California Is at Fiscal Brink

California Is at Fiscal Brink

California is about to implode, and I’m loving it. It couldn’t happen to a more deserving bunch of socialists. I never thought I would see it in my lifetime; in one corner of America, Atlas is shrugging. This point seemed to zoom right over the head of the pundits (but maybe not the reporter):

California prides itself on its progressive income tax, with people earning high incomes paying a huge share of state taxes. The top 10 percent of filers pay 75 percent of personal income taxes. But when their income drops, as it did when the technology boom went bust in early 2000, the state treasury crashes.

“Nobody expected the loss of revenues due to the drop in the stock market to be as severe as it has been,” said B. Timothy Gage, the state finance director. “Nobody anticipated the truly staggering extent of the hit we took. States have not seen such drops since World War II.”

You know what else we haven’t seen since WW2? A progressive income tax that draws 75% of the revenue from 10% of the population. The aggravating factor is that this 10% is the part of the population that has the most flexibility to simply pick up and move.

With states like Texas and Tennessee that have no state income tax around, the free market of government will work. When you have to decide between one state with a nice climate, a strong digital infrastructure, and no state income tax and a state with a nice climate, a strong digital infrastructure, and a horribly burdensome state income tax, what does California have to draw people in? The beach? Rolling brownouts? Too bad I don’t have the energy to rant about the California power de-regulation actually being re-regulation.

James L. Brulte, the Republican leader in the State Senate, said that raising taxes would not only be insufficient to stanch the red ink but would also throttle growth when the economy is sputtering.
At least someone in the California Lege is paying attention.
“Given this, there is really no easy way out of the current predicament,” said Elizabeth G. Hill, the Legislature’s chief budget analyst, “and this makes it all the more important that the Legislature take advantage of the alternative budget-balancing approaches and options available to it.”

Those include deep cuts in programs, suspension of pay increases for state employees, elimination of special tax breaks for business and consideration of tax increases on businesses and individuals. Property taxes, which were capped by Proposition 13 in 1978, are not an option for new revenue, so many analysts expect increases in so-called sin taxes on alcohol, tobacco and gambling.

“California has a very liberal legislature and their easy answer is to pile more taxes on the business sector, which is already struggling,” said Jack Kyser of the Los Angeles Economic Development Corporation. “And it’s not just business that is nervous,” Mr. Kyser said. “County and city governments are scared half to death.

“It’s not a pretty sight.”

The answer is very easy. Cut the idiotic socialist medical coverage, end mandatory education, privatize the schools, and kill the state income tax. The only portion of the California state tax structure that is keeping the state running is the sales tax. Kill the income tax, foster consumer spending, and get rid of socialism.

I have to disagree with you, Mr. Kyser. It is a beautiful thing.

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