, which are a significant contributor to increased housing prices as they create an artificial scarcity of land.
Also, it was not “reporters” who wrote this piece, but editorialists. Editorialists write opinion, which is exactly what you gave when you said “They left because of unaffordable housing”. While housing prices in California have increased tremendously in recent years, so have taxes, fees and regulatory restrictions. It’s likely that all of these have contributed to the exodus. While the WSJ acknowledges that several factors are probably at work, you state that one factor, and one factor alone, accounts entirely for the movement of those 250,000 people. While I agree that the WSJ piece should have discussed housing more directly, I don’t see that your blanket statement is particularly accurate either. You’ve mischaracterized their post without linking to it, and rebutted it with an absolute statement that is unknowable.
March 3rd, 2006 at 11:40 am
ok i’ll admit i don’t know the difference between an article and an editorial.
I tried to link to it but when i tested the link it kept going to the search page
and not the article. it requires a subscription anyway, so you can search for
it using the title.
I still stick to my statement that house prices are causing people to move
and not taxes. I disagree that regulatory restrictions cause inflated home
prices. they may contribute to it but the are not the cause. [just as interest
rates contribute to it but again or not the cause]. The last time California
saw a net outward migration also coincideded with a peak in home prices.
Wealthy people who make their money from investments or businesses
are not overly concerned by taxes going up 1.7%. As a % of their net wealth
they pay a lower % than regular folk. They invest in tax-free munis and real
estate giving them great tax shelters. Now if you’rew2 income, you might
be concerned. however i think you’d be more concerned about insanely
high home prices.
I don’t buy it and i’m sticking to my guns.
March 3rd, 2006 at 5:10 pm
How can something contribute to people moving (regulatory restrictions, taxes) but not be a cause of them moving?
You’re conceding the point that several factors influence the decision to move, but at the same time insisting that only housing prices are “The Cause”.
Your logic is baffling.
March 3rd, 2006 at 5:50 pm
geez, how stupid are you?
the point of the post was that you shouldn’t blindly believe everything you read in any paper, but use your own intelligence to draw your own conclusions.
the point i’m making is that gov. regulations & taxes do not cause people to move.
Gov. regulations may contribute slightly to increased home prices [which do cause people to move] but by themselves they are not causing people to pick up and move out.
taxes do not contribute to mass exodus. i’m willing to leave CA today,if my wife would let me. home prices are the deciding factor, not taxes. there are a lot of ways to shelter taxes, which rich people do. according to the “editorial”, people should be fleeing new york in droves. they have 12% state tax and a 5-6% property tax.
you’re free to believe that taxes and gov. regulations are causing people to move to other states. I just don’t believe you and i have data to back up a different conclusion.
March 5th, 2006 at 5:21 pm
It seems to me that you both are arguing about the distinction between primary factors affecting people’s decision to move (high real estate prices) and secondary (or tertiary) factors that also affect people’s decisions, but only in a marginal way. These secondary factors generally don’t drive people’s decisions, but they can. For instance, a friend’s brother made millions programming for Google and is now retired. In CA? No, in Nevada where the state income tax is 0%.
March 7th, 2006 at 1:52 pm
My heart bleeds for these emigres:
In New York City an 800sf apartment with a parknig spot would sell for in 10 minutes for $1.2 million.