More on California Tax-Services Model – William Voegeli Responds to Comments

Last week I blogged about a very interesting article in the Manhattan Institute’s City Journal by Claremont Review of Books contributing editor William Voegeli titled “The Big-Spending, High-Taxing, Lousy Services Paradigm” (Autumn 2009).  It compared the tax-services models of California and Texas.  VC commenters were spirited as ever and raised a number of important questions.

Although I haven’t had the pleasure of meeting William Voegeli, I took the liberty of contacting him through the Claremont Institute and asked if he might have any additional thoughts for us, particularly responding to VC commenters.  Mr. Voegeli was kind enough to say yes, and has sent along the following response, below.  Let me add, on behalf of the VC community, myself as well as readers and commenters, our great thanks for engaging with us.  And let me add to the VC commenting community, that in the spirit of the original article, you might call Volokh Conspiracy a … Low-Taxing, High-Services blog!  Mr. Voegeli:

Dear Prof. Anderson:

Thank you for bringing my City Journal article (http://www.city-journal.org/2009/19_4_california.html) on California and Texas to the attention of the Volokh conspirators, and for your generous and thoughtful analysis (http://volokh.com/2009/11/02/the-california-versus-texas-model-and-public-choice/) of the piece.  Your post elicited many . . . spirited comments.  It would be cumbersome to address them individually, but I can offer a few points that speak to some of the general questions your readers brought up.

My essay argues that it’s not enough to look at how much states and localities spend because how well they spend is very important.  I understand several people in the comments section to be saying that this principle applies to the tax side of the equation, too.  Thus, California’s problem is not so much that it is a high-tax state but, as one commenter says, that it is a “constrained-and-erratic tax” state.

That’s a fair point.  The combination of direct democracy and the state’s belief that vast optimism could overcome mundane realities left Californians believing they could somehow be “taxed like libertarians, but subsidized like socialists,” as Troy Senik recently said (http://www.nationalaffairs.com/publications/detail/who-killed-california) in National Affairs.  Not only did it prove impossible to achieve the best of both worlds, but the political impotence created by undertaking the effort helped bring about the worst of both: “In a grim irony, Californians are now being taxed like socialists and subsidized like libertarians.”

Proposition 13 is certainly not beyond criticism.  Some things need to be said in defense of the law and its advocates, however. Lots of poorly drawn laws and state constitutional amendments have been passed at the ballot box.  The ballot initiative is never going to be a precision instrument, however, and it’s unfair to hand the voters an axe and then judge their work as if they possessed a scalpel.

The best way to have averted the enactment of Proposition 13 would have been if California’s political establishment in 1978 had put forward a better alternative, one that addressed Californians’ anxieties about tax escalation without 13’s flaws.  Instead, Gov. Jerry Brown and the Democratic legislature held off for as long as possible in offering any sort of response to the people angry and fearful about rapidly rising property taxes, in the hope that the political problem would blow over.  When it didn’t, they finally devised a tax limitation alternative to 13 whose distinguishing feature was that it didn’t guarantee that anyone’s taxes would be limited.

In the 31 years since Proposition 13 was enacted that bait-and-switch problem crops up over and over.  When people here complain that taxes are too high, especially given the doubtful quality of the public services they purchase, the enlightened response is always that taxes aren’t high so much as they’re arbitrary and complicated.  The correctives proposed to enhance the quality of the citizen’s tax-paying experience all purport to make taxes fairer and simpler, but their one clear outcome is that taxes would be higher.  Thus, the reforms that would streamline how California’s governments collect money would have the consequence of relieving those governments of any obligation to devise better, smarter and fairer ways to spend it.  It takes a trusting spirit to believe that this outcome would be an accidental byproduct of tax reform.

A final note.  One commenter argued that government is expensive in California largely because housing is expensive, thus disproving the idea that California governments spend their money in undisciplined, ineffective ways.  Two points:

  • 1) California’s state and local employees are the best compensated in the country (http://www.census.gov/compendia/statab/tables/09s0448.pdf) and the differences between them and their counterparts in states that are also expensive are not trivial.  Local government employees make 11.5% more in California than Connecticut, and 21.4% more than those in Massachusetts.  State workers in California make 13.1% more than New York’s and 19.9% more than those in Massachusetts.
  • 2) The high cost of living in California, especially the high cost of housing, is a problem for government, in that it puts pressure on it to increase the pay scale for public employees.  That fact does not preclude the possibility that the high cost of housing is, in significant measure, a problem caused by California’s governments.

Let me close on this point by bringing in an expert witness, Edward Glaeser of Harvard’s economics department and Taubman Center for State and Local Government.  In a Los Angeles Times article (http://www.latimes.com/news/opinion/commentary/la-oe-glaeser4-2009mar04,0,4085382,print.story) earlier this year he said:

Although California is a populous state, it still has plenty of land. Santa Clara County, the home of Silicon Valley, only has about 2.2 people per acre. Even in denser places, such as Los Angeles, there is plenty of room to build.

California’s growth has slowed because the state has made it increasingly difficult to build new homes. There is an almost perfect correlation between the growth of an area and the amount of housing that is permitted in that area. California has some of the toughest land-use regulations in the country, which are often justified as environmental measures. When high housing demand is met with restrictions — not construction — California homes become unaffordable and new construction goes somewhere else.

Best regards,

Bill Voegeli