[ExI] lotta splainin to do

Tue Nov 22 14:00:44 UTC 2022

…> On Behalf Of Giovanni Santostasi via extropy-chat
Subject: Re: [ExI] lotta splainin to do

Spike,

>…Why California or any state would continue to accept dollars for taxes if it becomes worthless through inflation?...

It was by intentional and careful design Giovanni.  The state constitution was specifically written to protect long time homeowners and landowners some of whom are on fixed pensions enumerated in dollars.  As inflation was already eating away at the value of their pensions, people who had been on a property for generations were being presented with tax bills they couldn’t pay, including indigenous people whose families predated the California government.  Governor Jerry Brown in the 1970s realized that wasn’t right.

So… he and the sympathetic legislature baked into the California constitution protections for those long time California landholder and homeowners.

If these people are still living on a 70s style pension, in that home, they can still make it easily by renting a piece of it to someone at modern prices, which will cover the property tax, the utility bills, the grocery bills, the medical insurance.  I see evidence of it all over my own neighborhood where homeowners have converted garages to apartments and now rent those out for enough to cover expenses.  That rent goes up with inflation.  One has the option under Prop 13 to pass the home down to the next generation, who then keep the old tax structure, allowing that generation to live off the rent from the garage, probably rented to some hot-ass engineer working up at Tesla.

>…Romans were in the same situation at one point and they refused to accept their own currency to pay taxes, they wanted pure gold or labor in kind…

Romans had more options than the California state government, which may not demand any other currency for taxes other than US currency.  To change that would require a change in the state constitution, which by design is very difficult to do: it requires 2/3 vote of both chambers, which hasn’t happened since I can recall.  I consider it extremely unlikely that voters or the legislature dependent on those voters, would agree to what would be a huge tax increase on all long-time homeowners.

On the flip side, the companies which pay pensions cannot be obligated to pay those with any other currency besides US tender.  Conclusion: US notes will be with us for as long as the California constitution is there, which I predict is a long damn time.

>…It was a sign the end was near for such an Empire. History is repeating again? 
Giovanni 

I think not, for California still has new vigorous businesses such as Tesla coming to town.  It also benefits from a lotta lotta stinkin rich Taiwanese and Indian people buying homes here.  I do not think California is going to go broke anytime soon.

However… you do raise an interesting question.  The tax basis is set by the sale price.  What if someone buys a home with BtC.  They need to agree with the state somehow on what was the price of that home.

In any case, back in the 70s the state government knew eventually there would be serious challenges to Prop 13 so they put all the guardrails in place at the time, which have been challenged repeatedly, such as the rule that requires a 2/3 vote of both legislatures to change the constitution.  That rule (which is also in the constitution) was challenged, but the court ruled that changing the 2/3 requirement required a 2/3 vote of both chambers.  So they tried to change that rule, but the court realized that changing the 2/3 vote rule to change the 2/3 vote rule required 2/3 vote.  That’s the rule.

Now… Sacramento must live with the consequences.  That constitution will not change.

There is a bright side to it: state governments must balance their books.  The Fed has the option to just borrow until no one will lend it real money for their fake money.  States cannot do that.  So… my conclusion is that all the real heavy lifting in government should be done at the state level, with the fed having only a few clearly defined responsibilities, such as forming a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, secure the blessings of liberty to ourselves and our posterity, that sorta thing.  The rest of it: state level.

spike

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