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Comment by erentz | Hacker News Reader

Question: the imbalance between what California contributes vs receivers from the federal government is pretty crazy to me. I'll grant some imbalances are necessary - you will always have richer and poorer areas of the country. But when he gap is as wide as it is, and then it is turned into a tool for punishing CA due to our politics, at what point should CA seek to seriously tackle this? Firstly of course is the very long shot possibility of successon, but I was wondering if there might be something in the tax code that would allow CA to shut off the flow of money to the federal government? Perhaps by implementing some kind of massive tax and dividend scheme (e.g. naively I'm thinking if I'm allowed to deduct state taxes - what stops CA from taxing 100% of my income, so I pay nothing to the federal government, then CA pays me a "dividend" equal to my income minus whatever the real tax rate should be (30% or whatever).

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Much of the wealth in California comes from high technology. The research of the high technology came from the Federal Government. The training of the PhDs that created the research (think semiconductors) came from the NSF and NIH and other federal funds.

Thus, it is not unlike a VC making early stage investments in a company.

BTW, I'm in NY State and it also has net tax outflows.

Much of the wealth in California comes from high technology.

I think you need to get out of SV more often.

The top 3 ranked sectors in California by GDP are: (1) health, education - 18%, (2) real estate, rental and leasing - 17% and (3) trade, transportation and utilities - 16%.[1]

Not sure where tech would fall, but probably in: information - 6% or professional and technical services 9%.

Silicon Valley seems like it's a big deal when you're in the middle of it, but it's nowhere near the biggest GDP contributor in the state.

[1]https://en.wikipedia.org/wiki/File:Gross_Domestic_Product_of...

That was from back in 2008 and it isn't well sourced. It from the author "own work" and a 404'd link.

But what is california's trade balance with other states? I suspect it "exports" more than it imports. So paying more in tax (by some measure) is the price of remaining in the federation. US states are so integrated that generalizing them into givers and takers isnt very honest imho. It makes for gòod headlines and fans state pride, but always omits important detail. As example: How much of california's wealth comes from intelectual property laws, laws created and managed by the fed?

Why is it that progressive income taxation is so awesome for everyone else and sucks when applied to you?

(FWIW, I've looked at the report that purports to back the 'CA pays more than it receives' and it isn't super accurate)

But it isn't progressive, right? An individual in CA who makes 50k gets less in Federal funding to projects that would benefit them, than if that same individual moved to another state, and made the exact same amount.

Not saying I agree with the conceit that a state should have the level of economic autonomy argued for the the original post, but your argument doesn't hold water.

Would they still be making 50k if they moved to a different state though?

If your country is large enough, you probably need to adjust for cost of living for a progressive taxation system to be fair.

Although I suspect much of this effect is explained by the fact that states get fixed senate votes regardless of population.

I'd venture such a dividend scheme would immediately get hit with lawsuits by the federal government.

Some of the things CA "receives" from the federal government are zero percent interest rates and preferential access to vast capital markets, a heavy implicit labor cost subsidy via immigration policy, an implicit promise of massive earthquake insurance, access to the Colorado River, copyright & patent protections for its primary industries...

Looking at fiscal inflows and outflows isn't the benchmark of who gains from a relationship and whether it is positive-sum.

That dividend would be federally taxable income. :)

I mean I guess they could keep taking more and more money from you every year and giving more and more back, but generally any money they give you would be subject to federal taxes, unless they give it and take it all away again every year, just to give it back again.

It would be a huge headache but I suppose it could work. Especially if they made it like a voluntary tax overpayment or something.

Edit: Also, unless you have it all sitting around in cash, any money you spent during the year on non-deductible things you'd have to pay tax on.

CA cannot stop tax collecting by the Feds --and residents will not risk getting hauled into the Pen for avoiding tax payments.

It'd be ironic if California became more nationalistic than people at the national level --I mean, why not SF county ask residents not to pay Sacto and why not the FinDi ask their residents not to pay taxes to SF county? How far do you want to take that? Down to the "sovereign citizen" -which would seem the opposite of what you are looking for.

  the imbalance between what California contributes vs receivers

Do you have a firsthand source for that, or are you just quoting unsupported media quotes? The one study on that topic that I've seen omitted a lot of Federal spending in CA, such as transfer payments, military personnel, CA's share of defense spending, etc.

Remember that CA has had a lot of power in Congress under Democrats, including two senior Senators and the Speaker of the House twice.

Every state gets two senators and the one that's served the longest is called the "senior" senator and the other the "junior". By definition a state can't have two senior senators.

A charitable interpretation would be to note that as of the 114th Congress, both California's senators have high seniority, which is how senate rank and privileges are determined.

Boxer's retirement leaves CA in the 115th Congress with Feinstein, 8th, and Harris, 97th.

http://www.periodicalpress.senate.gov/seniority/

That plus each CA senator represents over 18 million people as a contrast to Wyoming's senators which represent a hair over 284,000 people each.

"A lot of power"

2/50 senators = 4%

55/538 electoral votes = 10.2%

Compared to:

Population = 13% of US

GDP = 15% of US

So splitting California into two or more states would go a long way to solving the issue?

That won't work because of water rights.

Why is this not a federal issue anyway? How many watersheds extend across state/national lines?

Northern CA sends a lot of its water to Southern CA. The Owens Valley is where the LA gets most of its water. There are water deals between different states. San Diego gets the majority of its water from the Colorado River. Seven states have agreements on how much water they can take from the Colorado River.

Every state gets two senators.

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