Saturday, 27 June 2009
- Texas again has been chosen as No.1 state and did well in Litigation, Fortune 500, Tax Climate, Economy and Quality of Life.
- Other states did well in this ranking are Virginia(proximity to Washington DC and its funding), Utah(Litigation, Tax Climate & Quality of Living) and South Dakota (Tax Climate, Labor Cost & Quality of Living).
- On the contrary, large economy - high cost states such as New Jersey, California and New York did poorly and ranked bottom 10. No wonder many business are out-migrating from these states to above-mentioned business friendly states.
This data clearly suggest advantage and era of Texas.
Thursday, 25 June 2009
Firstly, let's review each state's 2010 state budget, projected deficit and its percentage as follows.
- Below list is based on the size of state budget. You can see that large budget size of large GDP states such as California, New York, Texas, New Jersey, etc....
- Ranking of states with largest projected budget deficit are; 1) Californial 2) Nevada; 3) Arizona; 4) New York; 5) Illinois; 6)Connecticut; 7) Florida; 8) Washington; 9) Wisconsin; 10) Louisiana. High-cost/large economy state such as CA/NY and real estate bubble burst states such as NV/FL/AR are leading the pack.
- Ranking of states with smallest projected budget deficit are; 1) South Dakota, 2) Arkansas; 3) Nebraska; 4) West Virginia; 5) Indiana; 6) New Mexico; 7) Maine; 8) Alabama; 9) Michigan; 10) Ohio; 11) Texas. Small states that are located inland (away from east/west coast) are faring very well (though I was very surprised about Michigan's low deficit projection).
|All States Total||$ 705.82||$ 133.40||18.90%|
|California||$ 101.19||$ 33.90||33.50%|
|New York||$ 61.72||$ 17.90||29.00%|
|Texas||$ 46.05||$ 3.50||7.60%|
|New Jersey||$ 32.41||$ 7.00||21.60%|
|Pennsylvania||$ 28.57||$ 4.80||16.80%|
|Illinois||$ 28.34||$ 7.00||24.70%|
|Ohio||$ 28.17||$ 2.00||7.10%|
|Massachusetts||$ 28.09||$ 5.00||17.80%|
|Florida||$ 25.66||$ 5.80||22.60%|
|Michigan||$ 23.19||$ 1.60||6.90%|
|North Carolina||$ 21.50||$ 4.60||21.40%|
|Georgia||$ 21.38||$ 3.10||14.50%|
|Minnesota||$ 17.49||$ 3.20||18.30%|
|Virginia||$ 17.31||$ 1.80||10.40%|
|Connecticut||$ 17.30||$ 4.10||23.70%|
|Maryland||$ 15.20||$ 1.90||12.50%|
|Washington||$ 15.04||$ 3.40||22.60%|
|Wisconsin||$ 14.22||$ 3.20||22.50%|
|Indiana||$ 13.16||$ 0.72||5.50%|
|South Dakota||$ 11.85||$ 0.32||2.70%|
|Tennessee||$ 11.11||$ 1.00||9.00%|
|Arizona||$ 10.07||$ 3.00||29.80%|
|Kentucky||$ 9.30||$ 0.82||8.80%|
|Louisiana||$ 9.22||$ 2.00||21.70%|
|Missouri||$ 8.96||$ 0.92||10.30%|
|Alabama||$ 8.31||$ 0.54||6.50%|
|Colorado||$ 7.69||$ 1.00||13.00%|
|South Carolina||$ 6.90||$ 0.73||10.50%|
|Kansas||$ 6.59||$ 1.10||16.70%|
|Oklahoma||$ 6.52||$ 0.60||9.20%|
|Iowa||$ 6.39||$ 0.78||12.20%|
|District of Columbia||$ 6.25||$ 0.65||10.40%|
|New Mexico||$ 6.05||$ 0.35||5.70%|
|Utah||$ 5.96||$ 0.72||12.10%|
|Hawaii||$ 5.73||$ 0.68||11.90%|
|Mississippi||$ 5.11||$ 0.48||9.40%|
|Arkansas||$ 4.56||$ 0.15||3.20%|
|West Virginia||$ 3.92||$ 0.20||5.10%|
|Nevada||$ 3.79||$ 1.20||31.70%|
|Delaware||$ 3.64||$ 0.56||15.30%|
|Nebraska||$ 3.53||$ 0.15||4.30%|
|Rhode Island||$ 3.28||$ 0.45||13.70%|
|Maine||$ 3.05||$ 0.18||5.80%|
|Idaho||$ 2.96||$ 0.41||13.90%|
|New Hampshire||$ 1.55||$ 0.25||16.10%|
|Vermont||$ 1.22||$ 0.25||20.80%|
* By the way, as you can see from above, California's budget deficit in 2010 is projected around $34 billion. California is making approx. $250 billion in Federal tax payment and get only 80% return. It means California overpays approx. $50 billion in Federal tax, more than enough to fill the 2010 state budget deficit!
Then, let's look at 2009 State Business Tax Climate Index. Below is the states with WORST tax climate.
1. New Jersey
2. New York
5. Rhode Island
In large states like CA/NY, states government have very high operating expense so they are charging very high tax to residents and business. As results, massive out-migration from California and New York is happening right now.
2. New York
5. Rhode Island
Here is the ranking of the most favorable tax states. Many states in the top 10 has are ones without state personal income tax such as Wyoming, South Dakoda, Nevada, Florida and Texas.
2. South Dakota
8. New Hampshire
This proves my argument --- "Why Californians are charged too much state tax?" No wonder so many high income family are paying almost 50% of their income on both federal and state tax!
In addition, California and New York started enforcing more tax to fill the budget deficit.
"6 States Hitting Residents With Big Tax Hikes" - WSJ.com
This will further accelerate the out-migration from California and New York to the low tax - strong economy state like Texas and delay the recovery from recession. In order to maintain long-term strength, California (and New York) has to stop raising tax, cut state budget and downsize service and operations.
Or should California (and New York) go separate ways from United States of America?
What do you think?
Friday, 19 June 2009
Having said that, I think it is worth analyzing Federal and States' tax system and dig down the real issues.
Let's look at Federal Tax system first. In Federal Tax system, personal income tax and corporate tax represents majority of total tax revenue; 83% and 13% respectively. These tax are progressive tax.
The issue of progressive tax is that residents in high income and high cost of living states such as California and New York are taxed at much higher rate than the residents from low income and low cost of living states.
Below is the ranking for Per Capita Tax Burden and Return on Federal Tax Dollar: Fiscal 2005. Residents in state of New Jersey receive 65 cents per capita though they pay $1 for Federal tax.
- The return for California and New York residents is 0.80 and 0.82 respectively. I believe return for high income residents in NY, LA and SF metropolitan area is much lower. I
- On the contrary, residents in Mississippi、New Mexico、Alaska and Louisiana receive approx. $2 on $1 Federal Tax payment.
- While Texas is third largest economy after California and New York, the return is 0.97, much higher than CA/NY residents. I guess federal government is afraid the independence movement of Lone Star so they put "moderate" federal tax burden on the state of Texas;)
Per Capita Tax Burden and Return on Federal Tax Dollar: Fiscal 20051
Rank State Return
50 New Jersey 0.65
49 Nevada 0.67
47 Conneticut 0.73
48 Minnesota 0.73
46 New Hampshire 0.75
45 Illinois 0.78
43 Delaware 0.80
44 California 0.80
42 New York 0.82
41 Colorado 0.83
40 Massatusetts 0.85
39 Wisconsin 0.88
38 Washington 0.89
37 Oregon 0.93
36 Michigan 0.94
35 Florida 0.95
34 Texas 0.97
33 Rhode Island 1.01
32 Georgia 1.03
31 Ohio 1.06
30 Indiana 1.07
27 Pennsylvania 1.08
28 North Calorina 1.08
29 Utah 1.08
23 Vermont 1.09
24 Iowa 1.09
25 Nebraska 1.09
26 Wyoming 1.09
22 Kansas 1.13
20 Arizona 1.19
21 Idaho 1.19
19 Tennesee 1.29
18 Maryland 1.30
17 Missouri 1.32
15 Oklahoma 1.35
16 South Calorina 1.35
14 Arkansas 1.40
13 Maine 1.41
11 Hawaii 1.43
12 Montana 1.43
10 South Dakota 1.48
8 Kentucky 1.51
9 Virginia 1.51
7 Alabama 1.63
6 North Dakota 1.65
5 West Virginia 1.75
4 Alaska 1.83
3 Louisiana 1.85
2 New Mexico 2.00
1 Missisippi 2.02
* If you are interested in per capita expenditure by states and its allocation, please download "Consolidated Federal Funds Report 2006" and look at page ２４.
* Federal tax expenditure per capita in Washington DC is approx. $70,000! No wonder Washington DC economy is booming now.
California and New York both face approx. 30% state tax revenue deficit on 2010 budget. I bet, if CA and NY receives 100% return on its federal tax burden, story should be quite different. But, under current US legislation, non-coast states have much more say and control over federal tax allocation.
I personally think federal government's exploitation of California and New York (and NJ/CT) is the key issue facing growth of their economy. State governments had to charge high state tax to compensate for low return on federal tax. Therefore business and residents are migrating to low-tax states.
That's it for today. Please look for follow up posting on state tax issues.
Thursday, 18 June 2009
Anholt-GfK Roper City Brands Index report shows consumer perception of the image and reputation of 50 major cities worldwide with the following criteria.
- Presence (knowledge of the city and perception of its global contribution)
- Place (cleanliness and climate)
- Pre-requisites (affordable accommodation and quality of public amenities)
- People (friendliness and cultural diversity)
- Pulse (interesting events, activities, and lifestyles)
- Potential (perception as good place to do business, to find a job, and to go to university/college)
Here is the Top 10 Cities with strong brand.
Here is the Top 10 Cities with strong brand.
5. New York
7. San Francisco
8. Los Angeles
9. Vienna10. Madrid
The following are the top three ranked cities in each category:
Presence Brand Ranking
2. New York
Place Brand Ranking
Pre-requisites Brand Ranking
People Brand Ranking
Pulse Brand Ranking
2. New York
Potential Brand Ranking
2. New York
I believe city branding has strong correlation with real estate price as all of top 10 cities are known for quite expensive real estate price. High awareness and favorable image create demands for real estates, especially among highly educated workforce who can chose to live wherever they want. This is how so called bubble proof real estate superstar cities!
For the real estate speculation, it is very strategic to identify 2nd or 3rd tier cities that have potential to be in 1st tier. These up-and-coming cities have major appreciation potential.
Lastly, I would also recommend for investors to review various rankings and understand when choosing your city to invests.
Liveability Ranking by Economist.com
Mercer Quality of Living Index 2009
Best Cities to Live in 2009 (Askmen.com)
Top 10 cities for recession recovery is as follows:
- Austin Tx is ranked No.1, driven by educated workforce, strong IT industry and recession proof University of Texas and State Capital.
- Four Texas cities are listed in Top 10. This is proof of "Era of Texas" has arrived.
- For other cities in Top 10, each city has extraordinarily strength such as Washigton DC - government spending, Seattle - highly educated workforce and IT industry, Fayettevile - Walmart HQ, Huntsville - booming IT industry, McAllen Tx - trade with Mexico, etc...
|Rank||Metropolitan Stastical Area||2009GMP||2010GMP||Growth||Unemployment|
|1||Austin-Round Rock, Texas||72.4||77.7||7.3%||5.8%|
|5||San Antonio, Texas||66.3||68.4||3.2%||5.4%|
|7||Dallas-Fort Worth-Arlington, Texas||274.6||287.9||4.8%||6.0%|
Conversely, the worst 10 cities for recession recovery is as follows:
- 6 out of the worst 10 cities are in California. "The end of the era of California" seems to be really happening.
- Flint and Detroit was ranked Worst 1 and 3 respectively because of decline of US auto industry. They are constantly ranked "worst" in many economic indicators.
- Hit hard by financial industry meltdown, New York metro area's GMP (Gross Metropolitan Product) is forecast to go down by -3.8% by the end of 2010. Since NY metro's real estate price has not declined much, Deutche Bank economist expect additional 30-40% decline.
|Rank||Metropolitan Stastical Area||2009GMP||2010GMP||Growth||Unemployment|
|7||New York-N. NJ-LI, N.Y.-N.J.-Pa.||988.0||950.0||-3.8%||7.6%|
|10||Los Angeles-Long Beach-Santa Ana, Calif.||597.0||581.0||-2.7%||10.1%|
Real estate is location, location & location! Each metropolitan areas have entirely different economic base and growth potential. Since the biggest advantage of the real estate investment in US is long-term capital gain, it is safest bet to invest in high growth areas.
Happy Investing !!!!!
Sunday, 14 June 2009
Saturday, 13 June 2009
Here is great article about emergence of Texas from newgeography.com. Since this is pretty much explain why I (San Francisco resident) invest in Austin Tx, I would like to introduce as follows:
America's Four Great Growth Waves and the World Cities They Produced
by Tory Gattis 04/14/2009
- There have been four great growth waves in American history. In each case, there was an attractive new frontier, which not only drew migrating waves of people seeking new opportunity, but also developed large new bases of industry, wealth, and power. These waves have also created top-tier world cities in their wake. The first three of these waves were:
- The Boston, New York, Philadelphia, Baltimore, Washington DC corridor was America's original land of opportunity, industry, wealth, and power. New York was the big winner, and DC and Boston still do quite well.
- The rise of the agricultural and industrial Midwest, including Chicago, Detroit, Pittsburgh, Cleveland, and St. Louis. The fall here has been a hard one as manufacturing moved abroad, but Chicago still stands as a world-class city produced during the region's heyday.
- The great westward migration, mostly focused on California, but with ancillary growth in adjacent and west coast states. This migration started well before World War 2, but really took off after the war, and produced two top-tier mega-metros – Los Angeles and the San Francisco Bay Area - and several successful second-tiers like Seattle, San Diego, Las Vegas, and Phoenix.
- These waves are not clearly distinct, but overlap each other. As one region matures and starts to level off, the next region starts its growth wave. And that's the situation now as California shows clear signs of having peaked: gigantic tech and housing crashes plus economic and domestic outmigration as tax, cost-of-living, housing, and regulatory burdens rise and a dysfunctional government teeters towards financial collapse.
- The fourth wave is increasingly clear and follows the same California model of a single focus mega-state and an ancillary region: Texas and the new South.
- · The growth wave really covers much of the South, but Texas is the 800lb gorilla vs. states like Georgia and North Carolina, just as California dominates over Washington, Nevada, and Arizona.
- Texas even looms over Florida, which certainly has experienced incredible population growth to become the fourth-largest state, but has had considerably less success with building industry, wealth, and power. Florida’s wealth – like that of Arizona – comes in part from people who built wealth elsewhere but moved or bought a second home there. Neither place is home to many Fortune 500 headquarters, an area where Texas has excelled.
- California had its agriculture and oil barons before WW2, but the real story there was the post-war rise of the entertainment, defense, aerospace, biotech, trade and technology industries. In a similar way, Texas’ oil tycoons are just the tip of the coming surge of wealth and power in industries such as technology, health care, biotech, defense, trade, transportation, aerospace, finance, telecom, and alternative energy in addition to traditional oil and gas (in fact, Texas is the #1 wind power state).
- · The great cities emerging from this new wave are Atlanta, Dallas-Ft.Worth, and Houston. They dominate the census growth stats (Houston story), and all indications are that Houston will pass Philadelphia in the 2010 census to join Dallas-Ft.Worth in the top 5 metros along with New York, Los Angeles, and Chicago. DFW and Houston are even approaching the combined San Francisco Bay Area population of 6.1 million, and Texas passed California and New York for the #1 ranking in the Fortune 500 HQ rankings last year.
- The DFW-Austin-San Antonio-Houston Texas Triangle has the population of 18 million and fastest growing economic corridor in USA.
While I really like California, I tend to agree that Era of California is over. It is quite evident from current economic slump, fiscal budget mess and increasing tax and cost of business.
Happy Investing in Texas and take advantage of this 4th wave!!!!!!
As recession get worse, even college graduates are having tough time finding job, especially ones that they want. Under
Underthese circumstance, they may question the value of college degree. Here is interesting statistics!
- The unemployment rate for workers over 25 years old who haven't gone beyond high school rose to 10% in May, nearly doubling from 5.2%.
- Among workers who haven't completed high school, the unemployment rate rose to 15.5%, compared with 8.4% last year.
- By contrast, the jobless rate among those with four-year college degrees was 4.8%, up considerably from 2.3% a year ago, but well below the rate for people with less education.
- The unemployment rate in April among four-year college graduates between 20 and 24 years old was 6.1%; among those the same age with only high-school diplomas, it was 19.6%.
I guess college degree does not guarantee your economic success. But, without it, it will totally limit your career options.
As you seen from recent mess on US auto industry, labor union are under severe pressure in terms of high salary and benefits. This pretty much symbolize the end of American Dream --- “upon high school graduation, get manufacturing jobs and enjoy middle class life for the rest of one’s life”. In fact, in this recession, manufacturing factor is one of the most severely hit area. As US economy moves toward more information and creative based, I do not see bright future in manufacturing jobs in US. This indicate that expanding income inequities based on education level.
Anyway, let’s go back to real estate. I believe there are strong correlation on residents’ education level and real estate stability. Below is the ranking of most educated metropolitan area in USA. You can see that top ranked cities are known for high real estate price. This has to do with strong economy and higher income.
MSA College Graduate Ratio Median Household Income
1. Seattle, WA52.7 $49,297
2. San Francisco, CA 50.1 $57,496
3. Raleigh, NC 50.1 $48,131
4. Washington, DC 45.3 $47,221
5. Austin, TX 44.1 $43,731
6. Minneapolis, MN 43.2 $41,829
7. Atlanta, GA 42.4 $39,752
8. Boston, MA 40.9 $42,562
9. San Diego, CA 40.4 $55,637
10. Lexington-Fayette, KY 39.5 $42,442
11. Denver, CO 39 $42,370
12. Charlotte, NC 38.8 $47,131
13. Portland, OR 38.8 $42,287
14. St. Paul, MN 36.5 $44,103
15. San Jose, CA 36.1 $70,921
16. Colorado Springs, CO 34.9 $47,854
17. Honolulu, HI 34.7 $50,793
18. Oakland, CA 33.8 $44,124
19. Pittsburgh, PA 32.3 $30,278
20. New York, NY 32.2 $43,434
Source: U.S. Census Bureau, American Community Survey
My real estate investment is concentrated in good neighborhood in Austin, San Francisco and Manhattan (40%+ residents in Manhattan has master degree or higher!). Fortunately, real estate market is quite stable in these markets and unemployment is not as bad as rest of America.
One of the reason I have not-so-positive point of view in Las Vegas real estate is that its low education level. Only 20.4% of Las Vegas residents have college degree or higher. With this fact, you can easily understand why unemployment rate in Las Vegas has shot up to 10.4% in 12 month period. For same reasons, I am not bullish on real estate market in Inland California. Richard Florida has pointed out importance of educated workforce to be "winning cities".
As you observed that real estate bubble burst is most severe in low education neighborhood (= subprime loan + high unemployment) while, at “good” neighborhood with high-education residents, real estate price is tend to be stable. As income inequities by education level will continue to spreads in USA, I think it is more important that you focus more on good neighborhood where those with high education choose to live.