1 January 2017 - DrSunshine.org

California is the economic equivalent of a major nation
Let’s act like it (but without seceding)

When Californians travel to other states or other countries and people ask where they’re from, eyes light up with the response. California inspires people, worldwide. The nation under Trump is headed in destructive directions. California, the economic equivalent of France, has the power to show how constructive paths lead to a stronger economy.

California can be the place it wants the United States to be, and lead the way for the rest of the country.
Here are some goals:

  1. Climate change: reduce fossil fuel usage by 80% in ten years, 99% in twenty
  2. Healthcare: Obamacare or better for Californians
  3. Taxes: income taxes that fill the gap opened by Republicans at the federal level

Climate change: Scientists at MIT and the National Renewable Energy Lab have found that solar, wind, geothermal, and energy storage technology (battery, pumped storage, etc) are now efficient enough to provide all the electricity we need at affordable prices. California can require PG&E to phase out all electric power generators that use fossil fuels. As for cars, electric vehicles are here for good. California can require all gas stations to have at least as many electric vehicle charge points as gas pumps. That would make it possible to clear the roads of gas-burning cars.

Trucks are another matter, but most freight moved by truck would, instead, move by rail if California eliminated roadbed subsidies for large trucks, which, according to industry records and engineering measurements, amount to about 25% of freight-truck revenues. Requiring railroad companies to move from diesel-electric to all-electric for locomotives operated in California would then come close to eliminating fossil fuels for freight. The technology for air travel powered by renewable energy is not yet in place, but commercial flights in California would be greatly reduced by building high-speed rail to move people between major cities faster than airplanes, and cheaper, too, with appropriate subsidies. Strategies like these could, in less than two decades, replace fossil fuels with renewable energy for transportation and generation of electricity, and investment in renewable energy will lead to experience and expertise that could repay the investment many times over.

Healthcare: Massachusetts delivered healthcare to all its citizens well before the Affordable Care Act. California can do so now, no matter what happens at the federal level.

Taxes: FICA and Medicare taxes amount to 14.2% of wages for people with annual incomes under six figures. A 15% marginal rate for the total of federal and California income taxes on the lower third of the income spectrum imposes a greater hardship on those families than a 70% marginal rate would have on people in the top 1%. So, there is plenty of room to increase California tax revenue, and there will be even more room if federal taxes decrease for wealthy people. Economists have gathered a wealth of evidence that progressive taxation leads to more stable growth, so the benefits go beyond increased revenue. Democratic supermajorities in both houses of the California legislature make tax changes possible. People are beginning to notice this historical opportunity, and California should seize it.

California has a history of leadership, and it has paid off. Think big. There couldn’t be a better time for it.

Blue skies
Dr Blue White & Red

email Dr Blue White & Red

Update, 1 Feb 2017: By going its own way, but continuing to operate as a state in the Union, California can get most of the benefits that might accrue if the Calexit project were to succeed (which it won't), but without the complex and potentially catastrophic downsides. California would be the kind of place it wants the USA to be. That's close enough.

Update, 2 Feb 2017: A friend of Dr Blue White & Red asked for a rationale for a 70% marginal rate on people in the top 1%. The following table of income and essential expenses shows that if a 70% marginal rate on the people with incomes in the top 1% is unfair to anyone, it's unfair to the low-income wage earner, not the one-percenter.

Total Tax Rates (federal + state + FICA + Medicare) - an example

Annual Income from

  $0

$50,001 $100,001 $200,001 $400,001

to

  $50,000

$100,000 $200,000 $400,000 $800,000

Marginal Rate

15% 20% 30% 50% 70%

 California marginal rates would be rates in the table, minus marginal federal, FICA, and Medicare rates.
 People with $480,000 incomes, pay 70% only on the last $80,000, lower rates on the rest.
 This table is just an example. People with more data and expertise would decide actual rates.

  
Comparing Incomes and Essential Expenses (to show that 70% rate is fair to people in top 1%)

Low-Income
Wage Earner

Essentials
(monthly)

Person in
Top 1%

$2,000 income $40,000 Monthly income (and expenses, following)
$800 shelter $6,500 Let them have their million-dollar houses
$300 food $2,000   and eat in fine restaurants, shop Whole Foods
$300 transportation $1,000   and drive a Mercedes
$50 clothing $500   and wear Italian loafers
$0 healthcare $0 Assume government pays for healthcare (see Note 4)
$300 income taxes $16,958 May look high for top 1%, but isn't ... see cash left over
$1,750 total (essentials) $26,958 A rich person's "essentials" are expensive
$250 left over for
non-essentials
$13,042 Even with lavish lifestyles, people in top 1% have
50 times as much cash for non-essentials
12.5% % left over for
non-essentials
32.6% One-percenter has a third of income on non-essentials
Low-wage earner has a meager ⅛ of income to spend

Notes:

  1. California income tax rates would be total rates (eg, above example) minus federal+FICA+Medicare marginal rates.
  2. FICA taxes (11.7%) are not paid on income over $127,200, so California could capture that revenue on high incomes.
  3. California could tax all income at the same rate. Much of the income of the top 1% is unearned (eg, capital gains), so this gives the state additional opportunities for revenue.
  4. The table of essential expenses assumes the government pays for healthcare from tax revenue. Otherwise, wages of $2,000 a month cannot cover healthcare insurance, so low-wage workers could not afford basic healthcare.
  5. State taxes are deductible in the federal tax computation, so California income tax increases reduce the amount of tax money sent by Californians to Washington DC.

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