California is on its way to self-destruction. The Budget which was just passed by both houses means that a family of four will be paying approximately $1,500.00 more in taxes at time when California can least afford it and in an economy that Obama has repeatedly equated to a quasi-Great Depression.
Why doesn't California understand that when you raise taxes, the ones you want to stay, leave? The ones who leave are the job creators, and those with resources who are tired of California's confiscatory tax system. The ones who stay are the illegal immigrants or those who clamor for the social services California provides. California's unemployment rate is 9.3% and climbing. Its budget deficit is 42 billion dollars, and this tax increase will not solve the deficit – it will make it worse.
There is an exodus from California. Millionaires in California dropped from 44,000 in 2000 to 29,000 in 2002. They are leaving in droves. In addition 1.5 million people have left California more than entered in the past decade. People are leaving because of the onerous tax burden California imposes on its citizens.
Tax revenue is decreasing not because the state doesn't tax enough, but because people leave for greener pastures where they don't have to worry about the government confiscating their hard earned money to support a state that cannot manage its own affairs because of prolifigate spending by an out-of-control legislature. Retirees take their 401ks and IRAS with them depriving California of a source of tax revenue. Businesses relocate outside the state depriving California of even more tax revenue. Anyone would be crazy to retire in California with California's tax burden. I know several people who would not come to California for that reason. two-thirds of the economy is from consumer spending. This tax increase will only cause consumers to spend less. So, what is the answer to California's ills – Raise taxes.
Yesterday California passed its budget after a grueling 48 hour stand-off. California voted in a so-called "temporary" sales tax of one cent. Nothing is more permanent than a temporary tax. Vehicle registration fees will increase from the current level of .65% to 1.15%. How is that for destroying an automobile industry already on the brink? And then we have a .25% percent surcharge on personal income tax. Aw – but that would be cut in half if we receive more federal stimulus funding than expected. Here is the kicker - California will only allow annual expenditures to increase 5% annually. Why are they allowing expenditures to increase at all when tax revenue is failing to keep pace with expenditures? Any business would slash costs when it fails to meet its goals. Tax revenues do not materialize, but California continues to spend. When tax revenues fail to materialize, the state will try and raise taxes again.
The Wall Street Journal stated the following:
It's sad to watch. The Golden State -- which a decade ago was the booming technology capital of the world -- has been done in by two decades of chronic overspending, overregulating and a hyperprogressive tax code that exaggerates the impact on state revenues of economic boom and bust. Total state expenditures have grown to $145 billion in 2008 from $104 billion in 2003 and California now has the worst credit rating in the nation -- worse even than Louisiana's. It also has the nation's fourth highest unemployment rate of 9.3% (after Michigan, Rhode Island and South Carolina) and the second highest home foreclosure rate (after Nevada).
Political Vanguard reports that the California budget was a mere $50 billion in the early 1990s. It more than doubled since then and in the last five years, it increased over 40%. That constant growth matched against a fluctuating revenue stream is the anatomy of our current crisis.
All Democrats and three Republicans from the Senate and three Republicans from the House voted for passage of the Budget. Republicans who voted for this should be voted out of office. The Republicans who should be voted out of office are: The Senate: Roy Ashburn of Bakersfield, Dave Cogdill of Fresno, and Abel Maldonado of San Luis Obispo. The three Republicans in the Assembly are Anthony Adams of Claremont, Roger Niello of Sacramento and Mike Villines of Fresno.
California is racing to be number one, number one in the highest state taxes in the country.
Who will be the last man standing in California?
The Dow is down another 172 points at 7,293, and there is no bottom in sight. Again, how does the market like Obama's stimulus package?