High-tax states are costing DemocratsThe Republican push for less government spending is vapid. But by talking about government inefficiency, they're touching on issues that clearly resonate with voters.
A lot has been written about why Kamala Harris lost the 2024 Presidential election. The reality, of course, is that there are lots of reasons that she didn’t win.¹ But all of these articles are missing an important point. The largest states that Democrats consistently control—California,² New York, Illinois, and New Jersey—have some of the highest tax burdens in the country. For all the money its residents pay in taxes, it’s not clear that the quality of life is any better than in places like Texas and Florida, where the tax burden is substantially lower. In many ways, it might be worse. This is something that Democrats need to seriously grapple with, and I don’t see enough Democrats doing that yet. Comparing California and New York to Texas and FloridaAbout 115 million people—more than a third of the country—live in California, Texas, Florida, and New York. But the tax profile of California and New York vs. Texas and Florida could hardly be more different. In California, top earners pay 13.3% income tax rates, on top of federal taxes. In New York, top earners pay 10.9%, and that rate is higher if you live in New York City, where top earners can pay as much as 52% in income tax across federal, state, and local taxes. In Texas and Florida, the income tax rates are 0% and 0%, respectively. Yes, in California and New York, only the highest earners pay that much in income taxes. But even for the median taxpayer, across all taxes—income tax, property tax, sales tax, etc.—the tax burden in California and New York is high, and the tax burden in Texas and Florida is low.³ What do California, New York, Illinois, and New Jersey have to show for their tax rates?Here’s a side-by-side comparison of metrics in the largest Democratic states vs. the largest Republican ones.⁴ (I’m including Missouri too, just for comparison and context, since many of you also live here.) It’s not that things are uniformly worse in places like California, New York, Illinois, and New Jersey relative to Texas and Florida. There are jarring differences, for instance, in health insurance coverage⁵ and life expectancy. The challenge is that for all the taxes Californians and New Yorkers pay, it’s not clear that things are any better. At best, it’s kind of a mixed bag. And that should have people in California and New York—and across the country—asking questions. A few things to point out from this table:
Press coverage of blue-state governanceIf you’re trying to defend blue-state governance, there are a lot of headlines that don’t help. Take, for instance, train infrastructure. In New York City, extensions to the Second Avenue Subway have been over budget and decades behind schedule, and train spending there is shockingly inefficient relative to similar infrastructure projects in other countries. In California, the high-speed rail project has been a cosmic flop. Headlines like these don’t exactly illustrate disciplined taxpayer spending: It’s not like the privately owned Florida high-speed rail project was a paragon of financial restraint: the cost was about $3.5 billion (3.3×) over the initial projections. But: the project was completed and has been operating for a few years—even if it hasn’t been entirely successful.⁷ Likewise, in an election where immigration was a key issue, headlines like these don’t inspire much confidence either—especially when the Governors of Florida and Texas were as aggressive on immigration as they were: Americans very consistently believe that they pay too much in taxes. 58% of Americans believe that their tax dollars are spent inefficiently; only 18% believe they’re spent efficiently.⁸ And when you have pretty prominent examples like these, and a bunch of others, that people can point to demonstrating resources being spent inefficiently? That shapes the narrative in powerful ways. Wait, so are you a fan of DOGE now?No. Not even a little.⁹
With that said, can the government be operating more efficiently than it is? Without question. One glaring example: the bipartisan infrastructure bill set aside $42 billion for broadband internet access, and that money has resulted in zero people getting broadband internet access. (Nothing the DOGE people are talking about addresses issues like these.) People want their tax dollars spent well. And the issue, really, is that Democrats don’t have enough credibility on this right now. Voters who look to places like California and New York see too many examples of states that aren’t being run particularly efficiently. What’s the solution here?
Democrats have to demonstrate that they can improve quality of life. That means low costs for everyone and basic human rights for all. I worry a lot about the next four years. But in the immediate term, Democrats need to pivot and focus more on reducing costs, reducing taxes, and showing voters that they’re able to deliver meaningful change for their constituents. Feel free to share this post with someone who will find this interesting. (If you’re reading this email because someone sent it to you, please consider subscribing.) For press inquiries, please contact [email protected]. 1 I’ve written earlier about Democrats failing to reach young men. That proved to be, unfortunately, prescient. 2 I feel terrible for the people impacted by these fires in Los Angeles, and nothing I’m writing here should be taken otherwise. I’ve had a bunch of people I know lose their houses; I hope people are able to rebuild, though it’s tough to know what the path forward is right now. For people who don’t have ties to California, I worry that there’s fatigue around wildfires-on-the-West-Coast stories, since they seem to happen every year. But this is so much worse than anything we’ve seen before. 3 It’s a relatively complicated calculation, and the assumptions that people make around consumption, etc. vary, so different sources have different answers here. WalletHub, for instance, has a slightly different ranking. I’m also keenly aware that a lot of the organizations that analyze tax policy do so with a political agenda in mind. But no matter how you slice it: the tax burden in California and New York is higher than the tax burden in Texas and Florida. 4 First, here are the sources for everything here: median home price, unemployment rate, average commute time, robberies per 100,000, life expectancy, and the percentage of residents living without health insurance. The differences in commute times may not seem like much, but over the course of a year, they add up. People in New York commute 5.6 minutes more than people in Texas each way. Over the course of a year, that’s about 47 hours of additional commuting—more than a full work week. (The difference between New York and Missouri amounts to 77.5 hours per year.) 5 It’s especially jarring in Florida, where the population is older, meaning that a much higher percentage is on Medicare. What that means is that a huge chunk of the state’s younger population are uninsured. 6 Polling in this context has its issues, since it’s not necessarily correlated with outcomes. But in a recent California poll, 47% say the state’s K-12 education is getting worse (vs. 13% who say it’s getting better). In Texas, 84% of parents of K-12 students are very or somewhat satisfied with the quality of their child’s education. This is an apples-to-oranges comparison, so it’s hard to learn much from this, but it does seem clear that higher taxes aren’t necessarily leading to more parents satisfied with the state of public education. 7 It hasn’t been entirely successful, at least not yet, but for the future of U.S. infrastructure investment, I very much hope it will be. I think and hope we can chart a path forward for more private-sector investments in mass transit. 8 There’s a lot to unpack here when you dig into this data. 65% of federal spending goes to four things: Social Security, defense, Medicare, and paying interest on debt. In order to cut federal spending in any material way, therefore, the federal government would have to cut spending in (at least) one of those areas. But the details of this polling demonstrate that although people don’t think federal spending is efficient, Americans also believe that too little is spent across the board:
There are a bunch of reasons for this, not least of which is that when options are laid out one-by-one, there’s no sense of tradeoffs being made. In a vacuum, sure, who doesn’t want more education spending and more defense spending and more Social Security and more spending on National Parks! 9 DOGE, for those of you who have the fortune of not knowing, stands for the Department of Government Efficiency. It’s run by the sort of people who aren’t nearly as competent as they think they are, and unironically refer to themselves as geniuses. 10 Indiscriminately taking a weedwacker to federal expenses is dangerous and would be exceedingly unpopular. Not for nothing: there are plenty of places where more federal employees would be helpful. I submitted a records request that took over a year to work through the National Archives and Records Administration, the National Personnel Records Center, and the Department of the Navy. A lot of that stemmed from staffing shortages, especially coming out of the pandemic, that made it difficult for federal employees to get to my request. Can this be run more efficiently? Absolutely. But just wholesale firing government employees would make things much worse, not better. 11 I think a lot of the “libertarians” who espouse small-government views are basically just libertarians of convenience, and they see the value of the government when they worry that government inaction will cost them. 12 50% of all individual spending is just two things: housing and transportation. If you include food, those three categories account for about 63% of total spending. 13 Of the 10 most expensive states for housing, seven are reliably Democratic, one is Republican (Utah), and two are purple-ish (New Hampshire and Colorado). Washington, D.C. would also be on the list if it were a state. Some of this is simply a function of urban areas being more expensive and more Democratic, for reasons that have little to do with cost of living. But nonetheless, there’s much, much more that has to be done on housing affordability, everywhere across the country. |