U.S. states are sovereign, have the authority to impose income, wealth, and consumption taxes, can borrow money, can make it illegal for employees to work for less than a threshold wage (and also illegal for an employer to pay more than a limit wage?), handle law enforcement and criminal justice for most issues, etc.
Why haven’t states run by Democrats achieved at least most of the social justice agenda that Democrats say they want?
Consider income inequality. California, for example, has a top income tax rate of 13.3 percent and a minimum wage of $12/hour. There is no reason the state income tax rate couldn’t be 30 percent with a minimum wage of $20/hour, right? (California Democrat and Presidential candidate Tom Steyer says that he wants a higher minimum wage that is a “living wage,” which would be roughly $50/hour in California to lift a family above the welfare eligibility thresholds.) That would narrow the spending power inequality (can be a measurement challenge) considerably, a goal that is related to the “income equality” goal that Democrats say is important to them.
(Same deal here in Massachusetts. Off-the-charts support for reducing income inequality and, simultaneously, among the highest levels of inequality in the U.S. Nobody in Washington, D.C. could prevent us from establishing a progressive income tax, raising wealth/property taxes, etc. and redistributing the money to poor residents. Yet we don’t do it, nor do we raise our minimum wage from $12 to $15 (or $20!)/hour.)
One objection to high tax rates is that people will move to avoid them. Yet Sweden was comfortable with this during its experiment with high tax rates back in the 1970s. If rich citizens moved to Monaco, the happy middle class Swedes said “good riddance.”
(Swedes experienced with multi-national business on our recent Northwest Passage cruise said that Sweden now has lower effective tax rates than the U.S. The nominal personal income tax rate in Sweden is comparable to Federal+California, but executive or entrepreneur Swedes are generally able to avoid this by turning what would have been ordinary income into capital gains.)
Democrats (e.g., Kamala Harris and Tom Steyer) say that they want a universal health care system. One third of Californians are already on Medicaid (“Medi-Cal”). Californians older than 65 should be on Medicare. Why not use the revenues from the above higher tax rates to automatically enroll everyone else on Medi-Cal and they can use it if they don’t have employer-provided insurance?
California Democrat Kamala Harris says that she wants free four-year public college (PBS). Why couldn’t California’s legislature vote to eliminate tuition at the University of California and Cal State?
Democrats say that they don’t want children to inherit wealth from parents. States have the power to impose estate taxes and a bunch do. Why wouldn’t the Democrats who control California change the state constitution to enable the collection of an estate tax?
- “Surprise: Florida and Texas Excel in Math and Reading Scores” (nytimes): “[California] ranked 46th over all in Mr. Chingos’s analysis, behind Mississippi”
- Tax Foundation on California (#6 out of 50 in percentage of residents’ income collected via state and local taxes)