NewGeography.com blogs

The Tax Foundation calculates the taxes paid per capita, including what is spent by people on average in neighboring states, including state and local fees. The two maps show, first, the tax burden, taxes paid as a percent of income, the second, the difference in the ranks of states in tax burden and in income.

The map for tax burden is colorful, so one might suppose there is a big difference in the local and state burden. There is variation, but the amazing story is how small the differences really are. The variation is from a maximum of 11.8 percent in New Jersey (note that Taxachusetts is in the middle of the pack) to a low of 6.4 percent in Alaska. But most states, 38, are in between 8.6 and 10.2 percent.

The lowest tax burdens are not surprising – Alaska (6.4) and Nevada (6.6), but the next lowest, Wyoming (7) and Florida (7.4), may be a surprise. The highest tax burdens, as may be expected, are megalapolitan New Jersey, New York (11.7), Connecticut (11.1) and Maryland (10.8), but Hawaii (10.6) in this group may be a surprise. The states in the middle, besides Massachusetts, include a contiguous set centered in Chicago – Illinois, Indiana, Iowa, Michigan, Kentucky and West Virginia (all 9.3 to 9.5).

The modest range of burdens implies that generally richer states have higher tax burdens and poorer states have lower burdens, but the second map shows that there are many exceptions. Richer states with higher tax burdens include (a small difference in tax and income ranks) District of Columbia, New Jersey, Connecticut, New York and Maryland, and poorer states with a moderately low tax burden are few – Alabama, New Mexico and Montana. Poorer states but with a high tax burden are Arkansas, Kentucky, Utah and Idaho, but this finding perhaps tells us the statistical problem or risk in using per capita rather than per household measures. Strongly Mormon Utah and Idaho, indeed all four states have high average household size, so are not as disadvantaged as the data suggest. For a similar reason, Florida may not be as good as it looks, since it has a quite low average household size.

Most interesting may be the richer states with lower ranking tax burdens, notably Wyoming, New Hampshire, Washington and Nevada. Other states with a relatively low burden (lower tax rank than income rank) include Alaska, Colorado, Florida, Massachusetts, and Texas and other states with a relatively high burden (much higher tax rank than income rank) include Georgia, Kentucky, Ohio and West Virginia.

Finally states with close to the same rank in income and tax burden include a set of contiguous Midwestern states, Iowa, Minnesota, Missouri, and Kansas, then Michigan, Oregon and California.

But in sum, choosing a state based on its local and state tax burden could be worth the effort, but the effects by themselves could be more limited than commonly supposed.

New Geography contributor Richard Reep has written lately on the increasing activity of farmer's markets and how the financial crisis may boost local markets.

Here's a great interactive map at FortiusOne GeoCommons of a USDA database of national farmers markets.

Only a few months ago, I admonished Michigan for its hysteria about brain drain. Given the recent news coverage concerning the exodus from the recession-plagued state, you might expect I’m ready to eat some crow. On the contrary, I’m here to report that Michigan has learned nothing from its past mistakes.

Richard Herman, an advocate for increasing rates of immigration to the Rust Belt, posts on his blog the same critique I have aired about how Michigan addresses its talent crisis:

However, the current focus on "brain drain" as the source of the problem misses the real issue.

While no doubt the Midwest economy is causing college grads who might otherwise want to stay home to leave, in an ever more mobile society, moving out is a natural part of people's lives. Indeed, if you read the typical account of how the elite global knowledge worker lives, you often hear about people flitting from place to place to place chasing opportunity.

The real problem is not that too many people are leaving, but rather that too few are coming. It isn't an outflow problem, it's an inflow problem.

The former urban industrial powerhouses of the United States all suffer from the same malaise. Every city is fixated on its local labor pool, asking institutions of education to staff the “factory.” The great irony is that economic growth doesn’t happen without immigration or domestic in-migration. There is no story of a great metropolis that successfully barred its people from leaving.

The tortured metaphor for brain drain stems from private enterprise. But even in the arena of human resources, the concept of churn isn’t an anathema:

The purpose of this article is to open your mind about the silliness of measuring only aggregate turnover. I can think of no better indication of a so-called expert’s lack of true understanding of employee turnover than when I read an article or a book on retention and the author invariably expounds on the need to keep everyone.

The burgeoning narrative is that churn benefits both employee and employer. The same is true for resident and state. Fear of the outsider prevents all parties from making a rational choice and improving human welfare.

Michigan should embrace its out-migration and aggressively seek new residents. I further recommend any reference to “retention” be abolished from official policy. Where, and how many, graduates go is largely immaterial. Instead of Cool Cities to keep Michigan talent instate; what would it take to get the next generation of engineers from Colorado schools or Asia to move to the Rust Belt?

On April 3, 2009, R. Glen Ayers spoke at the American Bankruptcy Institute in Washington, D.C. Mr. Ayers is a former bankruptcy judge, now with the law firm Langley & Banack in San Antonio, Texas. He spoke on a subject I covered here on March 4 – not all mortgage backed securities are actually backed by mortgages. The rush to write more mortgages and to issue more bonds meant that mistakes were made in the paperwork.

The Ayers speech is connected to an article he wrote with Judge Samuel L. Bufford, who had the California case I mentioned last month where the mortgage note disappeared after being transferred to Freddie Mac. In the article, “Where’s the Note, Who’s the Holder”, they drop this bombshell: “A lawyer sophisticated in this area has speculated to one of the authors that perhaps a third of the notes ‘securitized’ have been lost or destroyed.” Meaning that 1/3 of the mortgage-backed securities are not backed by mortgages!

This is the junk that Treasury Secretary Geithner wants to finance the hedge funds to purchase. As of the end of 2008, there was $6,838.7 billion worth of government-backed mortgage bonds outstanding. An additional $178 billion were issued in the first two months of 2009.

Scary stuff. No wonder the hedge funds are giving Geithner’s Public-Private Investment Partnership “two thumbs-down.”

More of the so-called “mainstream press,” like the Sacramento Bee, are catching up to what we wrote here about Warren Buffett back on March 16. He supported the bailout because his investments benefited from the handouts.

It seems obvious that Washington takes policy advice from Buffett because he has lots of money. Newsweek reporter Mark Hirsch uncovered evidence, in fact, that Buffett may have been the one that came up with the original proposal for Treasury to buy the junk bonds off the banks’ balance sheets. Given the direction that Berkshire Hathaway’s own credit rating is going, Buffett may have even more reason to support this plan – his companies will be able to invest in the junk at discounted prices after they sell the junk to the government’s partnership funds at inflated prices!

Some of the comments at Newsweek.com believe that the article is unfair to Buffett – after all, what company doesn’t support policies that will benefit them? But to the tune of $11.6 trillion, which is what the U.S. government has committed to this bailout? We bet even Karl Marx would find that excessive. We agree with the title of a book by William Black, an economist whose work we referred to in our own research on the Savings & Loan crisis – “The Best Way to Rob a Bank is to Own One.” Professor Black discussed the financial crisis with Bill Moyers on April 3, 2009.

Berkshire Hathaway has significant ownership stakes in more than one bank. This brings us to an article at the Mises Institute, the libertarian think-tank. The article contains a link to an article from 1948 written by Warren’s dad when he was the U.S. Congressman from Nebraska – “Human Freedom Rests on Gold Redeemable Money.” The younger Buffett has a preference for the freshly printed stuff that Treasury is doling out.