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 ...


  1. Great charts, but the school funding one is puzzling as I don't think the regional variations in cost of living are enough -- you need to use state variations. California's cost of living is about 132% of the national average, Texas, 90%.

    I wrote this in the San Francisco Chronicle a couple of days ago (

    Insofar as school funding goes, the National Education Association lists its evaluation of K-12 per student average daily attendance funding. In the most recent year, the association calculated the U.S. average per pupil ADA at $11,305, with California at $9,524 and Texas at $9,446. But these figures are not adjusted for the rather large cost of living differences from state to state. The fact is the dollar goes about 42 percent further in Texas than in California. With the cost of living figured in, Texas spends at 97 percent of the U.S. average while California weighs in at 67 percent of the U.S. average.

  2. This is a goldmine!

  3. Great Research. As a Texan I do understand why people love California. I have traveled all over the state over many different years - Yosemite, the Bay Area, Napa, Monterey Bay, San Diego Beaches. I just hope like you that someday all citizens stop cheer leading for each of their teams (Reps/Dems) and instead demand more efficiency from their governments because frankly they are not doing their best.

  4. Your first chart shows New Hampshire as having a 5% personal income tax. That is in error. New Hampshire has no personal income tax. It does, however, have an Interest & Dividends tax, but it kicks in at a relatively high level, meaning most folks don't have to pay it.

  5. Hi DCE, you're correct that New Hampshire has no income tax on wage income. However, there is a 5% tax on interest and dividend income. I'm not sure how capital gains income is treated.

    The chart is meant to convey California's income tax rates against the MAXIMUM tax rates that you might pay in the other 49 states, hence the 5% for New Hampshire.

    1. There is no tax on capital gains. And I believe the tax on interest and dividends is 4% and there is a relatively high trigger level before that kicks in. (Most retirees and small investors would never have to pay it. Mitt Romney would, however.)