We Vote With Our Feet

This is a theme I have returned to many times over the years, because I myself have done it a few times.

I once lived in Cleveland and worked in suburban Parma, OH. Each city had a municipal income tax of 2%. When I finally gave up on my rough, decaying Cleveland neighborhood and moved to Parma, I gave myself a 2% raise. I got to thinking that I had to be an idiot to stay where the schools sucked, the crime rate was high, my auto and homeowners insurance rates were higher, and my commute was longer besides.

Later, I moved to Indianapolis. The Indiana tate income tax was lower than Ohio's, 3.1% to 7%; the sales tax was lower, then 6% to 8%; the property taxes were then about a third of what Ohio's were. Again, I thought what an idiot I would have to be choose Ohio.

Then we moved to Fishers. Again, the schools are better, the crime lower, the property taxes lower, the county income taxes lower, the insurance rates lower. Yet again, the thought of what kind of idiot I would have to be to choose Indy over Fishers came to mind, and continues to every time I learn of a violent crime in our previous neighborhood.

I expect to see a lot of migration in the next few years, as high tax jurisdictions are exposed for their empty rewards. From an AP report:

The number of people leaving California for another state outstripped the number moving in from another state during the year ending on July 1, 2008. California lost a net total of 144,000 people during that period — more than any other state, according to census estimates. That is about equal to the population of Syracuse, N.Y.

The state with the next-highest net loss through migration between states was New York, which lost just over 126,000 residents.

Two high-tax states lose population- before the economy really began to tank! It isn't news to me. We're going to see a lot more of it. Just wait until the legacy costs of those states and their cities do to them what they've done to GM, Ford, and Chrysler.

Among other things: California's unemployment rate hit 8.4 percent in November, the third-highest in the nation, and it is expected to get worse. A record 236,000 foreclosures are projected for 2008, more than the prior nine years combined, according to research firm MDA DataQuick. Personal income was about flat last year.

With state government facing a $41.6 billion budget hole over 18 months, residents are bracing for higher taxes, cuts in education and postponed tax rebates. A multibillion-dollar plan to remake downtown Los Angeles has stalled, and office vacancy rates there and in San Diego and San Jose surpass the 10.2 percent national average.

What I observed first-hand about Cleveland seems to hold true anywhere: The combination of high taxes and lousy schools is lethal. People of means and high values flee. Cities become magnets for the poor and the stupid.

In 1950, Cleveland's population was a shade under 915,000. By 2006, Cleveland had lost more than half its population. Chart.

Cities don't learn. Rather than lowering the taxes so as to attract people of means, they are wed to the glories that are their 'services', so they raise taxes evermore in order to keep revenues up, thereby chasing evermore people from their jurisdiction. The population gets poorer and dumber.

There are exceptions. Places like New York can get away with it because of the incredible cultural offerings. But, Detroit? Cleveland? Indianapolis? I think when the legacy costs come home to roost, you will see an exodus from NYC as well.

Blame the highways. Blame 'white flight'- although blacks with means flee all the same. Blame anything, but unless you start looking at tax policy and ask people of means just how much they value the 'services' provided by government, you're going to miss the mark. Notice that people of means leave the places with the most services, and taxes. They prefer to leave what they built behind for others, starting completely new in another area, just to be left alone, away from the greedy hands that gobble taxes.

I will probably vote with my feet again, if Fishers continues to grow, and add services, and employees, and legacy costs. I don't want any of that stuff, but the Bigger Brains create it and fatten it, so I'll eventually flee it.

It should become an environmental cause to lower taxes. Hey- it would prevent sprawl!

(h/t: Duncan Adams, for the California article)

Governments And Prices

I've been blogging for five years about the relationship between taxes and the relative attractiveness of cities. Also, about how government officials don't get said relationship. I had the issues put clearly before me once again, but in a discussion about water policy, in a post title "BassAckWards":

Although I welcome this bit of news (higher prices!), both JN and I noticed the perverse order of things:

1. People use less water.

2. Prices rise.

As I have mentioned before, this order of events is terribly annoying to people. The reason it occurs so often in water is because most water utilities are run on a break-even basis, i.e.: if they sell less water, they have to raise prices to generate the same revenue.

Mainly, government officials never seem to understand the relationship between price and revenue. If the price goes up, consumption goes down. That's great for water consumption and for consumption of other natural resources, if conservation is your goal. It's disastrous in this example, because the city is trying to generate more revenue in response to lower usage. Their result is going to be even lower usage, hence, even lower revenues. (Still good for conservation, though.) If they wanted greater usage, they should lower the price. Well, government officials aren't to be confused with the sort of people who have a clue about economics.

Which brings me back to taxes. Cities that drive away businesses and people of means with their higher taxes tend to look at their falling tax revenues and conclude that to make up the shortfalls, they need to raise taxes. 

Well, duh! That's what drives people away! The revenues aren't going to rise. The population is going to fall. Just look at Cleveland, Detroit, and a host of other cities that have chased their tails, and their wealth away, by failing to understand the relationship between price and use.

As the man so named his post, most government officials are BassAckWards.

h/t Aguanomics