More on Seiler's Law

Steve, you are right when you write, “I would be thrilled if Californians and their political leaders would sit down and decide the following: What public services do we need? How do we pay for them? What services can we do without? How do we get rid of them?”
I would be thrilled, too. And that’s what’s going to happen now that the state is broke.
You mention my “magic 6.2 percent.” But it isn’t magic. It’s an empirical observation. As I mentioned, it’s like Moore’s Law in physics.
It’s not cut in stone. So, if you wish, refute it. Find some flaw with it, and I will print it here on CalWatchDog.com, including any graphs you may come up with. I like graphs.
What’s curious is that my theory now has been tested and validated. I first noticed it back in 2002-03. Since then, we’ve had a major boom-bust cycle with the economy, yet the 6.2% limit has held up well. Spending, for example, has not risen to 8% and stayed there with no budget deficits.
You write, “I’m sure the elderly Alzheimer’s patient who is deprived of home care or the low-income worker who loses child care will feel better because they are helping us get closer to your magic 6.2 percent.” Well, I’m sure the Alzheimer’s patient doesn’t like it when he falls and breaks a hip. Or the low-income worker doesn’t like it when his child falls down and breaks an arm. Yet the law of gravity is not changed because of their likes and dislikes.
One of my points was that Seiler’s Law works even if taxes are increased, as they were last year. So, your call to increase taxes again, if heeded, will not bring higher budget revenuess. The budget general-fund spending, whatever you raise in taxes, will not rise for long above the 6.2% of personal income earned by Californians.
Supposed you quadrupled the income tax rates in California, so that the middle-class tax rate of 9.55% would go to 38.2 percent. Would you get quadruple the tax revenues? Obviously not. The state soon would be hit with 50% unemployment. People would flee even faster than they already are.
If you want to spend more tax money, you have to expand the tax base. One way would be the revenue-neutral (let me emphasize: it would raise the same amount of money) flat-tax idea of Art Laffer that I wrote about several months ago: http://www.calwatchdog.com/2010/01/15/new-flat-tax-idea-revived/
But that is highly unlikely to happen, even though Jerry Brown proposed a national flat tax in his 1992 presidential bid.
The main point of my article is this: There are limits in life. Seiler’s Law is one of them.

I always like the replies to my posts from StevefromSacto. Even though I usually disagree with him, he gets me thinking a little more, a little deeper, about what I write. He wrote a reply to my recent article, “CA budget tops sensible limits.” I thought I’d put his reply, and my answer, here as well.

My article was about my observation that California’s state general-fund budget never for long rises above 6.2% of personal income.

StevefromSacto replied:

“Then, in 1990, voters passed Proposition 111, which was sold as a way to build more roads. In fact, it effectively gutted the Gann Limit.”

But it also built needed roads, John. State budgets are not just numbers; they are about meeting the needs of the people of our state.

I would be thrilled if Californians and their political leaders would sit down and decide the following: What public services do we need? How do we pay for them? What services can we do without? How do we get rid of them?

But we can’t have that conversation as long as one side refuses to pay for the programs we need. We can’t make rational decisions when one side declares that health and human services programs are unnecessary but that unlimited spending on prisons is essential.

I’m sure the elderly Alzheimer’s patient who is deprived of home care or the low-income worker who loses child care will feel better because they are helping us get closer to your magic 6.2 percent.

I answered:

Steve, you are right when you write, “I would be thrilled if Californians and their political leaders would sit down and decide the following: What public services do we need? How do we pay for them? What services can we do without? How do we get rid of them?”

I would be thrilled, too. And that’s what’s going to happen now that the state is broke.

You mention my “magic 6.2 percent.” But it isn’t magic. It’s an empirical observation. As I mentioned, it’s like Moore’s Law in physics.

It’s not cut in stone. So, if you wish, refute it. Find some flaw with it, and I will print it here on CalWatchDog.com, including any graphs you may come up with. I like graphs.

What’s curious is that my theory now has been tested and validated. I first noticed it back in 2002-03. Since then, we’ve had a major boom-bust cycle with the economy, yet the 6.2% limit has held up well. Spending, for example, has not risen to 8% and stayed there with no budget deficits.

You write, “I’m sure the elderly Alzheimer’s patient who is deprived of home care or the low-income worker who loses child care will feel better because they are helping us get closer to your magic 6.2 percent.” Well, I’m sure the Alzheimer’s patient doesn’t like it when he falls and breaks a hip. Or the low-income worker doesn’t like it when his child falls down and breaks an arm. Yet the law of gravity is not changed because of their likes and dislikes.

One of my points was that Seiler’s Law works even if taxes are increased, as they were last year. So, your call to increase taxes again, if heeded, will not bring higher budget revenuess. The budget general-fund spending, whatever you raise in taxes, will not rise for long above the 6.2% of personal income earned by Californians.

Supposed you quadrupled the income tax rates in California, so that the middle-class tax rate of 9.55% would go to 38.2 percent. Would you get quadruple the tax revenues? Obviously not. The state soon would be hit with 50% unemployment. People would flee even faster than they already are.

If you want to spend more tax money, you have to expand the tax base. One way would be the revenue-neutral (let me emphasize: it would raise the same amount of money) flat-tax idea of Art Laffer that I wrote about several months ago: http://www.calwatchdog.com/2010/01/15/new-flat-tax-idea-revived/

But that is highly unlikely to happen, even though Jerry Brown proposed a national flat tax in his 1992 presidential bid.

The main point of my article is this: There are limits in life. Seiler’s Law is one of them.

— John Seiler

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  1. StevefromSacto
    StevefromSacto 31 May, 2010, 09:25

    Appreciate your comments, John. One of the major problems we have in this state (and the country) is that we can’t have rational give-and-take discussions on important issues without being targeted by MoveOn or having our heads put on a stick by the Rabid Right.

    As to this subject, what frustrates me the most is that we’re constantly being told that we can only solve our budget problem with program cuts. That just is not so.

    I’ve already cited the example of the oil severance tax. Here’s another:

    “Last year, as part of a state budget deal, corporations were given an alternative to use the ‘single-sales’ system beginning in 2011. It’s estimated that state revenues would drop by some $900 million in the 2010-11 fiscal year and at least $2 billion every year thereafter – presumably offset by expanded operations in the state. Democrats contend, justifiably, that with huge budget deficits and the specter of wholesale slaughter in state services, it’s no time to consciously cut revenues.

    “Schwarzenegger and other Republicans say such tax breaks are needed to pull the state out of recession but offer no concrete evidence that they would do so. The Legislature’s budget analyst, Mac Taylor, argues cogently that shifting to a single-sales factor should be delayed to 2013….”

    We HAVE choices, John. Even without arguing about “expanding the tax base” or making BP pay an oil severance tax, surely we can close unnecessary tax loopholes and postpone corporate tax breaks until the economy improves.

    You know the old expression: “When you find yourself in a hole, the first thing to do is stop digging.” Tax breaks like the one above would simply make the hole deeper.

    Reply this comment
  2. John Seiler
    John Seiler 31 May, 2010, 09:41

    Thank you for the reply, Steve.

    I’m still plumping for Laffer’s flat-tax idea, which I mentioned. It would bring about an instant economic recovery, which would increase the tax base, and so tax collections.

    Jerry Brown backed a national flat tax in his 1992 presidential run, and knows Laffer. Jerry is just quirky enough to propose it for California, should he be elected.

    Not that I want Jerry to become governor. Or Meg or Poizner, either. At this point, I’m backing Hiram Johnson.

    Reply this comment
  3. StevefromSacto
    StevefromSacto 1 June, 2010, 10:30

    “I would be thrilled if Californians and their political leaders would sit down and decide the following: What public services do we need? How do we pay for them? What services can we do without? How do we get rid of them?”

    I’m glad you would also be thrilled with this. But you may be missing a key point. This isn’t just about eliminating programs we don’t need. It is about paying for those we do need. And if that requires new revenue, so be it.

    Reply this comment

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