Let’s say you are a single young professional renter earning $80,000 a year. Not atypical for readers of the Long Beach Post, I am not sure what the median income of our readers is but my assumption is $80,000 may not be far off. So let’s say that you are earning $80,000 a year and you want to buy a Samsung 40” Flat Panel LCD HD television for $1000.00 but you do not want to buy it on credit.
With the potential passage of Measure R the sales tax in Los Angeles County may increase from 8.25% to 8.75%, adding $5 to your purchase. Seconds after the election this past week Governor Schwarzenegger told Californians he would like to “temporarily” increase our sales tax state wide another 1.5%, raising sales taxes in Los Angeles County to 10.25%, adding another $15 to your purchase.
So if you go to Best Buy in Marina Pacifica to buy your new Samsung television for $1000, you will pay $1,105 for the privilege; plus delivery fee if any. Being in California your taxes do not start or end with the sales tax at Best Buy, first you have to pay Unkie Arnie your state income tax, and also Uncle Sam your federal income tax and do not forget the “tax” that is your portion of social security donations—if you are young and single start to assume there will be no social security when you turn 67.
In order to purchase a $1000 flat panel LCD Hi-Def television for your apartment you need to earn a bit more than $1000. The state income tax (9.3%), the federal income tax (33%) plus your social security contribution (6.2%) total 48.5% of your gross income. Making the poor assumption that you do not have any deductions for 401(k) or medical insurance, this means to purchase a television that has a price tag of $1,000.00 in Long Beach, California—where you work, live and are looking forward to playing Wii on your new television—you will have to earn $2145.63. With Measure R and Schwarzenegger’s proposed tax hike your purchasing power in Los Angeles County is 46.6% of your gross income.
I have some advice for our erstwhile home electronics shopper. First: eBay, avoid the 10.5% tax premium on the television. Second: many other people in California will also be looking for out of state sellers for consumer goods, so buy stock in UPS and FedEx. Third: buy it before the Bush tax cuts expire and your federal income taxes increase and additional 3%, or more, reducing your purchasing power to 43.6% of your gross income.
Announcing the current budget shortfall, Schwarzenegger also announced that he was proposing tax credits for the movie industry to bring filming and production back to California and Hollywood. Imagine that, tax cuts to increase economic growth and production. So if you are a single parent with two kids making $40,000 per year you will pay 2% in income tax and over 10% on sales tax if you live in Los Angeles County; but maybe your job in the film and television industry will be saved. Schwarzenegger has hung around the Democratic caucus in Sacramento too long, they still think our state’s biggest budget issue is revenue.
By the way, who the hell voted for Measure R? If the first result that come back after all the ballots are counted is even close to the necessary two-thirds required to pass then Long Beach should pay for a recount to see if it can be over-turned. Long Beach will get bupkis from Measure R, but the increase in sales tax will push more buyers across the nearby Orange County line where they can save 1% on taxable items. Over a year that can add up to a business buying office supplies or fuel for its fleet. How many auto sales now leave Signal Hill and Cerritos for Westminster or Huntington Beach?
Auto sales are all over the news now with General Motors and Ford saying they are “burning through cash.” GM is saying they need a couple of billion from Washington D.C. in order to stay in operation; House Speaker Pelosi (D-SF) is saying they should get it. Why is it that since the oil embargo crisis of the 1970s through today American auto makers have not been able to adapt and are on the verge of extinction, yet Japanese auto makers—producing a significant amount of their fleets in the United States—have been flexible and adapting to the American markets? Like almost any business the single largest expense on the income statement is labor, the auto industry is no different. Detroit’s problems have been two-fold. First they have a complete inability to provide Americans the cars they wish to buy when they wish to buy them. I read a statement over the weekend where on top Ford executive said, “Who could have predicted such an increase in gas prices?” Well, I did. That is why in 2006 I got rid of my Dodge Dakota four wheel drive V8 four door pickup and got a Honda Pilot. I figured then when gas was below $3.00 per gallon my gas savings was akin to about a 25-30% discount on the cost of the Pilot. At $3.50 a gallon my vehicle cost was about 50% of what it was for the Dodge—plus I did not have the huge mechanical problems with the Honda that the Dodge would inevitably have after 50-60,000 miles.
The second problem for U.S. automakers and by far the biggest is the labor cost. GM and Ford have so much money tied up in benefits and pensions for retired members of the United Auto Workers and other unions that it is almost impossible for them to make any money when they sell a vehicle. Contract after contract the automakers allowed the unions to hold them hostage for bigger and bigger benefits for their older workers, creating larger and larger back end benefit and pension packages. Now that those are starting to hit the balance sheets the automakers say they are out of money and need Washington to bail them out. So once again taxpayer money may go to pay off someone’s bad decisions. I say don’t give them a penny. They have plenty of inventory on their lots they can sell at steep discounts to raise cash, they can sit down with the UAW and show them the books, either they restructure contracts and pensions or no one will get anything. Plus they need to be forced to retool their industry. They can blame Federal emission standards all they want, but the Japanese and European automakers, while in a bit of a slump, are doing a lot better than the U.S. automakers.
If you are under the age of say 35 or 32 and work for the City of Long Beach or the State of California and belong to one of the public employee unions let the autoworkers situation be a huge warning for you. Your co-workers over the age of 50, and those who have retired in the last five to ten years, negotiated contracts that fatten their pensions. These contracts will create the same environment for the city and state in five years or so that is happening in the auto industry now. Older, retired workers will have their pensions saved, younger—by then middle aged—workers will have drastic cuts and possible reversals of pensions and benefits and pay because the city and state will be out of money, and the citizens will by then be weary of saving this industry and that with government money and taxes. You may be out of a job and benefits. Better start paying attention to the contracts being negotiated and what they mean in a global sense five, ten, twenty years down the line if you wish to have a retirement plan.
Barak Obama’s victory on Tuesday has brought with it incredible expectations from so many people. In reading statements from so many Americans from all over the country it is apparent that a lot of people, an awful lot, seem to think their condition improves instantly on January 20th when he takes the oath of office. It is rather unfair to expect that upon taking office there will immediately be jobs available in people’s neighborhoods, or that their school system will suddenly improve and their children will be academically competitive, or that gang and criminal activity will suddenly cease. Individual conditions are most affected, in order, by oneself and the choices and decisions made throughout ones life, then by the local community in which one lives, then by the local government that impacts safety, crime and attracting employers, then by county and state governments that also impact job creation and growth, then by Congress and finally by the President. Can the President make you feel better or worse about yourself? Sure, but that is generally a choice and decision you make, when it comes to actually altering your life for the better or worse, that depends more upon yourself than anyone else. With Obama’s election I hope that more people take his messages and determine to improve their condition and that of their neighbors. I hope that he is able to succeed on the international issues and get Russia to back down from its growing imperialism, get Iran to quit funding Hamas and Hezbollah and give up its nuclear weapons program, to get Pakistan to more fully cooperate and help us track down and kill Osama binLaden. But my expectation is not that suddenly the lives of me and my family will improve merely because he takes an oath of office. I have empathy for the burdens of expectations that exist for him, tempered by knowing he created this burden himself with his rhetoric used to get elected.
Obama’s election has created some big cracks in the Democratic caucus. As evidenced with the Proposition 8 results there are many different groups and causes under the Democratic tent and their goals and visions and values are not the same. I am somewhat confused by the hatred and rancor shown by those in favor of gay marriage towards religious groups, as if the primary and only reason the measure failed was because of Mormons and Baptists and other Christian groups. Demographically these groups can have an impact on an election but by no means control a majority. If they did then our state government would be a lot different than it is and has been. Proposition 8 passed not because of the evangelicals, Mormons and fundamentalist Christians, they were voting for the measure and did not make up a majority so it would not have passed based on those groups alone. Proposition 8 passed because of the huge turn out in black voters and their overwhelming, in the 70% range, support of the proposition, enough to put it firmly in the “yes” column.
So what are the Democrats and Obama to do to reconcile these two groups, and others with conflicting social values and agendas? How do the Democrats maintain the huge percentages of both the black and homosexual voters in coming elections when those groups have such opposing views on gay marriage and rights? I do not think they can hold the coalition together and once Obama is no longer a candidate there will most likely be a large migration of black voters to the right, towards the Republicans, whose conservative values on social issues more closely align with those of the majority of black voters in the United States. In the meantime the party whose President gave us the Defense of Marriage Act and “Don’t Ask Don’t Tell” policy for the military now has as President-Elect a man against gay marriage. With its large and active voting block the gay community needs to start putting forth some political capital with the leaders of its party, otherwise they will find themselves in no-mans-land between the Democrats who will not publicly pass any legislation for gay marriage at the state or federal level and the Republicans who will publicly oppose and such legislation.
I received an email from a reader asking why California has propositions, many of them for large spending measures and others for social or political issues. My answer to her was that it is because our legislatures are fairly cowardly politically. They pass thousands of bills every year but none that have significant impact or may cause staunch resistance. They are very safe in their districts, they have secure funding sources for their campaigns and see no reason to tackle tough legislation—such as budget cuts—that may upset either the voters at home for those who write thousand dollar checks for their campaigns. So instead of passing legislation for funding infrastructure or significant social change, they pass legislation that puts a proposition on the ballot and let the voters do their job for them. One hopes that with the passage of Proposition 11 and the hoped for re-districting after the 2010 census resulting in more competitive races for Assembly and Senate, perhaps we will have candidates and legislatures with some nerve and courage and willing to stand on their principals actually governing on real issues and not just passing fluff and favors for their districts and donors.
God speed President-elect Obama, all Americans need your Presidency to be a success, and unlike those in opposition in 2000 and 2004, most of us who did not vote for you this year are hoping we were wrong and that you are able to prove us wrong. Oh, and let’s keep the tax rates where they are so our reader won’t have to make even more to buy that flat screen!
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