Patricia is Short Because State Government Has Made California Unaffordable

Patricia is Short Because State Government Has Made California Unaffordable

At a recent congressional hearing, freshman Democrat Katie Porter from Orange County took to her soapbox to grill JP Morgan Chase CEO Jamie Dimon about income inequality at the company.

Using the example of Patricia, who is employed as a full-time, entry-level bank teller at JP Morgan Chase – admittedly the employee’s first ever job.  Porter channeled her inner class warrior to argue that Patricia cannot afford to live off her estimated $35,000 a year annual salary.

Compiling a rough estimate of the employee’s monthly expenses, Porter concludes that the employee would run a $567 monthly deficit on that salary.

With dramatic effect, Porter asked Dimon, “She’s short $567, what would you suggest she do?”

Porter should really be asking her liberal colleagues in Sacramento what Patricia should do to afford the expensive costs of living in California that are largely the result of their policies.

Let’s take a closer look:

  • Taxes: Porter estimates that Patricia would lose about $6,000 to state and federal taxes.  She neglects to mention that Patricia would surely receive a significant tax refund.  Running her scenario through Tax Act, Patricia would get a roughly $4,400 federal tax refund, benefitting from the increased per child tax credit in the Trump tax reform plan. Taxes are a problem in California, thanks to Porter’s comrades in Sacramento, who have imposed the 11th-highest tax overall tax burden in the nation and the 5th-highest individual income tax burden based on WalletHub’s latest rankings.
  • Rent: Patricia pays $1600 per month for a one-bedroom apartment for herself and her 6-year old daughter.  It’s true that housing costs have skyrocketed in California.  But this is due to policies enacted in Sacramento like the California Environmental Quality Act that make it very difficult and expensive to build more housing supply in California.  Some want to make the problem even worse with a new rent control scheme, which studies have shown would decrease supply and increase rents.
  • Car Payment: Patricia’s car payment was made more expensive by the state’s recent $52 billion transportation tax hike, which included a new annual “transportation improvement fee” ranging between $25 and $175 annually based on the car’s value. 
  • Gas: Patricia is paying nearly $4 per gallon for gas, prices that have been driven up by misguided government policies.  Cap-and-trade and the low carbon fuel standard add an estimated 28.5 cents per gallon to gas prices.  Californians now pay 76 cents per gallon in total state and federal gas taxes – the second-highest in the nation.  Gas taxes increased by 12 cents per gallon in November 2017, and will go up another 5.6 cents per gallon on July 1.  That tax increase proved even too much for Porter, who publicly supported Prop. 6 to repeal the gas tax. 

Porter makes a good point about the expensive cost of living for working class Californians like Patricia.  But Patricia is not $567 short each month because JP Morgan Chase paid her a good wage for an entry-level job, which should be noted is above the soon-to-be $15 California minimum wage.

Sadly, she’s short cash each month because state lawmakers chose to make California such an unaffordable place to live.   Maybe Porter should explore some of these Sacramento-enacted policies that make it so expensive to live here before lecturing CEO’s who pay their workers a good wage.

Tim Anaya is the Pacific Research Institute’s communications director.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.