Monday, February 25, 2013

Have a Coke and a Tax Hike

NOTE: Updated 28-FEB-2013 with updated Senate Bill number.

California State Senator Bill Monning (Democrat, 17th Senate District) re-introduced his controversial soda tax (SB 229 and previously AB 669), which would levy a $0.01 per ounce tax on every beverage sweetened with a caloric sweetener such as sugar or corn syrup.

Okay, let's do a little math to see the total effect of this proposed legislation.

Johnny buys a 12-pack of 12-ounce cans of regular Coke for $3.60, on sale from a supermarket in Capitola, California.  How much, per can, will Johnny pay?

Divide $3.60 by 12 cans and you find that each can of Coke costs $0.30.

Now add $0.05 per can for the California Redemption Value (CRV), just for the privilege of using a bottle or can in California.

Now add the appropriate sales tax.  The sales tax in Capitola is 8.5% and it applies not only to the cost of the can but also the CRV.  The CRV is NOT a deposit, as commonly thought.  It is a government fee subject to tax.  Therefore, the sales tax applies to $0.30 for the soda plus $0.05 for the CRV.  8.5% of $0.35 is $0.03.

Because regular Coke is sweetened with a caloric sweetener, add Assemblyman Monning's $0.01 per ounce tax for the 12 ounce can.  This adds $0.12 per can.

What's the total cost for each 12 oz. can of regular Coke?

$0.30 for the can of Coke
$0.05 for the California Redemption Value (CRV)
$0.03 for the 7.5% California sales tax plus the additional 1.00% Capitola sales tax
$0.12 for Bill Monning's soda tax (SB 229 / AB 669)
$0.50 total cost for the can of Coke

For that $0.50 can, Johnny paid $0.30 for the Coke and $0.20 in taxes and fees.  Put another way, 60% of Johnny's money went to pay for something he actually wanted while 40% went to fund the California Nanny State.

The $0.30 can of Coke costs 67% more once government taxes and fees are applied.  The soda tax adds 32% over today's current cost, which would not include the soda tax.

Never mind that California ALREADY has ...
  • the nation's 1st, 2nd, 3rd, 5th, and 7th highest state income tax rates thanks to Proposition 30
  • the nation's highest state sales tax rate thanks to Proposition 30
  • the nation's 2nd highest gasoline and diesel taxes

Naturally, beverage companies fear that the additional taxes will cut demand, which is the stated purpose of the legislature.  I have little sympathy for the Coca Cola Company or PepsiCo, who spent a combined $3.7 MILLION to support tax increases on all Californians via Proposition 30.

It appears that beverages sweetened with non-caloric sweeteners are unaffected (at least so far).  There are also dozens of possible loopholes, potentially leading to some very interesting new product offerings by the beverage industry to circumvent the tax.

Also, as pointed out by @TrollColors in response to this piece, retailers will likely adjust the price of sugary and diet sodas to maximize their profits.  The extra $0.12 tax on sugary sodas allows retails the ability to increase prices on diet sodas while still keeping below the sugary soda price.  This action will increase their profits.

One also wonders whether the California Legislature will disallow welfare recipients from purchasing sugary sodas using EBT cards.  In the past, the California Legislature refused to ban tobacco purchases using EBT cards, despite that the California government also collects heavy taxes to combat cigarette use.

See also ...

Wednesday, February 13, 2013

Digging Deeper Into President Obama's Manufacturing Jobs Claim

During his 2013 State of the Union address, President Obama said ..
After shedding jobs for more than 10 years, our manufacturers have added about 500,000 jobs over the past three.
The 500,000 number sounds impressive!  Is it true? Fortunately, the government keeps good records for all this data, so I checked.

The following chart shows the number of those employed in manufacturing (MANEMP) from January, 2008 until today. The minimum over the last three years happened in January, 2010 when the manufacturing workforce fell to 11,460 thousands, or 11.46 million.  The peak manufacturing workforce in the last three years happened in July, 2012 at 11,957 thousands, or 11.957 million jobs.  The difference between the peak and the trough is 497 thousand manufacturing jobs, which is certainly close enough to the claimed 500,000 for government work. However, the current tally through January, 2013 falls slightly to 450,000.

Because I know what the definition of "is" is and I'm semi-fluent in how politicians sometimes manipulate statistical data, my spidey senses were all a tingle from the "over the past three" years statement.  President Obama has been in office longer than three years, right?  How many manufacturing jobs have we created since he took office?  Here's the same chart as before, but now let's measure from February, 2009, when he was first inaugurated as President, until today.  By picking slightly different data points, we've now LOST 436,000 manufacturing jobs.  That's only a difference of 933,000 manufacturing jobs--nearly a million jobs difference--between the President's best-case numbers and the President's term in office.

Yes, I'm quite aware that President Obama was standing way too close when the big chunks struck the proverbial fan after the subprime mortgage bubble collapsed.  I'm also aware that we've bailed out banks, purchased one of the world's largest auto makers (General Motors), spent $878 BILLION on a Stimulus program, spent $3 BILLION on the "Clash for Clunkers" auto rebate that also benefited foreign auto manufacturers, had interest rates near 0% for years, and the Federal Reserve purchased over $1 TRILLION in U.S. debt.  Excuse me for saying, but I would have expected a much bigger jump in manufacturing employment given that amount of rocket fuel.

Yes, it's good that we increased the number of manufacturing jobs in the United States.  But let's compare the ratio of all manufacturing jobs (MANEMP) to the number of all those on non-farm payroll (PAYEMS).  This ration was about 0.1 back in January, 2008 meaning hat about 1 in 10 jobs was in manufacturing.  After the global financial crisis, this number dropped to about 1 in 11.2 jobs and has remained fairly flat over the President's time in office.

How can we be adding jobs but be losing manufacturing jobs as a percentage of the workforce?  Fortunately, total non-farm payroll (PAYEMS) has been slowly clawing its way back after the global financial meltdown. So, despite more manufacturing jobs, their percentage of the total workforce remains roughly the same (and even falling slightly the last few months).

That's the "good" news.  What's the bad news?  The percentage of people participating in the civilian workforce (EMRATIO) remains fairly stagnant and near a 30-year low.  Yes, even after all that rocket fuel.

Likewise, the average duration of unemployment (UEMPMEAN) is at a 30-year high, well above previous levels.  This may be due, in part, to Congress extending federal unemployment benefits to 99 weeks.

In summary, yes, it's good that we have employment growth in the manufacturing sector.  However, that growth is not as robust as the President's claim might lead people to believe.  We still have a long way to go toward a healthy economy, despite the massive infusion of cash, stimulus, and aid into the system.  We've also been in a 30-year trajectory (MANEMP) of lower and lower manufacturing employment, especially after the September 11, 2001 terrorist attacks.  There are many driving forces, including globalization (cost differences, tax policy, new competitors) and improved manufacturing technology (robotics) that lead to improved productivity.

Friday, February 8, 2013

The Great Texas vs. California Smackdown

(or the Great "More Taxes" vs. "More Texas" Debate)

Recently, Texas Governor Rick Perry dared to challenge the All Great and Powerful Oz (aka, California Governor Jerry Brown) with a small radio advertising campaign inviting California businesses to "come check out Texas."  The radio ad was apparently so inflammatory and so very dangerous (just listen) that it prompted a response by Governor Brown, who, always the adult, dismissed the ads as "barely a fart."  Strangely, by even responding to the ads, California Governor Jerry Brown provided Texas with lots of valuable free advertising and publicity.

Even the The Party Mouthpiece (aka, The Sacramento Bee) got in on the act with a poorly-researched editorial dissing Texas.  Now, before we go much farther, it's important to know my biases.  I'm a fourth-generation native California who loves California's natural beauty and many of its fine citizens.  However, I have no love for those fine, free-spending fools that occupy California's capitol dome.

Governor Brown, as any good cheerleader would, accentuates California's positives.  I thought I'd do the same.  For example, thanks to Governor Brown's, union-funded, big-government Proposition 30 tax hike, California now boasts the 1st, 2nd, 3rd, 5th, and 7th highest marginal state income tax rates in the nation. So what if it's bad public policy and a complete abuse of the democratic initiative process.

Poor ol' Texas.  Those fools in Texas don't even have an income tax!

Similarly, Proposition 30 also raised California's state sales tax, which was already the nation's highest before Proposition 30.  Governor Brown just wanted to make sure we didn't lose our first-place position.

In keeping with the theme, California has among the nation's highest gasoline taxes ...

... and among the nation's highest diesel taxes.

California is also one of the nation's leaders in high unemployment, despite its recent fastest-in-the-nation job growth.  Poor ol' Texas just can't seem to generate enough unemployment.

To be fair, California's job market is historically more sensitive to recessions.  Plus, California's unemployment rate has been higher than Texas' for most of the time since 1990.

One criticism of Texas, often heard in California, is "sure, Texas is generating jobs but they're all minimum wage jobs."  Indeed, Texas does have a much higher percentage of jobs that pay at or below the federal minimum wage--especially compared to California.

What many critics forget to mention is that California has an $8.00 per hour state minimum wage that supersedes the federal minimum wage of $7.25 per hour.  Additionally, some cities like San Francisco have an even higher minimum wage of $10.55 per hour.  Simple math dictates that state's with a minimum wage above the federal minimum wage will also have a lower percentage of jobs that pay at the federal minimum wage.  Here's the same chart as above, but this time, states paying a higher minimum wage are highlighted in blue.

As shown later, California, Texas, and Mississippi are the states with the lowest percentage of high school graduates.  No high school diploma usually implies a higher likelihood of a minimum-wage job.  In the most-recent recession, unemployment was highest among those with lower education.  If you compare a state's percentage of minimum wage workers to its unemployment rate, Texas seems to have a natural advantage over California.  Sure, Texas has more minimum wage jobs, which means there are more jobs available to those that have the most difficulty finding employment.  As a consequence, Texas has the lowest overall unemployment rate of the ten most populous states.  Admittedly, due to the cost-of-living differences, a minimum wage income goes a lot farther in Texas than in California. California, by comparison, has fewer minimum wage jobs and suffers from the nation's 3rd highest unemployment rate.  Nevada and Rhode Island have the nation's highest unemployment rates and also have a lower percentage of minimum-wage jobs.

Ample data shows that California's workers with lower educational attainment also have the highest unemployment rates.  The unemployment rate for those in California with less than a high school education was nearly 20% in 2010, or nearly double the national average.  Again, as shown later, California, Mississippi, and Texas are the three states with the lowest percentage of people with a high school education or higher.

California's dismal unemployment rate and the lack of minimum wage jobs fits with California Governor Jerry Brown's philosophy.  During his 1995 radio show, "We the People" on KSRO, Jerry Brown said:
"We need more welfare and fewer jobs. Jobs for every American is doomed to failure because of modern automation and production. We ought to recognize it and create an income-maintenance system so every single American has the dignity and the wherewithal for shelter, basic food, and medical care. I'm talking about welfare for all.
As a consequence, it should be no surprise that California leads the nation with the largest percentage of its people receiving taxpayer-funded Temporary Aid to Needy Families (TANF) welfare benefits.  The people of Texas, obviously being a stupider and more heartily-bred people, just don't need as much government help.  I'll bet those stupid Texans value self-reliance!

Some in California's government complain that Texas has a high poverty rate.  The problem is, they use data from the U.S. Census Bureau that is not measured against the local cost of living.  Ask any Californian and they'll tell you that California has a high cost-of-living.  Using the Census Bureau's Supplemental Poverty Measure (SPM), the poverty level in California greatly surpasses Texas.  This might also explain why so many Californians are receiving TANF benefits.

Texas also stupidly tries to avoid large amounts of debt.  Can you imagine the insanity of NOT spending more money than you take in?  California is deeply in debt because we borrowed so much money to invest in ... what was it again we're investing in?  Well, there is that not-so-high-speed train that even high-speed rail advocates don't like.  Warning:  This chart might be biased in favor of California because it comes directly from the California Treasurers office.

Poor ol' Texans just don't suffer under the yoke of heavy deficits like Californians do.  California Governor Jerry Brown even suggested that maybe Texas should borrow more--you know, for investments.

California's government knows that business is evil and that you should treat them like dirt because, other than generating tax revenues to pay for government services, what good are they?  Texans stupidly think that a thriving economy is actually good for the state and its people.  Not surprisingly, California was one of only four states that proudly received an 'F' for its small business friendliness.  Those stupid Texans were only able to score an A+.

A nationwide survey of chief executive officers--you know, the people that decide to build and invest in businesses--also ranked Texas high and California low as "a place to do business."  On the survey, Texas ranked #1 for eight consecutive years.  Similarly, California ranked DEAD LAST for eight consecutive years.

One of the biggest surprises for me, as a Californian, is the difference in export industry between California and Texas.  Californians are often told that we're the world's 5th, or 8th, or 9th largest economy.  Despite that Texas has a smaller economy and a smaller population, Texas exports more goods than does California and has since about 2002.

California's share of total U.S. exports has fallen and is now below California's share of the total U.S. population.
No doubt, Texas has benefited from growth in the energy sector.  However, Texas exceed the national growth rate in exports in the top five export industries.  As a Silicon Valley worker, it is impressive to see the difference between California and Texas in Computers and Electronics.  California still exports more, but our share is falling.

The investor web-site 24/7 Wall Street compiles an annual list of the best- and worst-run states in America.  While Texas' ratings were more middle-of-the-road, California was ranked at the bottom of the heap for two consecutive years, 2011 and 2012.

Many in California love to brag about California's great companies, like Apple, Google, H-P, Oracle, Intel, etc.  It's funny that they never follow-up on that conversation.  Why is it that Intel hasn't created a new job in California in a decade?  Here, let Intel's CEO explain. Apple creates some amazing technological marvels, don't they?  I wonder how many middle-class manufacturing jobs Apple creates in California.  Also, I wonder what Apple's subsidiary in Reno, Nevada does?

The Sacramento Bee editorial taunted Texas as the "state that ranks dead last in the percent [sic] of its population with high school diplomas."  You'll have to excuse The Bee, being a California newspaper.  According to the latest U.S. Census Bureau data, Mississippi has the lowest percentage of its population, 25 or older, with a high school degree or higher.  Certainly, California at 80.8% ranks higher than Texas at 80.4%, but both rank below the national average of 85.4%.

[UPDATE 14-FEB-2013]:  Apparently, the source of The Sacramento Bee's claim is a different report from the United States Census Bureau, based on the 2011 American Community Survey.  Yep, according to the data table, Texas ranks last in the nation--but only because 'T' comes after 'C' and 'M'.  What The Sacramento Bee failed to tell readers is that California tied Texas and Mississippi for LAST PLACE.  The media will tell you with a straight face that they never distort the data.

If the editors at The Sacramento Bee were smarter, they would have instead pointed out that California has more college graduates than does Texas.  After all, California is home to the technological marvels in Silicon Valley.  Plus, you figure that The Bee would be proud, especially given the amount of money that California's taxpayers spend on our great university system and our students.  Despite massive tuition increases, California's public colleges and universities remain a relative bargain for California residents compared to other states, especially for California's illegal immigrants (sorry all you U.S. citizens in other states).

The highest percentage of college graduates occupy Washington, D.C--and look how well that's turned out for all of us!

Because we're on the topic of education, let's compare the performance of public schools.  The U.S. Department of Education regularly tests students nationally to assess the quality of education in various states and municipalities.  Those dumb hicks in Texas spend even less than the dismal amount spent by California.  Texas students must perform really poorly on those assessment tests, right? 

Okay, so Texas' public school students outperform California's public school students.  Who cares?  California has Silicon Valley, so math can't be that important.  California likely does better in science.

Oops, it looks like Texas does better in science, too.  Well, I'll bet those stupid hicks in Texas can't read.

See!  I told you.  Texas ranks below the national average in reading.  Please disregard California's lower-ranking data point (assuming you can read this). 

The Census data reflects what happened in the past.  The current high school graduation rate and dropout rate represents the present.  According to the United States Department of Education, Texas has a public high school graduation rate above the average of reporting states and above California.

Similarly, according to the United States Department of Education, Texas has a lower high school dropout rate than does California and is also below the average of reporting states.

Also according to the United States Department of Education, Texas has a lower dropout rate among all racial and ethnic groups than does California and than the averages of reporting states.  Texas' worst dropout rate of 4.2% was for Black students--which was still below California's average dropout rate of 4.6% for all students.

Many Californian's are blind to what has happened to our state.  Many live in an insulated bubble called Silicon Valley, near where I live and where I work.  I still have family in the California's Central Valley, where there is a much different reality.  Sure, California boasts the 2012 top-performing metropolitan area in the nation, San Jose, Sunnyvale, Santa Clara, CA--more popularly known as Silicon Valley. Texas, on the other hand, had three cities/regions in the top 10 and no cities in the bottom 50.  California has six cities ranked in the bottom 50 nationally.

In the 2013 Forbes list of the top cities for good jobs, five of the top ten are in Texas with only one in California.

Every year, Forbe's magazine tracks the top 20 most miserable U.S. cities. California has three cities on the list; Texas has none.  In fact, California's most miserable cities are all in the top ten worst, associated with failed cities like Detroit, Michigan and Chicago, Illinois.

Some in California blame all of California's woes on illegal immigration.  However, it's interesting to see that California and Texas are more similar than different in this regard.  Both states have large percentage of their population that was born outside the United States, including both legal and unauthorized immigrants.

A large portion of both California and Texas households speak a language other than English at home.

Both California and Texas have a large portion of undocumented immigrants in their state labor force, both roughly double the national average.

So, if undocumented immigrants are completely to blame, then why is California's unemployment rate so much higher than Texas'?

Everybody knows that those stupid Texans have way too many guns.  You can even buy AR-15s with 30-round clips, for God's sake!  Meanwhile, here in California, we have some of the nation's most stringent gun laws.  Obviously, as a consequence, California has a much lower firearm homicide rate, right?  Whaaaaat?

If fact, despite Texas' more-lenient gun laws, the overall murder rate in Texas is lower than in California as is the homicide rate from firearms based on FBI crime statistics for 2011.

Texas is often slammed by many in California for its lax environmental laws.  Funny, though, how many Californians seem blind to the problems in our own state.  According to rankings by the American Lung Association, California has the worst air quality on a variety of measures.

I could go on ... and I will as I generate more material.  I support many of Jerry Brown's attempted reforms (despite being a Democrat, Governor Brown is more fiscally responsible than most of the California Legislature and possibly his Republican predecessor, Arnold Schwarzenegger).  However, California's government lost any bragging rights when it refused common-sense reforms a decade ago.  California has overspent, accumulated debt, and refused to intelligently prioritize spending.  While Texas is far, far from perfect, its Legislature is on a more sustainable path toward prosperity.  Meanwhile, California is mired in fixing deficits and massive debts.

My hope is that someday ... maybe ... my fellow Californians will FINALLY WAKE UP.  As they say, the first step to a full recovery is to admit that you might have a problem.

See also ...