Sunday, May 24, 2009

Richard Rider Rant 5/23/09


“I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
—Winston Churchill

  1. Rider radio guest gigs now on Internet
  2. High state/local taxes = low economic growth
  3. Chula Vista sales tax defeat foretold Prop 1A-1E result
  4. Gringos gunrunning for Mexican Mafia?
  5. Actuaries perhaps biggest crooks in America
  6. The economy is so bad...
  7. Some state government mandates price health insurance out of reach
  8. California public college tuition is FAR too low
  9. Latest “Breaking Bad” article on California vs. other states
  10. John Murtha Airport a stunning monument to earmark waste
  11. Cohen cons complicit comrades in media

12. Rider interviews lurk on KUSI TV news website

13. More Rider lurking on KUSI

14. Soak the rich, lose the rich

15. Rich team owner flees his state – verifies he left because of high taxes

16. Proof that Prop 13 did not erode California property tax revenue

17. You SHOULD have invested in rich credit card companies – or not

  1. Rider radio guest gigs now on Internet

RIDER COMMENT: As you may recall, I’ve subbed a couple times on KCBQ for talk show hosts Rick Amato and Jesse Lipscomb. Always a kick to do so. Many thanks to both hosts for the gigs.

If you want to listen to a show, the links below can be used. Once you click the link, you’ll have to scroll down to the date to find the specific show.


Monday, 04 May 2009

Listen Now!

Hour 1: Guest Host - Richard Rider, Guest - Former San Diego City Councilman Fred Schnaubelt. Range of issues discussed.

Monday, 04 May 2009

Listen Now!

Hour 2: Guest Host - Richard Rider, Guest - Vicki Murrey Ph.D from the Pacific Research Institute. Education is the topic of the hour.

  1. High state/local taxes = low economic growth

RIDER COMMENT: Aside from high taxes being bad for one’s health, it also has a detrimental effect on the economy. But it’s good to actually document that fact.

Here’s a great study that clearly demonstrates the INVERSE correlation between high taxes and economic prosperity. If you can’t see the chart, go to the link.

Clear Negative Relationship Between Local/State Tax Burden and Economic Growth

Arlington, VA - U.S. metropolitan areas with lower taxes exhibit higher employment growth, faster population growth, and greater increases in real personal income than areas with a higher tax burden, concludes a new study released today by the National Foundation for American Policy (NFAP), an Arlington, Va.-based policy research group. The study, “Higher Taxes, Less Growth,” found that areas with higher taxes had lower employment growth, smaller personal income gains and slower growth of population.

“These findings are particularly relevant at a time when many states and cities are proposing to raise taxes to address short and long-term budget problems,” said Stuart Anderson, Executive Director of NFAP.

1. Employment growth between 2000-2006 was 54% higher in the 50 metropolitan areas with the lowest tax burden than in the 50 highest-tax metro areas (measuring the tax burden as state and local taxes as a percent of personal income in 1997 for all 381 metropolitan areas).

2. Real personal income growth was 80% higher between 2000 and 2006 in the 50 areas with the lowest state and local tax burden (as a percent of personal income in 1997) than in the 50 highest-tax metro areas (see chart above).

3. In the 50 lowest-tax areas, population growth at 8.6% (between 2000 and 2007) was more than three times higher than in high-tax metro areas (2.6%).

Conclusion: The results suggest a clear negative relationship between state and local tax burdens and local economic growth.

HT: Carpe Diem

  1. Chula Vista sales tax defeat foretold Prop 1A-1E result

RIDER COMMENT: The article below ran as a column in the SAN DIEGO DAILY TRANSCRIPT and some online blog services.

Chula Vista Sales Tax Defeat Is Great News

by Richard Rider Phone 858-530-3027

On 5 May, a clear message was sent that voters will no longer obediently approve the politicians’ tax increases. And that’s great news! And indeed, it foretold the outcome of the later statewide special election for the legislators’ props.

Chula Vista city politicians held a special mail ballot election to raise the city sales tax an additional full 1% to 9.75%. In a dramatic turnaround from similar previous city sales tax elections around the county, the Chula Vista city politicos and employee labor unions got their collective keisters kicked, losing the vote by a lopsided two-to-one margin.

This defeat in the county’s second largest city is all the more impressive because the other side had the public employee manpower and money to win easily – in normal times. But these are no longer normal times.

Many factors came into play:

· Perhaps the most important factor was the California statewide “temporary” sales tax increase. Currently the lowest sales tax rate in the county is 8.75%, up 1% from 2 months ago. Contrary to the dismissive “pennies per day” argument from elitist politicians, this super high sales tax is affecting everyone adversely in the teeth of a deep recession. Further sales tax increases are unacceptable to voters.

· In a special election, voter turnout will be low. And that’s not necessarily a bad thing when it comes to getting a knowledgeable vote on matters.

· Even better, there were no candidates in this election. Many people go to the polls to vote for “their” candidate based on looks, race, gender, political party, religion, “aura,” or whatever turns them on. Then, as an afterthought, such “cheerleader voters” vote on props about which they know little and care less.

· This was a mail ballot election, further reducing the casual voters – but not necessarily reducing voter “turnout.” Over 27% of the electorate voted in this single issue election, which is probably higher than if they had had held the far more expensive precinct poll special election.

· The people who voted in this election were interested only in the tax issue (not in candidate horse races) – and were far better informed than those who didn’t vote.

· Unlike many such elections, there was significant though underfunded organized opposition. Local taxpayer activist Larry Breitfelder led the grassroots opposition, with some support from timid dissident city councilmember John McCann. In addition, the San Diego Lincoln Club joined with the San Diego County Taxpayers Association to mail out a superb opposition piece to 21,000 high propensity voting households. Finally, the San Diego Union-Tribune came out strongly against the tax.

The initial churlish response to voters from Mayor Cheryl Cox was to cut services – including police. Not considered were more meaningful fiscal reforms – renegotiating the city’s opulent labor contracts, new lower pension plans for new hires, requiring employee pension contributions to their pensions, or contracting out city operations. For now, the city is still run for the benefit of employees (and for the politicians), rather than for the citizens.

But times have changed. Politicians need to understand the voters’ clear message to control spending with existing taxes. Or else.


For more info on why the Chula Vista sales tax increase was a bad idea, see the San Diego County Taxpayers Association insightful analysis of Chula Vista’s profligate spending madness:

  1. Gringos gunrunning for Mexican Mafia?

RIDER COMMENT: Remember the recent media stories that gangster guns in Mexico are 90% from the U.S. (presumably illegally purchased)? This factoid has been used to lobby for more gun control in the U.S. But a closer look challenges this 90% assertion. While the press bought it without investigating, it appears that this percentage is a cooked up figure based on false assumptions.

May. 10, 2009

Obama 'bitterly clinging' to his fake gun numbers

American gun owners, en masse, are "casting their ballots" on how much they
believe Barack Obama's campaign-trail promise to "not take away your guns."

They're driving the price of ammo through the roof, swarming gun shows,
hauling away cases on hand trucks, leaving the floors of the ammo suppliers'
booths as naked as a wheat field after the locusts pass through.

Glen Parshall at Bargain Pawn in North Las Vegas reports "I got 20,000
(rounds of) .223 on Saturday and by Tuesday it was more than half gone. And
that's only because I limit customers to a thousand rounds per day,
otherwise I'd be out already."

And are the shortages just in the popular light rifle-calibers -- .223 and

"No," Glen reports. "The shortage is total."

Industry newsletters report that should demand drop to normal, it would
still take a full year or more to bring inventory levels up to normal in
local gun stores.

The hoplophobes -- now nearing a veto-proof majority in Congress with the
defection of Arlen "Magic Bullet" Specter -- don't have to "take away our
guns" if they can ratify some kind of international treaty (bypassing and
overruling U.S. statute) that bans ammunition reloading as "manufacturing
without a license" and then drives the price of ammunition through the roof
by requiring every bullet and brass cartridge to bear some kind of "unique
identifying number," supposedly for the use of police in tracking "weapons
used in crimes."

(Naw, no bad guy would ever simply use stolen rounds, the way they use
stolen cars with stolen license plates as getaway cars.)

Larry Pratt, head of Gun Owners of America, asks "Remember candidate Barack
Obama? The guy who 'wasn't going to take away our guns'? Well, guess what?
... A week ago, Obama went to Mexico, whined about the United States (and
bemoaned before the whole world) the fact that he didn't have the political
power to take away our semi-automatics. Nevertheless, that didn't keep him
from pushing additional restrictions on American gun owners.

"It's called the Inter-American Convention Against Illicit Manufacturing of
and Trafficking in Firearms. ... This imponderable title masks a really
nasty piece of work.

"First of all, when the treaty purports to ban the 'illicit manufacture of
firearms,' what does that mean?" asks Pratt in a late April GOA release.

"Illicit manufacturing" of firearms is defined as "assembly of firearms [or]
ammunition ... without a license ... " "Hence, reloading ammunition -- or
putting together a lawful firearm from a kit -- is clearly 'illicit
manufacturing.' "

Article VI of the treaty requires "appropriate markings" on firearms. "It is
not inconceivable that this provision could be used to require
micro-stamping of firearms and/or ammunition -- a requirement which is
clearly intended to impose specifications which are not technologically
possible or which are possible only at a prohibitively expensive cost," says

And Article XI of the treaty requires the maintenance of any records, for a
"reasonable time," that the government determines to be necessary to trace
firearms. "This provision would almost certainly repeal portions of
McClure-Volkmer and could arguably be used to require a national registry or
database" -- gun registration, the GOA warns.

Meantime, the Libertarian Party points out even the statistics used by Mr.
Obama to supposedly justify his "emergency need" to "block the flow of arms
to Mexico" are bogus.

"Is Barack Obama 'bitterly clinging to falsified numbers' in his bid to push
his anti-gun treaty?" asked the Libertarian Party in an April news release.

"This war is being waged with guns purchased not here, but in the United
States. More than 90 percent of the guns recovered in Mexico come from the
United States," Mr. Obama said in a face-to-face April meeting with Mexican
President Felipe Calderon in Mexico City.

But that claim, the LP points out, "is blatantly false. According to
information supplied by the Bureau of Alcohol, Tobacco, Firearms and
Explosives the real number is closer to only 17 percent.

"There is a reason Obama is intentionally spreading false information about
American firearm businesses," says Donny Ferguson, Libertarian National
Committee Communications Director. "He ... promised anti-gun groups he would
enact gun bans and is hoping to scare people into voting away their own
rights. ...

"ATF Special Agent William Newell tells Fox News that between 2007 and 2008,
around 11,000 guns used in Mexican crimes appeared to come from the United
States and were submitted to the ATF for tracing. Of those, only 6,000 could
be successfully traced. Of those, only 5,114, according to testimony in
Congress by William Hoover, were found to have come from the United States.

"Obama's '90 percent' number refers, not to the percentage of 'guns
recovered in Mexico,' as Obama claims, but to the 'percent of the traced
firearms' according to an ATF spokeswoman.

"Mexican authorities report that in those two years, a total of 29,000 guns
were recovered at 'crime scenes.' That means 68 percent of the guns
recovered by Mexican police did not even appear to come from the United
States. That means only 5,114 out of 29,000 guns used in Mexican crimes were
found to have come from the United States," the Libertarians conclude. "That
figure would be 17 percent, not the 90 percent repeated by Obama.

During his term in the Senate, Obama earned an "F" rating from Gun Owners of
America, as well as from the National Rifle Association. In an April 11,
2008, campaign speech in San Francisco, Obama claimed gun owners are simply
"bitter," racist people who "cling to guns or religion or antipathy to
people who aren't like them."

"Obama is 'bitterly clinging' to falsified numbers, hoping he can take away
the constitutional rights of 'people who aren't like' him," The Libertarian
Party concludes.

Vin Suprynowicz is assistant editorial page editor of the daily Las Vegas
Review-Journal, and author of "Send in the Waco Killers" and the novel
"The Black Arrow." See

© Las Vegas Review-Journal

  1. Actuaries perhaps biggest crooks in America

RIDER COMMENT: One seldom understood part of the systemic “defined benefit” pension scandal now crushing most state and local governments is the rampant dishonesty of the pension actuaries. This applies to both in-house government actuaries and the “hired guns” from the outside which supposedly are providing objective information.

The adage to remember is “follow the money.”

The government actuaries’ conflict of interest is obvious – they get the same pensions that they oversee. Unrealistically optimistic actuarial assumptions result in them getting higher pensions and paying less into the pension fund as employees.

Less obvious is the huge conflict of interest of outside actuary consultants. To quote another trite but true cliché, “He who pays the piper, calls the tune.” Such consultants are usually hired by senior government staffers who want their pensions as high as possible. The consultants who get such contracts fully understand that they are expected to provide Pollyannish analysis to justify increasing pensions while underfunding the pension funds.

Stated differently – If an actuarial consultant does indeed provide accurate, objective, cautionary advice on pensions, it is unlikely that they will be retained as a consultant, or indeed that they will ever win another government consulting contract. Over time, the most dishonest actuaries win most of the government pension contracts.

And I’m talking about the top actuarial firms in the nation. This is quite similar to the accounting dishonesty that brought down Author Anderson and other respected accounting firms. But in the arcane world of pension accounting, the level of dishonesty is harder to detect than regular corporate accounting, and hence more widespread.

One dissident actuary, John Bury, has been pointing out this industrywide conflict of interest – and the magnitude of the consequences. Consider this latest article from this fellow concerning the “Soprano” pensions and healthcare of New Jersey employees.

EXCERPTS: When the 2008 pension reports came out they placed New Jersey's
unfunded liability at $34.4 billion. I place it at $133 billion now.

State unfunded healthcare is projected at $59.7 billion. I figure it’s around $150 billion.

Not exactly chump change!

  1. The economy is so bad...

    CEO's are now playing miniature golf.

    Even people who have nothing to do with the Obama administration
    aren't paying their taxes.

    Hotwheels and Matchbox stocks are trading higher than GM.

    Obama met with small businesses to discuss the Stimulus Package: GE,
    Pfizer and Citigroup.

    McDonalds is selling the 1/4 ouncer

    Parents in Beverly Hills fired their nannies and learned their
    children's names

    A truckload of Americans got caught sneaking into Mexico

    The most highly-paid job is now jury duty

    Dick Cheney took his stockbroker hunting

    People in Africa are donating money to Americans

    Mothers in Ethiopia are telling their kids, "finish your plate, do
    you know how many kids are starving in the US?"

    Motel Six won't leave the light on

    The Mafia is laying off judges

    And finally...
    Congress says they are looking into this Bernard Madoff scandal.
    Hey, neat...the guy who made $50 billion disappear is being
    investigated by the people who made $750 billion disappear.

  1. Some state government mandates price health insurance out of reach

D o w n s i z e r - D i s p a t c h

Quote of the Day: "If Obama screws up health care where will the Canadians go?" -- sign seen at a protest event

Subject: NEW CAMPAIGN! The dirty secret about expensive health insurance

Do you need health insurance coverage for . . .

  • Maternity care, if you're a single male
  • Infertility, if you don't want a family
  • Alcoholism, if you don't drink

If you live in New York state, then you (or your employer) must pay for all these things, by law, or go without health insurance.

It's even worse in New Jersey, where the law only permits four basic health insurance plans, each with its own cluster of mandatory coverages. As a result, family premiums run from $2,631.41 to $6,467.58, per month. (Source: "America's Health Care Crisis Solved" by J. Patrick Rooney and Dan Perrin, page 113).

People who can't afford those premiums (and few can) must go without health insurance.

Similar situations exist in other states . . .

Health insurance is too expensive because the politicians have made it that way. They've bowed to lobbyists who want to use the coercive power of government to mandate coverage for . . .

  • The medical equivalent of oil changes and tire rotations
  • Or things like maternity care for single males, infertility treatments for people who don't want families, and alcoholism therapy for people who don't drink.

These laws corrupt the very nature of insurance. Insurance is supposed to cover unlikely but expensive procedures, NOT simple blood tests, or massages, or acupuncture, or chiropractic adjustments, or anything else we could afford to pay out of pocket, if only so many of us weren't being gouged by legally inflated insurance premiums.

Now the politicians want to redesign the entire American health care system from the top down, in one giant step, to supposedly fix a problem they created in the first place. But, instead of enacting a "grand plan" that will impact, and potentially harm, everyone, and that we may never get rid of once it's in place, the politicians should start by taking a few simple steps to clean up the mess they've made.

Fortunately, not all states have mandatory coverage laws as bad as New York and New Jersey. True major medical coverage is still available in many states, but only if you happen to live in one of those places. Congress can fix this problem very easily. They should pass a law permitting you or your employer to buy insurance regulated by other states. This would . . .

  • Enable you or your employer to shop for better deals across state lines
  • Put pressure on state governments to liberalize their insurance regulations

. . . is sponsored by, Inc. -- a non-profit educational organization promoting the ideas of individual liberty, personal responsibility, free markets, and small government. Operations office: 1931 15th St. Cuyahoga Falls, OH 44223, 202.521.1200

To subscribe to our free e-newsletter Downsizer-Dispatch, go to

  1. California public college tuition is FAR too low

RIDER COMMENT: I added the following to my ongoing “Breaking Bad”article comparing CA with the other states. I’ve included the latest updated version of my article in this edition of this rant. Keep in mind that you can read recent Rider Rants, plus the latest version of my Breaking Bad article online at

California – a destitute state threatening to let citizens die if we don’t pay ever higher taxes – still gives away college educations at fire sale prices. Our community college tuition is by far the lowest in the nation.

How low? The average community college tuition in other states is 4.5 times higher than California CC’s. This ridiculously low tuition results in a 30+% drop rate for class completion. In addition, many California CC students fill out a simple form that exempts them from ANY tuition payment at all.

On top of that, California offers absolutely free adult continuing education classes – a sop to the upper middle class who can well afford to pay tuition. In San Diego, over 1,400 classes for everything from baking pastries to ballroom dancing are offered totally at taxpayer expense.

  1. Latest “Breaking Bad” article on California vs. other states

Breaking Bad: California vs. the Other States

by Richard Rider, Chairman, San Diego Tax Fighters

Version 1.41 Revised 22 May, 2009

Phone: 858-530-3027

Here’s a depressing comparison of California taxes and economic climate with the rest of the states. The news is breaking bad, and getting worse:

California has the 2nd highest state income tax in the nation. 9.55% at $48,000. 10.55% at $1,000,000

By far the highest state sales tax in the nation. 8.25% (not counting local sales taxes)

Highest state car tax in the nation – at least double any other state. 1.15% per year on value of vehicle.

Corporate income tax rate is the highest in the West. 8.84%

2009 Business Tax Climate ranks 48th in the nation.

Fourth highest capital gains tax 9.55%

Second highest gasoline tax (58.3 cents) in the nation (April, 2009). When gas is $3.00+/gallon, we are numero uno.

Fifth highest unemployment rate in the nation. (April, 2009) 11.0%

California’s 2009 “Tax Freedom Day” (the day the average taxpayer stops working for government and start working for oneself) is again the fourth worst date in the nation – up from 28th worst in 1994.

1 in 5 in LA County receiving public aid.,0,4377048.story

California prison guards highest paid in the nation.

California teachers easily the highest paid in the nation.

California now has the lowest bond ratings of any state, edging out Louisiana.

California ranks 44th worst in “2008 lawsuit climate.”

In 2005 (latest figures), for every dollar Californians sent to D.C. in taxes, we got back 78 cents – 43rd worst.

America’s top CEO’s rank California “the worst place in which to do business” for the fourth straight year (3/2009). But here’s the interesting part – they think California is a great state to live (primarily for the great climate) – they just won’t bring their businesses here because of the oppressive tax and regulatory climate.

Consider this quote from the survey (a conclusion reflected in the rankings of the characteristics of the state): California has huge advantages with its size, quality of work force, particularly in high tech, as well as the quality of life and climate advantages of the state. However, it is an absolute regulatory and tax disaster.”

With 12.1% of the nation’s population [36,756,666 divided by 303,824,640], in February, 2009 California was responsible for 20.9% of the newly unemployed. To state it differently, in February California’s percentage growth in UNemployment was 72.7% above the national average.

California, a destitute state, still gives away college education at fire sale prices. Our community college tuition is by far the lowest in the nation. How low? Nationwide, the average community college tuition is 4.5 times higher than California CC’s. This ridiculously low tuition devalues education to students – resulting in a 30+% drop rate for class completion. In addition, many California CC students fill out a simple form that exempts them from ANY tuition payment at all.

On top of that, California offers thousands of absolutely free adult continuing education classes – a sop to the upper middle class. In San Diego, over 1,400 classes for everything from baking pastries to ballroom dancing are offered totally at taxpayer expense.

California residential electricity costs an average of 28.7% more than the national average. For industrial use, CA electricity is 48.6% higher than the national average (11/08).

It costs 38% more to build solar panels in California than in Tennessee – which is why European corporations have invested $2.3 billion in two Tennessee manufacturing plants to build solar panels for our state.

Consider California’s net domestic migration (migration between states). From April, 2000 through June, 2008 (8 years, 2 months) California has lost a NET 1.4 million people. The departures slowed this past year only because people couldn’t sell their homes.

These are not welfare kings and queens departing. They are the young, the educated, the productive, the ambitious, the wealthy (such as Tiger Woods), and retirees seeking to make their pensions provide more bang for the buck. The irony is that a disproportionate number of these seniors are retired state and local government employees fleeing the state that provides them with their opulent pensions – in order to avoid the high taxes that these same employees pushed so hard through their unions.

As taxes rise and jobs disappear, we lose our tax base, continuing California’s state and local fiscal death spiral. This spiral must stop NOW.

NOTE: If you would like to receive my free periodic “Richard Rider Rant” e-newsletter with more of this type of information and analysis, just drop me an email at To see the latest version of this “Breaking Bad” column, plus samples of my free “Richard Rider Rant” e-newsletter, go to my blog at

  1. John Murtha Airport a stunning monument to earmark waste

RIDER COMMENT: One of the best (well, worst) examples of earmarks gone goofy is the John Murtha Airport in Pennsylvania. Even the liberal media marvel at the level of arrogant waste this project represents.

John Murtha is a powerful Democrat Congressman. Naturally the people in his district love him for all the pork he brings home.

This is the fundamental flaw in district elections. In such governmental bodies, the primary loyalty of a representative is to his or her district – the hell with everyone else.

The Murtha Airport makes the “bridge to nowhere” look like frugal spending. Hundreds of millions have been spent on this lavish airport that last year averaged 20 passengers a day – split among its three “sewer pipe” flights to Washington, DC. In addition, sweetheart government contracts have been given to Murtha friends and even to his son – without competitive bidding. And yes, Obama has approved giving $800,000 in additional stimulus money to the airport.

For a good quick video telling the tale, check out this ABC News story:

For more detailed info, read this WASHINGTON POST article:

  1. Cohen cons complicit comrades in media

RIDER COMMENT: Periodically San Diego media publishes articles or quotes by Donald Cohen with the local Center for Policy Initiatives. Here’s his latest piece – an attack on Prop 13.

Aside from Donald Cohen being fundamentally wrong on just about everything, the real problem I have with Cohen, CPI AND the media is the lack of disclosure as to just what this outfit is, and who funds it. Here’s the comment I wrote online in response to his article:

Let’s have a little full disclosure here. Donald Cohen is a career labor union official who now runs the union-progressive financed Center for Policy Initiatives. This outfit is not a “think tank” — it’s a labor union propaganda mill.

Cohen has never seen a tax or government bond he didn’t like. NEVER. And he would never support a spending cap (as Prop 1A pretends it is) unless he knew (as do I) that it is filled with loopholes.

Now, there’s nothing wrong with being biased in one’s viewpoint. Lord knows I am!

But the difference is that when a conservative/free market/limited government/libertarian think tank (propaganda mill, if you prefer) is quoted, it is identified as to its bias — as well it should be.

Unfortunately, there are bogus “think tanks” in CA that (though nondisclosure) are not properly identified by the media as to their ideology. The CPI is one of these outfits.

12. Rider interviews lurk on KUSI TV news website

RIDER COMMENT: Among a number of recent media interviews, I did a quick Sunday AM debate on Prop 1A with my friendly opponent Fire Chief Augie Ghio. To watch the debate, go to: and then find my "show."

Oddly enough, the video does not run on MY computer (either Firefox or Internet Explorer), but runs fine on my wife's less powerful computer.

13. More Rider lurking on KUSI

RIDER COMMENT: I’ve taped a half hour KUSI show on San Diego People. It will run tomorrow (Sunday, 24 May) at 10AM on KUSI TV (channel 9). It’s about the just completed special proposition election, the California budget problems, and what needs to be done.

It was filmed in three segments within the half hour:

· The interviewer and me.

· The interviewer and Ruben Barrales, CEO of the San Diego Regional Chamber of Commerce.

· The three of us together discussing matters.

I think it went well, and the show will likely be posted up on their website by Monday or Tuesday.

You’ll be amused and probably puzzled by Mr. Barrales’ primary solution – “Call and write your state legislators and governor, telling them what you don’t want cut.” Yeah, THAT’LL solve California’s budget problems! Fortunately I had more concrete proposal to deal with the issue.

14. Soak the rich, lose the rich

RIDER COMMENT: Below is a terrific Wall St. Journal article by Arthur Laffer and Stephen Moore , detailing an issue I’ve been raising and reraising. Raise taxes – especially state and local taxes – and watch your area’s tax base erode. Nice to have actual studies documenting this logical cause and effect, and such broad dissemination as the Journal.

  • Need a Real Sponsor here

Soak the Rich, Lose the Rich

Americans know how to use the moving van to escape high taxes.


With states facing nearly $100 billion in combined budget deficits this year, we're seeing more governors than ever proposing the Barack Obama solution to balancing the budget: Soak the rich. Lawmakers in California, Connecticut, Delaware, Illinois, Minnesota, New Jersey, New York and Oregon want to raise income tax rates on the top 1% or 2% or 5% of their citizens. New Illinois Gov. Patrick Quinn wants a 50% increase in the income tax rate on the wealthy because this is the "fair" way to close his state's gaping deficit.

[Commentary]Chad Crowe

Mr. Quinn and other tax-raising governors have been emboldened by recent studies by left-wing groups like the Center for Budget and Policy Priorities that suggest that "tax increases, particularly tax increases on higher-income families, may be the best available option." A recent letter to New York Gov. David Paterson signed by 100 economists advises the Empire State to "raise tax rates for high income families right away."

Here's the problem for states that want to pry more money out of the wallets of rich people. It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states.

And the evidence that we discovered in our new study for the American Legislative Exchange Council, "Rich States, Poor States," published in March, shows that Americans are more sensitive to high taxes than ever before. The tax differential between low-tax and high-tax states is widening, meaning that a relocation from high-tax California or Ohio, to no-income tax Texas or Tennessee, is all the more financially profitable both in terms of lower tax bills and more job opportunities.

Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.

Did the greater prosperity in low-tax states happen by chance? Is it coincidence that the two highest tax-rate states in the nation, California and New York, have the biggest fiscal holes to repair? No. Dozens of academic studies -- old and new -- have found clear and irrefutable statistical evidence that high state and local taxes repel jobs and businesses.

Martin Feldstein, Harvard economist and former president of the National Bureau of Economic Research, co-authored a famous study in 1998 called "Can State Taxes Redistribute Income?" This should be required reading for today's state legislators. It concludes: "Since individuals can avoid unfavorable taxes by migrating to jurisdictions that offer more favorable tax conditions, a relatively unfavorable tax will cause gross wages to adjust. . . . A more progressive tax thus induces firms to hire fewer high skilled employees and to hire more low skilled employees."

More recently, Barry W. Poulson of the University of Colorado last year examined many factors that explain why some states grew richer than others from 1964 to 2004 and found "a significant negative impact of higher marginal tax rates on state economic growth." In other words, soaking the rich doesn't work. To the contrary, middle-class workers end up taking the hit.

Finally, there is the issue of whether high-income people move away from states that have high income-tax rates. Examining IRS tax return data by state, E.J. McMahon, a fiscal expert at the Manhattan Institute, measured the impact of large income-tax rate increases on the rich ($200,000 income or more) in Connecticut, which raised its tax rate in 2003 to 5% from 4.5%; in New Jersey, which raised its rate in 2004 to 8.97% from 6.35%; and in New York, which raised its tax rate in 2003 to 7.7% from 6.85%. Over the period 2002-2005, in each of these states the "soak the rich" tax hike was followed by a significant reduction in the number of rich people paying taxes in these states relative to the national average. Amazingly, these three states ranked 46th, 49th and 50th among all states in the percentage increase in wealthy tax filers in the years after they tried to soak the rich.

This result was all the more remarkable given that these were years when the stock market boomed and Wall Street gains were in the trillions of dollars. Examining data from a 2008 Princeton study on the New Jersey tax hike on the wealthy, we found that there were 4,000 missing half-millionaires in New Jersey after that tax took effect. New Jersey now has one of the largest budget deficits in the nation.

We believe there are three unintended consequences from states raising tax rates on the rich. First, some rich residents sell their homes and leave the state; second, those who stay in the state report less taxable income on their tax returns; and third, some rich people choose not to locate in a high-tax state. Since many rich people also tend to be successful business owners, jobs leave with them or they never arrive in the first place. This is why high income-tax states have such a tough time creating net new jobs for low-income residents and college graduates.

Those who disapprove of tax competition complain that lower state taxes only create a zero-sum competition where states "race to the bottom" and cut services to the poor as taxes fall to zero. They say that tax cutting inevitably means lower quality schools and police protection as lower tax rates mean starvation of public services.

They're wrong, and New Hampshire is our favorite illustration. The Live Free or Die State has no income or sales tax, yet it has high-quality schools and excellent public services. Students in New Hampshire public schools achieve the fourth-highest test scores in the nation -- even though the state spends about $1,000 a year less per resident on state and local government than the average state and, incredibly, $5,000 less per person than New York. And on the other side of the ledger, California in 2007 had the highest-paid classroom teachers in the nation, and yet the Golden State had the second-lowest test scores.

Or consider the fiasco of New Jersey. In the early 1960s, the state had no state income tax and no state sales tax. It was a rapidly growing state attracting people from everywhere and running budget surpluses. Today its income and sales taxes are among the highest in the nation yet it suffers from perpetual deficits and its schools rank among the worst in the nation -- much worse than those in New Hampshire. Most of the massive infusion of tax dollars over the past 40 years has simply enriched the public-employee unions in the Garden State. People are fleeing the state in droves.

One last point: States aren't simply competing with each other. As Texas Gov. Rick Perry recently told us, "Our state is competing with Germany, France, Japan and China for business. We'd better have a pro-growth tax system or those American jobs will be out-sourced." Gov. Perry and Texas have the jobs and prosperity model exactly right. Texas created more new jobs in 2008 than all other 49 states combined. And Texas is the only state other than Georgia and North Dakota that is cutting taxes this year.

The Texas economic model makes a whole lot more sense than the New Jersey model, and we hope the politicians in California, Delaware, Illinois, Minnesota and New York realize this before it's too late.

Mr. Laffer is president of Laffer Associates. Mr. Moore is senior economics writer for the Wall Street Journal. They are co-authors of "Rich States, Poor States" (American Legislative Exchange Council, 2009).

15. Rich team owner flees his state – verifies he left because of high taxes

RIDER COMMENT: The migration of rich California taxpayers to income tax-free states is sometimes called “the Tiger Woods effect.” Tiger USED to be a California resident. But years ago – after gaining star power success as a golfer and endorser – he moved to Florida, saving millions annually in taxes, while California loses the benefit of his earning power and spending.

Here’s a more recent example of a wealthy tax refugee leaving a state. NY has just added a temporary “millionaire tax” which brings wealthy New York residents to about 9% (and raises NYC residents to over 12%!). Apparently it’s enough to drive out some rich people – even NY state residents not paying the oppressive NYC combined income tax.

Recently Tom Golisano, owner of the Buffalo Sabres, founder of Paychex, and one of the wealthiest men in New York, told a Rochester lunchtime audience he was changing his residence from NY to FL because the NY Legislature passed the Millionaire's Tax, raising the New York personal income tax rate from about 7% to 9%. His personal income disclosure was revealing.

“I’m not happy about it by any means. But we have a state that continues to be run like this and you compare the state of Florida and seven or eight other states — Florida has no income tax at all, 6 percent sales tax versus 8 percent (NY) sales tax and 1 percent of property tax to market value compared to an average of 3.5 percent in upstate New York.

“I don’t expect anyone to feel sorry for me, but a number of friends close to me said I should say this. My tax savings just on income tax will be $13,800 per day. Per day. Now if it has this kind of effect on me imagine the effect on a lot of New Yorkers and what’s going to happen to our state as long as we keep allowing this to happen year after year after year . . . .”

Had he remained in NY, his personal income tax bill would have risen by about $1M per year - from $3.5M to $4.5M. By relocating to Florida, that income tax goes to zero.

Because he had been a severe critic of NY tax policy over the years, his move to Florida was barely remarked upon outside of Upstate NY, and the few downstate comments were in the nature of "good riddance". But his disclosure created quite a stir, and a lot of conversation Upstate. There has been a lot more discussion about how long it will make sense to remain a NY taxpayer before following our children to the states less under the influence of the public employee and health care unions and their pension obligations.

16. Concrete proof that Prop 13 did not erode California property tax revenue

RIDER COMMENT: After the dramatic rejection by California voters of Props 1A-1E, we are again hearing from Big Government fans claiming that our problem is primarily Prop 13, which somehow “cheated” government out of its rightful tax dollars. Typical was a short critique by Loren Kaye, a lobbyist for the California Chamber of Commerce, a big business outfit that favors most tax and bond measures as long as businesses get their subsidies, and are not the primary taxpayers of the measures.

Below is a slightly fleshed out version of what I wrote in response. With all due immodesty, I consider my response to be devastating -- crushing the canard that our budget problems are somehow all Prop 13's part. My reposte is succinct and easy to grasp, so share it with others.

I suggest the stats I referenced for San Diego County needs to be gathered locally by taxpayer activists throughout the state, and used to discredit the nonsense emanating from our opponents.

BTW, Loren Kaye is a paid CA Chamber of Commerce lobbyist (well, he works for the CA C of C’s bogus “think tank” that pushes for higher taxes and the repeal of Prop 13). Kaye vigorously campaigned across the state in favor of Prop 1A-1E, which is in character with his past positions favoring higher taxes, more bonds and bigger government.

Indeed, Kaye was flown into San Diego for our SD UNION-TRIBUNE editorial board meeting on these props. We kicked his butt, but then, his butt didn’t have a leg to stand on (don’t dwell on that thought).

RIDER COMMENT ON LOREN ARTICLE: Note that Loren includes not a single data point to make his case against Prop 13. Wise decision on his part.

Because if one looks at the history of property tax REVENUES (not rates), you find that Prop 13 is no problem at all -- except for profligate spenders.

Take my San Diego County. Please.

According to the SD County Tax Assessor, in 1977 -- the year BEFORE Prop 13 took effect -- our countywide property tax revenue was about $639 million. For this 30 June concluding 2008-2009 fiscal year, our county assessor is projecting revenues of $4.656 BILLION. For every property tax dollar collected in 1977, the county today collects $7.29.

During that time frame, our county population has grown about 83%, and inflation has gone up about 260%. Hence property tax revenues today are substantially higher than the bloated PRE-Prop 13 year, even after adjusting for inflation and population growth.

Loren demonstrates the typical multipartisan big government apologist mentality -- blame it all on Prop 13 -- without ever looking at the actual HISTORY of what happened after Prop 13 was passed.

17. You SHOULD have invested in rich credit card companies – or not

RIDER COMMENT: President Obama is running for reelection – as is the habit of all first term Presidents. Naturally he wants to support popular policies – as long as such policies also advance the size and power of central government.

One easy target is credit card companies. EVERYONE hates credit card companies.

So Obama has decided to meddle in that industry. Using the wisdom of Solomon on meth, he’s decided to make good credit risks pay for bad credit risks. Now THAT will foster more personal responsibility, right? But of course, the more people who are dependent on government for “protection,” the more likely such folks are to vote for their perceived Protector.

Good politics. Dreadful economics.

And fundamentally unfair to the prudent folks controlling their family budgets.

But at least we know that for decades the rapacious credit card companies have been cleaning up. The greedy bastards have been screwing us all for years, right? These wealthy corporations and their fat cat shareholders can well afford to take a hit, in the interest of social justice (however “social justice” is currently defined).

Would that we had all been smart enough to have INVESTED in such companies. After all, deep down we all want to be fat cats. But of course, hindsight is 20-20.

Only thing is, no one actually LOOKS back to see what they could have made. It’s just assumed that the profits would have been substantial.

I decided to look at Capital One Corporation (symbol COF), since its main business seems to be credit cards. It’s well known, and aggressive in its marketing.

Ten years ago, COF was priced at about $58. Now it’s priced at $23. It reached a peak price of about $87 in the giddy days of 2006, and then tumbled to a low of $15 last December.

COF pays an annual $1.50 dividend – a current 6.5% yield. While the dividend percentage is very good, that payout would not have made up for the abysmal stock price decline. Bottom line: COF would have made a lousy investment.

How can this be? Every simple KNOWS that the credit card companies make money hand over fist. Annual fees, late fees, high interest, merchant fees – how can it not be a booming business with huge profit margins?

Answer: Unrecoverable bad debt. Credit card providers have to eat a LOT of bad debt – even in good times. Our court system lets people file bankruptcy far too easily, discharging their debt obligations.

Add credit card fraud. Companies eat such losses – not the person whose card (or card info) was stolen.

Then there’s that annoying open market restriction on big profits – damnable competition. And this is a competitive business.

The credit card business is NOT an industry with guaranteed profits, or even high profits. If it were, the stock would have done a heck of a lot better than history shows us was the case.

So here is Obama et al telling the credit card companies that they can’t charge the full cost of bad debt to the high propensity bad debtors. Instead, the companies have to charge the GOOD DEBT customers. Is anyone surprised?

Obama will run the credit card companies with the same consummate skill he’s demonstrated wasting billions on the Big Three auto companies. The top priority in the Detroit fiasco was the labor unions – not the shareholders, or bondholders, or the future viability of the companies. That’s S.O.P. for the Obama administration.

But, to be fair, Obama never promised to improve the business climate – only that he would make things “fair” – providing “change.” For Obama, narrowing the gap between rich and poor is far more important than economic progress and the financial health of the economy.

As long as we are all going downhill together, that’s just fine with Obama and his core supporters. Hey, it works for Castro’s Cuba!

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