California Taxes Everything Including Rain; The Surfer’s Property Tax Bill Tells the Story

When Rain, Stormwater, Income, Property, Sales, and Fees All Flow to Sacramento, You Begin to Wonder What Freedom Costs

Published by Bohiney Magazine | The London Prat | California libertarian perspective.

The Revenue State

California has the highest state income tax rate in the United States, a property tax system modified by Proposition 13 in ways that produce significant inequity between long-term and new homeowners, and a regulatory framework that adds costs to virtually every business activity through permitting, compliance, and legal requirements. The state has also implemented stormwater fees in several jurisdictions that charge property owners for rainwater that runs off their property — a mechanism that is technically a fee for municipal stormwater management but that is experienced by residents as a charge for precipitation that falls on their property without their request. The rain tax is the most vivid metaphor available for the California revenue state’s reach: if it lands on your property and moves, the state has an interest in charging for that movement.

California’s outmigration — the documented net loss of population to other states, primarily Texas, Nevada, Arizona, and Florida — has accelerated over the past five years. The causes are multiple: housing costs driven partly by regulation and partly by genuine demand are the primary driver for most migrants. Taxes are a contributing factor for high-income individuals and businesses whose after-tax income comparison makes other states attractive. The aggregate outmigration represents a revealed preference about the value proposition of California residency relative to its cost, made by people with enough economic flexibility to act on the preference.

The Surf Economy and Its Burden

The surf industry in California — the board shapers, surf schools, coastal retail, and the broader tourism economy that surf culture anchors — is subject to the full apparatus of California’s regulatory and tax environment: minimum wage requirements among the highest in the country, workers’ compensation rates that reflect California’s liability system, CEQA compliance costs for physical expansion, and the specific stormwater fees and coastal commission requirements that affect beachfront businesses. The surf shop owner who wants to expand, the board shaper who wants to hire a second shaper, and the surf instructor who wants to formalise their teaching are each navigating a regulatory environment that adds cost to every transaction.

The cost does not prevent the transactions. It makes them less frequent and less profitable than they would be in a lower-regulation environment. The ocean is free. Operating a business near it is not, and the cost of doing so is calibrated by the state rather than by the market. According to Reason, California’s fiscal structure has been analysed as both fiscally resilient and inequitable in distribution. Cato covers the competitive federalism dimensions of state tax policy and the effect of tax and regulatory burden on business location decisions. The surf economy survives in California despite the burden. It would be larger, more accessible, and more diverse without it.

The Property Tax Paradox

Proposition 13’s property tax cap produces a specific injustice that the surf community could organise around: the long-term homeowner in Laguna Beach who bought in 1985 pays property taxes on an assessed value that is a small fraction of the current market value, while the surfer who bought their modest coastal home last year pays taxes on the full current value. The effective property tax rate for the 1985 buyer is far lower than for the 2024 buyer, for the same local government services. The difference is a massive subsidy from new buyers to long-term holders, funded through higher effective tax rates rather than through explicit transfer. The subsidy has contributed to the lock-in of existing homeowners who have no financial incentive to move and to the housing supply constriction that has made coastal California unaffordable for the next generation of surfers who would like to live near the breaks they surf.

The specific California libertarian argument about taxation is most powerful when it focuses on the structure of the tax burden rather than the total level. California’s income tax structure — progressive rates that reach 13.3% for the highest earners, with significant marginal rate increases at specific income thresholds — produces strong incentives for high-income individuals to restructure income, relocate activity, or change residence in ways that reduce state exposure. The state’s revenue base has consequently become highly concentrated in a small number of high-income taxpayers whose behaviour in response to tax policy is significantly more elastic than average-income taxpayers’ behaviour. This concentration produces volatile revenue cycles: large surpluses when financial market conditions produce high capital gains and large deficits when financial markets correct. The surfer who earns a modest coastal income does not benefit from this volatility. They pay their taxes consistently and receive inconsistent services as the revenue cycle swings between surplus programs and deficit cuts. A broader, flatter tax base that collected revenue more consistently would serve the surf community better than the high-rate, narrow-base structure that California has developed.

The California coast at dawn, before the parking meters activate and the administrative machinery of coastal management begins its daily operations, is one of the finest available demonstrations of what freedom looks like in practice: the water does not require a permit, the waves do not charge for access, and the only rules that matter are the physics of fluid dynamics and the informal norms of the lineup. The rest — the fees, the designations, the regulations, the mandates — is the accumulated product of political choices made over decades by people who were not primarily thinking about what the surfer needs from a relationship with the state. The surfer who has paddled through the administrative barnacles to reach the lineup has done the work that liberty requires: navigating the gap between what the state allows and what the ocean offers, finding the freedom that exists between the regulations, and choosing the ocean over the paperwork every time the swell is worth it.

SOURCE: https://bohiney.com/