Monday, February 3, 2020

Red State, Blue State

Why are taxes in Blue States 400% higher than in Red States?  You read that right - 400% or more!

Many of the folks who live here on retirement island have a home "up North" as well, doing the snowbird bit, as we used to do.   And before you decry these folks are "bougie" bear in mind that a lot of middle-class people "snowbird" between homes up North and places in Florida.   Even Comrade Sanders has a vacation dacha on Lake Champlain, in addition to his other three properties.

We sold our house in the finger lakes, in part because the taxes were topping $8000 and going up.  We have a friend who lives in Elmira who bought a very nice two-bedroom house for $70,000.  I'm not talking a fixer-upper or some run-down slum, but a nice house in a nice neighborhood.   Her property taxes are $3000 a year.

Our house, which according to Zillow is worth about $500,000, is taxed at $2800 a year - less than my friend in Elmira.   We have income tax, and so does New York.  Ours is less, as is our sales tax.  I asked my friend, who is over 70, if they signed up for senior tax relief.  "I did!!" they said, "$3000 a year is the reduced amount!"

Here in Georgia, when I turn 65, I no longer have to pay school tax.  My property taxes will drop to $600 a year.  You read that right.  Six hundred bucks!

I have talked to a number of folks who still have their houses in New York or New Jersey, and they tell me of $10,000 or $15,000 tax bills - and not for very fancy houses, either.   Some folks are paying as much as $30,000 a year in property taxes alone!   Houses on the water are really socked - we knew a family in Ithaca who had to sell a house that had been in the family for generations (her grandfather built it as a railroad camp) when the property taxes went to twenty grand.  It didn't even have that much frontage.

All of this begs the question - where the fuck is all this money going?  It is not like New York has 25% higher taxes, or even 50% higher taxes, but taxes that are four or five times as much as many Southern states.   That's a freaking lot of money - where is it going?   Where is it being spent?   And why are people so complacent about it?

As to the first two questions, I have some theories and observations:
1.  Corruption:   We all laughed at Tony Soprano, who broke our hearts and broke people's kneecaps, one at a time.  He was so funny, wasn't he?  Actually, he wasn't, and that show illustrated how organized crime adds to the cost of everything "up North".  Building anything can cost twice as much, as labor unions (run by organized crime) want a "taste" of the action.  Crooked contractors pad government contracts and pay kickbacks to politicians.  If you want to run a restaurant, you have to deal with mafia-related food suppliers.  Even taking out the trash means having to deal with the mob.  Corruption costs a lot of money - and while they keep trying to root it out, it is embedded in the culture. 
2.  Everyone on Welfare:  When we had our place in New York State, there were a huge number of social programs available to people - in addition to Federal programs.  I was at a doctor's office one day and asked how much I owed.  The receptionist shushed me and said, "We don't take payment here and we wish you would not mention it, it would shame the other patients who can't pay.  We'll send you a bill!"   I noticed a pamphlet on her counter and took one - it recounted how I was eligible for medical assistance payments even if my income was as much as $45,000 a year.   That is a lot of money today (not far off the median) and was even a lot more back then (ten years ago). 
Various other social programs were foisted off by the Federal Government to the States.  New York foisted these off to the counties, and in some counties, people on assistance outnumbered people working.   As a result, taxes skyrocketed and the few remaining working people flee, creating a death spiral. 
3.  Big Government:  Back in the 1960's, the "liberal wing" of the Republican Party was headed by politicians such as Nelson Rockefeller and George Romney, governors of New York and Massachusetts, respectively. They promoted the idea of big, efficiently run government that would use modern management principles to bring low-cost services to the people.  Rockefeller built a huge government complex in Albany, and created a huge bureaucracy to go with it.  This added a lot to the cost of government. 
I was raised to believe that a car became an immobile piece of iron, once the tags were removed from it and that if we didn't pay the registration fee on our boat, we'd all go to jail.   It was weird to move to the South, where you could put a piece of cardboard in the window saying "tag applied for" and get away with it - at least for a week or so.    Boat registration was a form you filled out and you kept the lower half and your old registration numbers, even if from another State.   In a few months or so, they'd send you an official registration and number.   Things were more low-key. 
Red States, it seems, find ways of doing things less expensively, and part and parcel of this is just giving up on trying to control things that, in the greater scheme of things, really don't matter much.   We have no safety inspection or emissions inspection in rural Georgia (Atlanta has emissions, but that is a big city).  Oddly enough, you don't see a lot of unsafe cars cruising around, or people belching smoke out of their tailpipes.   Turns out, you don't have to nanny people all that much - most people tend to do what is in their own best interests.   Oddly enough, in inspection-happy New York, limousines run off the road and kill over a dozen people.  Big government doesn't always mean better government.
4.  Big Government Salaries:  The myth of the underpaid teacher or government employee is largely a myth - in Blue States.   Manufacturing jobs have largely fled those States, leaving government employ as the best place to find a good-paying job with a pension plan.   Many of the people who worked in government up North retire down here and live like kings.   The salaries and benefits of government employees "up North" are easily double what they are down here.  And some argue that since it costs so much to live there, they need more money - but since they are paid more, taxes go up, and then the cost of living increases - repeat ad infinitum.   It is like the stagflation we had in the 1970's.  Auto workers wanted more money to buy the cars they made, which got more expensive because the cost of labor went up - like a dog chasing its tail. 
5.  Schools:   In the rural county in New York where we had our house, we had two large schools built in the 1970's.  One of them had a planetarium (!!)  From what I understand, the country was still paying off the bonds on those - which may have been built by Tony Knuckles Construction Company. Due to declining population, they proposed combining the schools.  The elementary school principle objected - "how will the students reach the drinking fountains?"  (and "what about my salary?").  The school systems are gold plated and luxurious.   While my home town resisted the urge to build a "look at me!" school (by a very, very narrow vote) other districts built schools with Olympic swimming pools and auto shops. 
Of course, down South, it is all about football - and some schools have stadiums that put colleges to shame.   But even with lower school taxes and lower teacher salaries, the school systems are not much better or worse than those in New York State.  As Washington, DC has illustrated, you can spend the most money per capita of any school district in the county and still have the worst test scores.  In fact, when teaching becomes all about the money - and a union job - I suspect the quality of education declines as well.
Each of these factors, taken one at a time, isn't enough to account for 400% delta in tax rates.  But taken together, they result in an economic climate that discourages industry and encourages people to leave.  Our biggest export in New York State was college graduates. Since there were no opportunities within the State, many people leave when they graduate, as I did.   The only mistake I made was coming back.   I forgot how expensive things could be, and what low expectations people had.

But the last question I raised bears analysis - why do people put up with this?   To be sure, they can't change the government there, it is entrenched - although in some rural areas, people are fed-up with the Democratic machine.  And the corruption insures that nothing really will change.  The only option people have is to leave.

I talk to people with these staggering tax bills, and they chuckled about it.  "Ain't it crazy?" they say, "I'm paying $15,000 a year in property taxes!"   They can afford it - or so they think - because they are the last of the pensioners in this country.  Either they have a pension from a company that has yet to become insolvent, or they are retired teachers or government employees with pensions.   A retired schoolteacher couple down the street each draw $75,000 a year in pension - a combined $150,000 a year (!!) which some would claim "isn't a lot of money" but it is about three times what I am living on in retirement.

As you might guess, though, they have a mortgage and car payments and credit card debt.  Since they have this "steady paycheck" in retirement, they believe that things are going OK, so long as their income exceeds their expenses.  And for them, maybe that is true.  For me, I have to worry whether this small pile of money will last until I am dead.  Pensioners don't have that calculation to make.

Since they have a high income in retirement, they are chasing deductions - hence the mortgage and hence the lack of worries about high tax bills.   It's all deductible!   But of course, you can't deduct your way to wealth and Donald Trump pushed though a tax bill that penalizes people who live in high-tax States with high mortgages.   Deductions for mortgage interest and State and local taxes are now capped - and a lot of people in New York and New Jersey are pissed. Many are moving to lower tax States such as Florida.   Donald Trump was one of the first to move.

Of course, if more people move away, then what happens?  The burden of big government and big social programs now falls on the shoulders of fewer people.  The very rich buy a house in Florida and claim residency there.  The middle-class might not have that choice.

This raises the question - will people change their minds about big government and big social welfare programs and vote for change?   If they do, it will be a long time coming, as these sort of attitudes are very entrenched, and it is very hard to oust crooked politicians from Albany.   But maybe people are starting to rethink things - after all, New York has elected a Republican mayor - albeit one that is now running for President on the Democratic ticket.

Myself, I realized that waiting for massive social change wasn't a strategic move.   We sold the lake house - it was fun for nearly a decade, but pricey.   We still return to New York - in the camper, which is a lot cheaper than owning property there.  Plus, it is a lot less maintenance.   But as "native New Yorkers" it saddens us to see the Empire State having fallen from grace so far. 

But having lived there - and in Flint, Michigan, I can say that the best thing you can do is leave places like that behind and seek out greener pastures.   Sadly, many folks feel trapped by areas like this - they can't imagine moving or living anywhere else, oftentimes because they've never been more than 100 miles from their home.    And yes, we saw a lot of that in Central New York - people from Ithaca thinking that Rochester or Syracuse were akin for foreign countries (and vice-versa), even though they were little more than an hour or so away.

It is so sad.  But that's people for you - deer in the headlights.  Paying taxes through the nose and shoveling snow and thinking, "this is the only way to live, as it is always been the way I live."