Thursday, April 29, 2010

Proposition 13 is not a good target for California's failures

The time to blame Proposition 13 for California's status as a failed state has long passed. The public understands this; the ruling elite refuses to believe it in the slightest.
Is it possible that California's pro-13 majority, denounced for decades as shortsighted and greedy, is actually on to something? The reason people refuse to believe that California's taxpayers keep too much money and its tax collectors don't get enough is, as Brown now says, that there's "so little confidence in state government."

The core of that distrust is the belief that California's public sector suffers not from the lack of money but from the failure to use the ample funds it does receive efficiently and beneficially. There's no shortage of facts about the revenue and spending sides of government, California-style, to justify that suspicion.

California, in the first place, is not a state with low taxes. It's not even a state with especially low property taxes. In 2007, the year of the most recent Census Bureau data comparing state finances, California's state and local governments levied $1,141 in property taxes per capita, less — but only 11% less — than the corresponding average, $1,288, for the 49 other states and the District of Columbia.

If we broaden the view to look at all taxes (property, income, sales and excise taxes) paid to state and local governments by individuals and corporations, California's governments received $4,731 per resident, 14% more than the $4,160 average outside California. Only eight states and the District of Columbia had a higher per capita tax burden.

Not only is California a high-tax state, it is even more conspicuously a high-revenue state. Things that aren't taxes, such as fees for government services, often have a high degree of "taxiness," as Stephen Colbert might say. The Golden State, routinely described as desperately short of funds because of Proposition 13, brought in $12,776 per capita in governmental income from all sources — taxes, fees, federal aid, charges for government-administered insurance and revenue from government-owned utilities — in 2007. Only three states and the District of Columbia received more.

Thursday, April 22, 2010

On revising state constitutions, the shorter the better?

An interesting post at Marginal Revolution:
Using public choice economics, how might we redesign the Constitution of California? Lawmakers from both parties have proposed this idea, plus there were (failed) attempts to call a new constitutional convention through a referendum. Did you know that the operative constitution from 1879 is the third longest in the world, after Alabama and India?

I see a few options on the table:

1. Eliminate the 2/3 legislative majority required to pass a new budget.

2. Eliminate popular referenda.

3. Move closer to a Swiss-like "veto only" system for referenda.

4. Eliminate the power of referenda to authorize state-level expenditures.

5. Cap state-level expenditures.

6. Regulate state treatment of pensions more strictly, to encourage fiscal responsibility.

7. Amend the constitution to make it harder to...amend the constitution.
As Tyler notes California has the third longest constitution in the world. Reformers should aim for shorter, distinct Constitutions that affirm limited government. I think California needs to eliminate popular referenda that mandate the legislature to spend on specific programs.

Wednesday, April 14, 2010

Wall Street Journal on Obama's new PLA rule

WALL STREET JOURNAL: "We'd list more but newsprint is expensive."
Only 15% of the nation's construction workers are unionized, so from now on the other 85% will have to forgo federal work for having exercised their right to not join a union. This is a raw display of political favoritism, and at the expense of an industry experiencing 27% unemployment. "This is nothing but a sop to the White House's big donors," says Brett McMahon, vice president at Miller & Long Concrete Construction, a nonunion contractor. "We've seen this so many times now, and how many times does it have the union label? Every time."

It's also a rotten deal for taxpayers. White House economist Jared Bernstein blogged that these agreements "significantly enhance the economy and efficiency of Federal Construction projects." In fact, the carve-outs put an end to open, competitive federal bidding, which means higher project costs. They also mean taxpayers must finance the benefits and work rules of union members.

Mr. Bernstein could check all this with the Department of Veterans Affairs, which last year commissioned an independent study showing the Obama project labor agreements would likely raise the VA's construction costs for hospitals by as much as 9% in three of five markets—Denver, New Orleans and Orlando. In two others, New York and San Francisco, the study predicted a mixture of small cost increases and small cost savings.

The study reported "strong evidence to suggest that the result of a PLA [project labor agreement] that dictates work rules, double benefits, team structure and activities on non-union type contractors will be that production costs will increase—given these union-related requirements." It also rebutted a favorite liberal argument that such agreements lead to less labor strife, noting that there are "many examples for projects where there have been strikes but also no strikes—unrelated to whether or not a PLA is in place."

The Veterans study mirrors academic work showing that project labor agreements raise the costs of construction by 10% to 20%. The Beacon Hill Institute at Boston's Suffolk University in 2006 investigated the costs of building 126 Boston-area schools. It found project labor agreements raised winning bids for school construction projects by 12% and actual construction costs by 14%.

Boston's Big Dig, Seattle's Safeco field, Los Angeles's Eastside Reservoir project, the San Francisco airport, Detroit's Comerica Park—all were built under PLAs marked by embarrassing cost overruns...
Recent Beacon Hill Institute publications on Project Labor Agreements:

BHI Survey: Overwhelming majority of state voters oppose a key feature of Project Labor Agreements

Cato Journal: Why PLAs are not in the public interest

Project Labor Agreements on Federal Construction Projects: A Costly Solution in Search of a Problem

Friday, April 2, 2010

Cow tax and tax administration in Massachusetts

Move afoot to repeal the cow tax in Massachusetts.
“For me to go out and count every chicken that is moving or standing still is a lot of work,” said Ms. Dumont.

Share BHI content