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While interesting, the data is not presented in the most coherent fashion. What matter is not what fraction of the total debt is associated with these states, but what is the debt per citizen (after all, NY and CA are among the largest states).
Since the five “red” states (New York, California, New Jersey, Michigan and Massachusetts) account for 26.5% of the US population, while Georgia, Tennessee and Florida account for 11.1%, we see that the public debt per resident is about 3 times as large in the group of five compared to the group of three.
To lower order, here are some GDP/capita figures: NY $57K, CA $50K, NJ $54, GA $41K, TN $40K.
Given these data, I wouldn’t attribute the public debt of NY, CA or NJ to a tax shortfall. Their problem is that they are trying to do too much, not that their citizens are not productive enough to pay taxes.
“their problem is that they are trying to do too anything”
… fixed that for ya.
So typical. I can’t believe that we have to keep arguing that this most basic form of thievery is wrong. I’ve been so pissed at the GOP, I almost forgot how the Democrats managed to push their fascism on us. One pushes the police state, one pushes the welfare state, and they both push the nanny state.
I’m sure it has nothing to do with the fact that New York is one of the few states that pays more in taxes to the federal government than they get back in services and funding. It’s hard to keep a positive balance when Uncle Sugar is taking the money from your state and giving it to some other states.
If you look at the balance of payments, it’s all those red, “pro-business” states that are the big welfare queens and it’s we blue “anti-business” states that are paying the bills.
Chuchundra: Since that calculation, while correct, ignores the fact that the greatest expenditures of the fedgov in those states are on military bases and national research labs, it’s not particularly useful.
Though, truth be told, I’ll happily trade the NYSE for the nuclear weapons programs at Los Alamos and Sandia.
#3: Matt, one would think that the nanny state and police state go hand in hand, eh?
http://stiffrightjab.com/2008/08/04/fischer-outrage-in-idaho-feds-send-man-to-prison-for-protecting-town-from-flooding/
I’ll never get economics.
I went to the store here in North Carolina to get a watermelon, and all they had were California watermelons, so I asked the clerk if I could get a watermelon from NC, he informed me that I could not, because they had all been shipped to CA.
[...] take a pint at a time Balko links to this story about how vampire states (and the Vampire State) are awash in red ink, but [...]
Am I missing something? What does the fact that NY pays more in fed taxes than they get in fed money have to do with their state budget? NY state spends more money than they bring in, no? Isn’t that what the article says?
Well, but taxes and productive are most likely related. Increase taxes and people will be less productive. People determine how much work they do (i.e. how productive they are going to be for a given level of education and ability) based on the after-tax return on that level of work. Increase the tax rate and the after-tax return will decline resulting in a decrease in work effort…at least in theory.
Similarly for investments in say education. I’m going to invest in education up to the point where the marginal unit of education is equal the the marginal benefit which will likely include the interest rate. Since people care about the after tax return and interest income is taxed we’d have to look at the after-tax rate of interest here. The higher the tax rate the lower the after-tax interest rate and hence lower education. Now the latter can be partially offset by lowering the cost of education via subsidies, but that also increases you tax requirement and hence your tax rate assuming a balanced budget requirement, which a state like California has.
And this is just for individuals and the decisions they make. When we look at corporations the higher the corporate tax rate the fewer firms you’ll have in any (competitive) market. They will either relocate or simply shut down. There are firms that are on the margin–i.e. those firms that are on point of either staying in the market or leaving. Raise the tax rate and those firms will most likely decide to shut down. Bill Clinton’s moronic comment to the pizza store owner to simply raise prices is not an option in a competitive market. Sure the price in the market will go up, but precisely because the corporate tax has forced those marginal firms out of business.
So this idea that it isn’t a tax shortfall ignores the connections between tax rates an the decisions made by market participants. This doesn’t mean that these states also don’t spend gobs of money.
Hmmm…humorous, but I don’t believe it.
Yes it was meant to be a joke, but it is also true. You can grow about any fruit, vegetable, or plant in most states; however you go to your local store and it is from another state often. Even if you live in say Dallas you can get cheese from Wisconsin in about every store you walk into, but drive out of the city and see farms with cows all over the place. Now go to Wisconsin, and guess where you can find cheese from.
Mack – Wisconsin? They are famous for cheese.
MacK,
I doubt you are seeing oranges from say Florida being shipped to California and California Oranges being shipped to Florida. To ship from one state to the other it seems to me that both have to be true.
CA: P(FL) – P(CA) > T(FL)
FL: P(CA) – P(FL) > T(CA)
P(FL) = Price of oranges in FL, T(FL) = Transportation cost to Florida. Similarly for P(CA) and T(CA). Now, if we make the simplifying assumption that T(FL) = T(CA) = T then the above reduces to,
P(FL) > P(CA) + T for the CA orange grower.
P(CA) > P(FL) + T for the Florida grower.
Now do you see the problem? The above implies the following,
P(CA) > P(FL) + T > P(CA) + 2T or
P(CA) > P(CA) + 2T.
This is only possible if T < 0 which seems downright silly save for the possibility of transportation subsidies–i.e. you get paid money to transport oranges.
Mack –
You might want to look up the theory of comparative advantage, I think it’ll answer your question. Here are three explanations that I found, but there are others as well that say the same thing:
http://www.answers.com/topic/comparative-advantage
http://www.econlib.org/library/Topics/Details/comparativeadvantage.html
http://www.netmba.com/econ/micro/comparative-advantage/
The theory of comparative advantage is a fine explanation, but only if florida is transporting oranges to CA and CA sending avacados to florida. In other words, each state will tend to specialize in which ever crop(s) it has a comparative advantage in producing. For example, California can grow oranges, but the land is more valuabe used for housing, so there are fewer and fewer orange groves. If this is somewhat less so in Florida then Florida might very well enjoy a comparative advantage in orange growing/exporting.
This is only possible if T < 0 which seems downright silly save for the possibility of transportation subsidies–i.e. you get paid money to transport oranges.
Another possibility would be that oranges (or whatever) might not be fungible–there may be some difference between California oranges and Florida oranges. People in California might prefer the taste of orange varieties that don’t grow well in their state, but do grow well in Florida; people in Florida might prefer the taste of oranges that grow better in California.
supercat,
Yes that is possible, but I’m doubtful. Here in Cali most of the prime orange growing land is being turned into homes, condos, apartment buildings and strip malls. At least that is my impression evertime I drive through Orange county. Yeah, anecdotal evidence, but there is a reaason Orange county is called Orange county.