Tuesday, August 3
Karlgaard and the Cost of Living
Here's a book excerpt about cost-of-living-induced population trends in small cities, an article linked from Netscape's portal. It was written by Forbes' Rich Karlgaard, whose presentation on the "New Economy" (you know, the one that collapsed) my Fall 2000 economics professor at the University of Kansas urged us students to attend (though not without an extra-credit incentive).
Here's another article by Karlgaard on "America's Tax Patsy". The important twist here, though, is that he notes that income tax brackets place a heavier burden on coastal Americans than on middle Americans. Sure, a 40% tax on a $500,000 income leaves $300,000--I'd love to have that much after taxes--but that amount does not go as far here in San Jose, California, as it does in Topeka, Kansas.
We justify the progressive tax system on the basis that, if people can/cannot afford to pay more for the public good, they should/shouldn't. However, federal income tax adds to the cost of living on a mostly broad-brush basis across America--this regardless of local/regional cost of living. Just as the low affordabilities associated with low incomes justify lower tax brackets, should low affordabilities associated with a high-cost locale justify lower brackets for the locale's residents?
At the federal level, no. The disparity is just natural economics; all America's cities have strengths and weaknesses. High-demand areas like the San Francisco Bay Area have high costs because that's where the action is (or was). Des Moines is not known for being a major center of international industry, but its low costs surely appeal to many Americans who feel the in-the-center-of-it-all lifestyle is not worth it. Want to "stick it to the taxman"? Move to Topeka.
As a side note, it's funny how you can guess the indended audience of the latter article by Karlgaard's primary example: "Let's say you want to enjoy an executive-class lifestyle," complete with a Lexus or BMW, a country club, private schools, etc. He describes what for most of America is clearly an unrealistic goal, or a distant one at best, even though the cost-of-living issue applies to all Americans, especially low-income Americans.