“I’m moving out of state”: employees are trying to avoid California income tax
recode.net
recode.net
This argument is scale invariant, you could say that any level of taxation justifies any level of services. The moral argument for not aggressively minimizing your tax burden has to pass through the question of how effective the state is at spending the money it collects, and so it must also depend on the question of how other states manage to do the same work the California Government does (having schools, roads and police) with much lower rates of income and sales tax and a much less smaller tax base.
Exactly! I'm okay with higher taxes as long as the jurisdictions who collect them are good stewards of the money. First, governments must prove to me that they can efficiency provide promised services before convincing me to hand over more.
How is it that other nations/jurisdictions can have lower taxes than the USA, but still manage to provide for universal healthcare, free education, and a well funded military (Russia with a 13% flat tax and Singapore with a 22% top rate come to mind)?
I just don't understand where the tax money is going in the USA at both federal and state levels. Why do we get such low value for our tax revenue? Also, my problem with tax systems is they are often about "punishment" and politics instead of providing government services...
That's a common misconception. Yes, personal tax rate is 13%, but your employer will have to pay for health insurance (5.1), social services (2.9), and pension fund (22). Overall, you get closer to 43% flat tax rate.
The big difference is - you never see these moneys in the first place. Your paycheck is a net pay, all deducts are applied by the accounting department and only 13% rate is widely advertised as one the lowest in the world.
I have been considering becoming a Russian resident (and eventually citizen ~ yes, crazy). Do you know if self-employed people are liable for the other taxes you mentioned?
The US has substantially lower tax burden (share of GDP in taxes) than the OECD average, about 1/4 of GDP collared to about 1/3 as the OECD average.
> Russia with a 13% flat tax
Russia has a 13% flat income tax, but also has a national VAT (with different rates, not sure what the overall average is), and a social insurance tax that is regressive and has a rate of 26% up to about 3/4 of the median income.
Russia is a petro-state run by the Mafia.
But they still manage to provide a situation where you're not stuck paying student loans for decades or go bankrupt because you happen to get sick. Why can't the USA, a nation with higher levels of freedom and transparency, provide the same despite collecting more tax revenue? I'm not convinced higher taxes is the answer; there's an efficiency problem. Solve that, then we can talk about raising taxes.
You can find it online with a simple Google search. Pensions, medicare and social security are the bulk of the spending.
In aggregate, less than half, even if you add Medicaid and other public health spending on top of Medicare, so not the bulk.
Well, the part of the national debt at issue (at least as regards Social Security and Medicare) is also part of the national assets; since “intragovernmental debt” sits on both sides of the balance sheet.
What about property tax?
Some of California's higher budget may be explained by higher property prices - employees need to be paid more for the same standard of living, government property purchases cost more, etc.
(1) They don't do the work the CA government does, which is why CA has a larger tax base.
(2) They have higher property taxes; California has the third highest median home price of the 50 states plus DC, yet the 10th lowest tax bill on median priced home of the same 51 jurisdictions.
the 10th lowest tax bill on median priced home of the same 51 jurisdictions
The average of existing tax bills (with embedded Prop 13 reductions) is meaningless for comparing to new-property taxes in another state.
Since Prop 13 both sets the maximum rate of property tax and sets the procedural requirements for increasing any tax in California, everything about property tax in California is “Prop 13 effects.”
I suspect what you mean is “effects of the Prop 13 limits on annual assessment increases”.
> The average of existing tax bills (with embedded Prop 13 reductions) is meaningless for comparing to new-property taxes in another state.
The point wasn't comparing new-property taxes, it was addressing “how other states manage to do the same work the California Government does (having schools, roads and police) with much lower rates of income and sales tax and a much less smaller [sic] tax base.”
One of the ways they do it is by having higher property taxes. Often at effective tax rates higher than the prop 13 limit on nominal rates, even before the effect of assessment limits. (And, in the broader context of the thread, consideration of moving out of California, if the alternative is staying in place in California, property taxes with the Prop 13 assessment limit are absolutely the right comparison with new-home taxes in other states.)
Anyway...
"... if the alternative is staying in place in CA, property taxes with the Prop 13 assessment limit are absolutely the right comparison..."
No, because even if staying within California, moving generally means your new residence starts at "full retail" tax basis... so that is the proper comparison. (Had Prop 5 passed, it would be very different.)
The conversation about taxes always seems to be so shallow to the point of being binary. One side saying we need to increase taxes to fix things, the other saying we need to decrease them.
What about efficiency? We can do a lot more with what we have.
Of course, there is Prop 13, which greatly harmed the state's ability to collect taxes.
Finally, I'd argue that efficiency is impossible as long as the government continues to use the same just-in-time models that the private sector uses. The main problem being that there is no guarantee of work or quality when a contractor is hired by a government. We either need those guarantees or we need to switch back to in-house work.
Getting Corps out of Prop13 would massive increase state revenues by taxing the rich.
Trickle-down theory is a sham that tries to justify not taxing the rich. It has been proven time and time again to be unsupported by the data.
Have you ever considered the privilege of drinking water? We should tax that.
What about your car? We should come up with an emissions standard that ONLY APPLIES TO US. 49 state legal? Who's the odd man out? That joker.
What about your rifle and pistol magazines? Let's make manufacturers come up with a standard that literally only applies to our state, in the entire world. That will go over well!
Droughts? HA! That would require improving and building additional infrastructure for our water reclamation system. Surely we can just let it flow into the ocean - water is water, right? PS: we're going to tax it!
Fires? Controlled burns to clear underbrush? You must really hate the environment! Why would you want to burn our precious underbrush?!?!? :(((
That's not legal tax avoidance. That's downright tax evasion and is a crime. If you are making false claims on your tax returns that's flatly illegal. Full stop. Do not pass go. Do not collect $200. Some of these claims made aren't very debatable or up to much interpretation. Saying you live somewhere but you don't is lying and when done on official documents that's illegal and a form of fraud - in this case evasion. You can't claim to live on the East coast but then somehow work in Silicon Valley everyday and your family lives in CA.
Except they aren't.
One example: https://www.newsweek.com/more-native-born-texans-voted-beto-...
So you’re either being facetious and I fell for it, or Texas could use a state income tax to bump up their public education game.
The locals don't agree, and don't like you trying to do so.
Note well: This does not mean that a state income tax idea would be a good idea or a bad one for Texas. It only means that it would be a foreign idea.
This is a key point in the article. California goes out of its way to bend the rules in its favor, and to claim certain people are residents when a basic residency test does not determine that they live there. I have previously read horror stories of people hounded for years, having to fight it out, and either paying taxes they do not owe or accumulating late fees for taxes that they should not owe.
It is fair to set a stricter, objective, residency test. But it isn't fair to treat people the way they are doing it now.
But I don't think that change of legal domicile should be anything but an overt act of volition. If you surrender your driver's license from your old state, and take a replacement from your new state, you have implicitly changed your domicile to the new state. But changing that driver's license may just be a concession to the fact that the new state is where you do most of your driving, and your old state might make it too inconvenient to renew licenses when you are physically elsewhere. Inconvenience alone does not make one's home change. You might physically spend 11.5 months out of every year in State X, but you might also have 2 parents, 1 grandparent, 3 siblings, 2 aunts and uncles, 5 first cousins, 15 old friends, and 30 cemetery burial plots for people whom you knew, and years of memories in State Y. I think your domicile is probably State Y, no matter what State X tries to claim.
I have been where I am now for about ten years, but I still don't consider it "home". I'm only here because this is where the job is. I don't know when, exactly, I can ever return "home", or where it might be when I do, but the only places I have lived so far that really felt like "home" so far were Indianapolis and Madison, Wisconsin. Everywhere else has felt like the place belongs to someone else, and I was only allowed to temporarily stay there by some special indulgence.
Any state that tries to tell me that it is my home, whether I want it to be or not, is probably not one that I'd want to be my home.
My paycheck’s now include the 13% deduction from California :(
I’m leaving this project as soon as possible.
Would happily pay 13% more for federal income tax FWIW.
On the other hand, if the city wasn't there the job wouldn't exist, and nobody is forcing me to work there.
Looking at the CA non-resident form, I don't see how you have to pay taxes in CA:
https://www.ftb.ca.gov/individuals/fileRtn/Nonresidents-Part...
This reminds me of an experiment I read in - I think - Nudge. A random group of people were given the scenario of being at a store and about to buy a box of chocolate for $10. Just before they purchase it they find out they can buy it at a store a few blocks away for $5. Most said they would go to the other store.
Another group of random people were asked the same scenario but with a tuxedo costing $1500. The competitor store a few blocks alway sold the tuxedo for $1495. Most said they would not go to the other store for just a $5 decrease in cost.
Well, no benefit except for the 70% of his time he spends there.
California's budget is about 35% health care (his doctor is probably back in Texas), 20% education (his kids if he has any go to school in Texas), and about 20% to pensions for state workers, which he obviously derives no benefit from. So how do you justify taxing someone who doesn't live here based on the "benefits" they receive?
Things that keep people healthier and smarter, and provide infrastructure and livable wages, do in fact benefit people in the state, resident or not.
I mean, if he's in the 13% marginal tax bracket, that means he's making $1M+ a year. ( https://www.tax-brackets.org/californiataxtable ) The fact that California has such jobs while other states don't have as many is at least partially because the state provides an environment in which such jobs can exist.
Why shouldn’t he contribute to the state that is providing him with income and the services to support that income?
A lot of other states get by with lower state tax simply because they are net receivers of federal taxes which supplements stuff Californians pay for themselves.
Strange this point is so frequently tossed around, despite it being false:
https://www.latimes.com/politics/la-pol-sac-california-feder...
"Lawmakers have long lamented that Californians pay more in taxes than they receive back in services, hanging their hats on a 2007 report by the conservative Tax Foundation that California is a "donor state" that receives only 78 cents in services for each dollar in taxes paid. But state analysts point out that report added extra tax dollars from Californians — beyond those actually paid — to cover the state's share of the federal deficit.
Perhaps more accurate is a 2015 state-by-state review compiled by New York officials, one that puts California much closer to breaking even — about 99 cents in federal services for every real dollar in taxes."
Also, WTF: You took advantage of all of the infrastructure of a state to get rich and now you don't want to contribute back? Shame on you and may karma come around for you.
Easily the most corrupt state I've ever seen; most of the money goes to buying votes.
Without the weather, Los Angeles would lose a huge amount of its appeal. All it would have left is the simple fact that a lot of people already live here. But with its weather, it's like a year-round paradise to many people.
Don't be shy. We promise that we won't move in and ruin it for you all at once.
...No one?
Corruption follows the money. Highly paid jobs follow the money. By an argument purely by correlations and assumptions, I'd say that most of the people on HN have highly paid jobs in states with plenty of people, and plenty of money to spend on the tech industry, and therefore also experience some local corruption.
It's easy for a county, parish, or state to be honest when there's really nothing around to steal and no one rich enough to extort. It's only when someone shows up flashing a big wad of cash that people start to think about how to peel a few bills off of it. But then there are also plenty of places that steal as much as they can from everybody, all the time, no matter how poor, because they're the only ones around, and the system is already in place to do it.
So, in short, all rich counties are a little bit corrupt, because they're where the money is. Poor counties are either all the way corrupt, because that's the only way to pay for their corruption, or not corrupt at all, because there'd be no profit in it.
So by this hypothesis, California, Texas, New York, Florida, Illinois, Pennsylvania, Ohio, New Jersey, Georgia, North Carolina, Massachusetts, Virginia, Washington, Michigan, and Maryland are all at least a little bit corrupt. Vermont, Wyoming, Montana, South Dakota, Alaska, North Dakota, Rhode Island, Maine, Idaho, Delaware, West Virginia, New Hampshire, Hawaii, New Mexico, and Puerto Rico might possibly not be corrupt, or might be sickeningly pervasively corrupt, but you don't live there, so how would you know?
Unlike California, the roads work (the potholes start on 93 as soon as you cross the border to Massachusetts). Let's do a full stop there. California basically doesn't have weather, meaning the simple governmental function of road maintenance should be trivial. Here we have snowstorms (yes, yes California does too ... in the mountains where nobody lives), and somehow the roads are vastly better. Building new lanes or new stretches of highway also takes months instead of decades. Beyond that, despite the existence of copwatch in places like Berkeley, and the lack thereof here, somehow NH police are not insane stormtroopers. Housing outside of Portsmouth is zoned to be easy to build in, so property is what it should cost. Small businesses aren't regulated to death. Streets are safe despite the fact that you can walk around with a submachine gun in your pocket. Water is clean. There is no pollution to speak of. There aren't vast seasonal forest fires because the state doesn't have lunatics preventing normal forestry management practices. I've been here a year and there have been no pitched street battles between gangs of thugs over ... people talking ... in the entire state; a regular fall occurrence in Berkeley (and no doubt other towns in California). Oh yeah, and it took me 20 minutes to get a NH drivers license and register a car; something that would probably take me multiple days in California.
You can talk about corruption as if it is "well this many people went to jail for corruption" -IMO that is a lousy proxy for corruption. Nothing works in California; it is "failed state" level corruption; anarcho-tyrrany except for Google/Facebook oligarch tier people who probably don't pay California taxes either. If I could bribe minor officials like I could in other failed states, it would actually be an improvement over the way California works now. California is an IRL dystopia. Nice weather though, and some interesting people live there out of what I assume is inertia and provincialism.
I recently visited SF, the capitol city of HN's core demographic and my wife and I stood aghast at the sheer filthiness and unseemly nature of the place. Present day San Francisco is a place ripped straight from the pages of a dystopian cyberpunk-ish novel from 20-40 years ago. Excessive wealth cloistered in enclaves surrounded by slums (homeless camps) and a complete degenration of the public square (in a broad sense, I'm referring to all the public spaces in the city center) into a gallery of feces, drug abuse, and general decay all bathed in the glow of private spaces reserved for the wealthy tech elite. The "high tech, low life" aesthetic popularized by that genre has been given life in that city and it is terrifying to see such a nightmare become reality.
The NH economy is 3% the size of California's, with 5.7% the land area, and 3.4% the population. That suggests it has less than 3% the corruption opportunity, because the state still has to accomplish a lot of the same functions with about 3% as much money. Some things scale by land area or population, and other things are simply flat administrative burden, such as keeping the lights on in the sole state legislature building.
Any person wanting to profit from their own corruptibility would therefore not stay in NH, and would not go to Maine or Vermont, who have even less money to be stolen, but would instead go to Massachusetts, which is #11 on the "enough money to steal" candidate list. And take a ladle, to skim off some of the extra money sloshing around Boston.
This suggests that many of our largest (by money) states could be broken up as an anti-corruption measure, to divide the flows from tax revenues into expenditures into more channels, with less flowing through each. A corrupt person can only fish for dishonest opportunities in one metaphorical river at any one time. How corrupt would Illinois be, if Chicago-Naperville-Elgin-Gary were no longer attached to it? How would California differ if Los-Angeles-Long-Beach and San-Francisco-Oakland-San-Jose were no longer part of it? Would the effect be more pronounced in states where the current capital is not also the largest city: New York, California, Illinois, Texas, Florida?
The desired metric--that we want to approximate from the more easily obtainable data--is corruption profits per corruptible individual. Each corruptible individual has an incentive to move to places where that metric is higher, thus performing sleazebag arbitrage between those areas where corruption is endemic.
Are the examples you cited outliers, with explainable reasons for poorly fitting the trend?
Could it be that they are all territories, where crimes of corruption by officials at lower levels in the administrative hierarchy would be investigated by the federal Dept. of Justice from the start, without any states' attorneys-general getting a crack at them first or asking the feds for assistance or joint prosecution? If you separate out DC and the island territories, does the remainder of the set hold up?
Page 26. UNITED STATES ATTORNEYS’ OFFICES FEDERAL PUBLIC CORRUPTION CONVICTIONS BY DISTRICT OVER THE PAST DECADE (https://www.justice.gov/criminal/file/1096306/download)
Have you ever seen Illinois?
https://www.wbez.org/shows/wbez-blogs/long-list-of-illinois-...
Since moving to Alabama, I learned that the county sheriffs get an "allowance" for feeding prisoners in their jails, with little accounting. It should come as no surprise that they buy the cheapest food they can find, without regard to nutrition or foodborne illnesses, and pocket the rest for their private beach-house fund.
You have obviously not spent significant time in New Jersey or Louisiana.
I considered infrastructure to be roads, sewers, water mains, electrical, etc... not necessarily a medical outbreak.
The problem is one primarily of policy and not due to infrastructure being in disrepair. Stating that a typhus outbreak is due to crumbling infrastructure just outright false.
Have you only seen California?
Don't get out much?
https://www.latimes.com/local/lanow/la-me-bullet-train-calif...
Yes, it literally is! It's 13% - that's about the same as sales tax in many places and nowhere near AOC's 70% tax. This is greed, plain and simple. 99% of the world would do almost anything to have this "problem".
Based on your line of thinking, people should be fleeing Belgium in huge numbers. Belgium is in the EU and has land borders with Germany, Luxembourg, the Netherlands and France. Germany is not far off in taxes, but France is at 29.1%, Luxembourg at 31%, the Netherlands at 30.4%. Anyone with Belgian citizenship can work and live in any of these countries without having to apply for any visa or work permit. (so far that also applies to the UK, over the channel, but given Brexit I ignored it)
Most Belgians speak French or Dutch, so language should not stop them.
Yet, despite these rather significant monetary incentives to even move across the border, within a short driving distance from their current location, to countries with the same language, there is somehow not a massive amount of Belgians fleeing the country.
Note that this is tax burden for an average tax payer. Not marginal rates paid by the very few.
In other words: Sure, people act on incentives, but unsurprisingly peoples decisions about where to live are not only down to a few percentage points of taxation. Some will move, many won't, and yes, that is something to take into account when setting tax policies.
1. Government is necessary since some things are best run by public services and without a for-profit motive.
2. What are these things?
3. How much money should be raised to properly run these things?
4. What is the optimum tax rate/policy to achieve this goal?
My framing allows people to say 1. in response, if it is able to specify 2., and if it can then determine 3 and 4.
What it doesn't allow people to do is say "the state is entitled to as much in taxation as it can get away with, because the state also builds roads and hospitals" ('You didn't build that'), or "the state is entitled to use taxation as a proxy for creating equality of outcome" ('This is Class Warfare').
I don’t understand the point of your first paragraph. It’s a caricature of people you call the Left. I have never seen anyone anywhere paint taxation as an unalloyed good in and of itself. Can I suggest that instead of talking in terms of Left/Right that some other dialog be used? This is why I framed things the way I did. There’s not mention of Left or Right. It’s just questions that get at the heart of what being a society means.
I doubt you can large numbers of the Left saying what you claim. Specifically that the reason for wanting to increase taxes is to get rid of wealth inequality. I have heard people say things to the effect that beyond a certain point the wealthy can afford to pay more taxes in order to fund some programs. These things are nuanced and it's not helpful to reduce everything to a slogan.
I find offering the option quite appealing, in the sense that it would hold government strictly to account if it annoys sufficiently large minorities to warrant large splits.
But what the people opposing taxes often tends to forget is that if you want to argue that society should be organized in a fully voluntary way, then the rest of society don't owe you access to any of their public services either if you're not prepared to agree to their terms for interacting with you.
If someone is ok with taking the consequences of that, then, hey, let them, but in my experience the moment you point out the likely consequences, there is a tendency to start crying about how unfair it would be when other people want to exercise their freedoms to refuse to deal with someone not prepared to pay their share. In other words, most of this boils down to wanting to be free to pick and choose how they interact with wider society, without wanting the rest of society to be able to pick and choose how to interact with them.
This is a very silly statement. The small fraction of people who leave has increased a little bit in size.
No, not really.. You're free to choose states with sensible department of revenues.
Wyoming has a 4-6% sales tax, nowhere near the 13% you're arguing about. If capgains of 13% is levied upon 10mil, that's 1.3mil.... while Wyoming's 4-6% sales tax is (obviously less than half that) only levied upon actual purchases (which in practice is way lower).
Seeing as they're talking about 99% of the world elsewhere, it is reasonable to consider sales tax and VAT other than just the US. The vast majority of the worlds population live in countries with VAT rates at or above 13%
Only 3 European countries have VAT rates below 17% (Liechtenstein, Andorra and Switzerland). 19 countries in the Americas have VAT rates at 13% or above. 16 Asian countries (including China and India) have VAT rates at 13% or above. Only 8 of 55 African countries have VAT below 13%
Most also have capital gains tax and dividend taxes well over 13%
...For the highest tax bracket.
Also doesn't apply to capital gains.
Last I recall, Jeff Bezos has a salary under 100k, and the rest is from stock.