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Title: Do You Live In A Death Spiral State?
Source:
Forbe
URL Source: http://www.forbes.com/sites/baldwin ... -live-in-a-death-spiral-state/
Published: Nov 28, 2012
Author: William Baldwin
Post Date: 2012-11-28 13:52:45 by jwpegler
Keywords: None
Views: 5355
Comments: 10
Don’t buy a house in a state where private sector workers are outnumbered by folks dependent on government. Thinking about buying a house? Or a municipal bond? Be careful where you put your capital. Don’t put it in a state at high risk of a fiscal tailspin. Eleven states make our list of danger spots for investors. They can look forward to a rising tax burden, deteriorating state finances and an exodus of employers. The list includes California, New York, Illinois and Ohio, along with some smaller states like New Mexico and Hawaii. If your career takes you to Los Angeles or Chicago, don’t buy a house. Rent. If you have money in municipal bonds, clean up the portfolio. Sell holdings from the sick states and reinvest where you’re less likely to get clipped. Nebraska and Virginia are unlikely to give their bondholders a Greek haircut. California and New York are comparatively risky. Two factors determine whether a state makes this elite list of fiscal hellholes. The first is whether it has more takers than makers. A taker is someone who draws money from the government, as an employee, pensioner or welfare recipient. A maker is someone gainfully employed in the private sector. Let us give those takers the benefit of our sympathy and assume that every single one of them is a deserving soul. This person is either genuinely needy or a dedicated public servant or the recipient of a well-earned pension. But what happens when these needy types outnumber the providers? Taxes get too high. Prosperous citizens decamp. Employers decamp. That just makes matters worse for the taxpayers left behind. Let’s say you are a software entrepreneur with 100 on your payroll. If you stay in San Francisco, your crew will support 139 takers. In Texas, they would support only 82. Austin looks very attractive. Ranked on the taker/maker ratio, our 11 death spiral states range from New Mexico, with 1.53 takers for every maker, down to Ohio, with a 1-to-1 ratio. The taker count is the number of state and local government workers plus the number of people on Medicaid plus 1 for each $100,000 of unfunded pension liabilities. Sources: the Bureau of Labor Statistics, the Kaiser Commission on Medicaid and a study of state worker pensions done in 2009 by two academics, Joshua Rauh and Rovert Novy-Marx. Professor Rauh estimates that the shortage in pension funding is on average a third higher today. The second element in the death spiral list is a scorecard of state credit- worthiness done by Conning & Co., a money manager known for its measures of risk in insurance company portfolios. Conning’s analysis focuses more on dollars than body counts. Its formula downgrades states for large debts, an uncompetitive business climate, weak home prices and bad trends in employment. Conning rates North Dakota the safest state to lend money to, Connecticut the most hazardous. A state qualifies for the Forbes death spiral list if its taker/maker ratio exceeds 1.0 and it resides in the bottom half of Conning’s ranking. It’s easy to see how California got on our list. It has pampered a large army of civil servants while using every imaginable trick to chase private-sector jobs away, the latest being a quixotic scheme to reduce the globe’s atmospheric carbon. A City Journal essay by Victor Davis Hanson notes that the state spends $10 billion a year on entitlements for illegal aliens. Illinois is especially known for its dishonesty, whether among officeholders (future license plate motto: Land of Corruption) or in the habit of under- accounting for promises to government employees. The Rauh study counted $66 billion in the till to cover pension obligations of $233 billion. To lend money to California, Illinois or the other nine states perched on the precipice requires a leap of faith. So does buying a house in those locales. Don’t count on a property tax limit to protect your home’s value. If other taxes are high enough, there won’t be any buyers.
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#1. To: jwpegler (#0)
Property taxes in say...Texas more than make up the differences in the higher state taxes paid by the average California home owner. My San Antonio MIL was paying more than four times the amount for a home that upon her death a couple of years ago, sold for 50,000 versus those paid on my home worth 350,000 in California. Both bought in the same year and of similiar age, style, condition and square footage.
Almost every country in the Middle East is awash in oil, and we have to side with the one that has nothing but joos. Goddamn, that was good thinkin'. Esso posted on 2012-01-13 7:37:56 ET
Hmmm... should I just take your word for it, or look for some data??? Since your opinions are usually the exact opposite of reality, I concluded a little digging was in order. What did I find? It would appear that property taxes are similar- just as you claim- between California and Texas, overall... But with a super-majority in the state government, they'll do their best to overturn Prop.13, and then things will get very interesting. Since the election, they've already floated the idea to triple car registration fees (the day after I paid $300 to do my business car). They're desperate for cash, and think of the public as a huge ATM machine, from which they can extract money without limit... But you miss the point. Jwpegler's article stated (and you quoted) "Don’t count on a property tax limit to protect your home’s value. If other taxes are high enough, there won’t be any buyers..." And for this, we go to the composite cost of living- including all taxes and fees. 'Nuff said.
The ultimate result of Democrat party politics: Aren't you socialists PROUD???
Since homes in Texas are worth about one fifth as much as that same home would be in California but the property tax is still approximately the same according to your map? Of course that would make sense to you! LOLOL My area is booming and unemloyment is at it's lowest since the end of 2007, but please keep it a secret and by all means don't move here.
Almost every country in the Middle East is awash in oil, and we have to side with the one that has nothing but joos. Goddamn, that was good thinkin'. Esso posted on 2012-01-13 7:37:56 ET
That's a load of bullshit. LMAO. The only "booming" industries these days, are government spending, or financial fraud. Since you are dumb as a stump when it comes to finance, I must presume you're a gubermint parasite of some kind. Which would certainly explain your love of socialism, and blind faith in leftist talking- points. You're just TOO stupid to be an entrepreneur, that is certain.
The ultimate result of Democrat party politics: Aren't you socialists PROUD???
What she convienently forgets to mention is that the Texas home is 2-3 times larger than a California house for the same selling price and the same tax rates... And the cost of living is also much lower in Texas, much more bang for your buck.... Almost forgot there is "NO" state income tax in Texas either!!
“We have four boxes with which to defend our freedom: the soap box, the ballot box, the jury box, and the ammunition box.”
Washington State caps property tax rates at 1% of the assessed value, which is much lower than most other states. However, home prices in the Seattle area are high like the rest of the west coast, so people tend to pay tend to pay a lot. But we don't have a state income tax.
Exactly. That was the whole point of the second map I posted. And it was a point she conveniently ignored, I noticed. LOL.
The ultimate result of Democrat party politics: Aren't you socialists PROUD???
That's right at what I'm paying now in Ohio, 1% property tax rate... So what's your sales tax rate 7% or so??? BTW don't I owe you a 6 pack of your favorite brew??
“We have four boxes with which to defend our freedom: the soap box, the ballot box, the jury box, and the ammunition box.”
Our sales tax depends on the county. It's averages around 8%. But, for big ticket items we either buy on the Internet or just drive to Portland (Oregon doesn't have any sales tax). We wouldn't drive to Oregon just to buy something (it's 3 1/2 hours from Seattle). But if we want an extended weekend in Astoria or Cannon Beach, we'll save up our planned spending and just buy the stuff there. Cannon Beach, Oregon -- a great romantic three day weekend, plus no sales tax! No sales tax makes my wife HOT. LOL... FYI... from a tax perspective, the very best place to live in the U.S. is Vancouver, WA. (which is a Portland, OR suburb). Live in Washington and pay no income tax. Drive across the Columbia river to Oregon and pay no sales tax. WOW!!!!!
My friend, I actually can't remember. Thanks for being honest. (I would do the same.) Where do you live in Ohio? We'll be going to Michigan next June to visit my mom and sisters. As always, there is certainly a Cedar Point trip that will be part of this (with three car loads of sisters, daughters and nieces). If it could work, I'd actually love to buy you dinner (pizza and a beer, not steak -- LOL). You can buy me that beer. I'd love it. Send me a private message about where you live -- Toledo to Sandusky or somewhere else. Maybe we can work something out.
To lend money to California, Illinois or the other nine states perched on the precipice requires a leap of faith. So does buying a house in those locales. Don’t count on a property tax limit to protect your home’s value. If other taxes are high enough, there won’t be any buyers
#2. To: mininggold, wpegler (#1)
Property taxes in say...Texas more than make up the differences in the higher state taxes paid by the average California home owner.
... 
Shari Doyle, before and after her salvation by Democrat operative Janet Reno.
#3. To: Capitalist Eric (#2)
It would appear that property taxes are similar- just as you claim- between California and Texas, overall...
#4. To: mininggold (#3)
Since homes in Texas are worth about one fifth as much as that same home would be in California...
My area is booming and unemloyment is at it's lowest since the end of 2007...
...
Shari Doyle, before and after her salvation by Democrat operative Janet Reno.
#5. To: Capitalist Eric, mininggold (#4)
(Edited)
Since homes in Texas are worth about one fifth as much as that same home would be in California...
#6. To: CZ82 (#5)
(Edited)
"we must as a species go into a period of shrinkage that we have not experienced since the Dark Ages and the Black Plague" -- lucysmom
#7. To: CZ82 (#5)
What she convienently forgets to mention is that the Texas home is 2-3 times larger than a California house for the same selling price and the same tax rates... And the cost of living is also much lower in Texas, much more bang for your buck....
...
Shari Doyle, before and after her salvation by Democrat operative Janet Reno.
#8. To: jwpegler (#6)
Washington State caps property tax rates at 1% of the assessed value, which is much lower than most other states. However, home prices in the Seattle area are high like the rest of the west coast, so people tend to pay tend to pay a lot. But we don't have a state income tax.
#9. To: CZ82 (#8)
(Edited)
"we must as a species go into a period of shrinkage that we have not experienced since the Dark Ages and the Black Plague" -- lucysmom
#10. To: CZ82 (#8)
(Edited)
BTW don't I owe you a 6 pack of your favorite brew??
"we must as a species go into a period of shrinkage that we have not experienced since the Dark Ages and the Black Plague" -- lucysmom
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