Caifornia is Number 1!

[red-beard]

But is ain't a good thing...From the WSJ 12/28/2007


The Red Ink State
December 28, 2007; Page A12

In the contest to be America's most spendthrift state, New York and California are typically ahead of the pack. But here comes the not-so-Golden State charging back in the lead. Last week Governor Arnold Schwarzenegger announced he will declare a "fiscal emergency" in January, which he said has become "a common thing in California." No kidding. This budget crisis comes a mere five years after the last one.
The bean counters in Sacramento are now projecting the state's budget deficit at $14 billion, and climbing. That's a big enough hole that if the state were to slash 10% from every public service -- from schools, to courts, to highway patrol units -- it would still be $2 billion in the red. There are lessons for other states in these recurring budget miseries, in case anyone still thinks California is a model to follow.

Let's start with the culture of overspending in Sacramento. State outlays have nearly tripled to $142 billion this year from $51 billion in the early 1990s. After the technology bubble burst in 2001, the state's deficit swelled to $20 billion. Voters recalled Gray Davis from the Governor's mansion in favor of Mr. Schwarzenegger, who promised to "cut up the state's credit card." In Arnold's first year, the budget was held in check, but the state still issued $9 billion in "revenue bonds" rather than shrink the size of government.
What really rescued the state was the national economic expansion, including the housing boom and the cut in capital gains and dividend taxes that helped the state's technology industry. Tax receipts rose 40% over the last four years, but Sacramento returned to spending as usual. Expenditures rose by 44%, and billions of dollars of new school and road bonds were issued. After getting trounced by labor unions in state referendums, Mr. Schwarzenegger gave up trying to change any of this.
Even with the new deficit estimates, the Governor and legislature are promoting a new government health-care plan at a cost, coincidentally, of $14 billion. The state Assembly recently passed the plan. State Senate President Don Perata, a Democrat, advises that to launch this new health-care entitlement now would be both "impractical and impolitic." He's right, but the politicians are floating a $2 a pack increase in the state's cigarette tax to pay for it. So a shrinking number of smokers would be tapped to finance a growing number of citizens dependent on the state for health insurance.
One reason for the budget deterioration is falling home prices. The housing bubble sent the median home price to $500,000 last year in California. At the height of this real-estate euphoria, fewer than one in 20 residents could afford to buy the average home in San Diego and Los Angeles Counties. Now the state is enduring the inevitable correction, with prices tumbling by double digits in some markets. Homeowners are demanding a revision of their property tax assessments, which is only adding to the revenue drought.
California is also losing many of its most productive workers. Over the past decade nearly 1.5 million more Americans fled California than arrived; 275,000 left last year alone, according to Census Bureau data. An influx of foreign immigrants has maintained the state's overall population, but those departing include upwardly mobile middle-class families moving to lower-tax states with more affordable housing.
All of this circles back to the policy mess in Sacramento, especially to its steeply progressive income tax that encourages budget boom and bust. The Golden State applies a top marginal income tax rate of 10.3%, the highest rate on earnings of any state (excluding some city levies, such as New York City), according to the Tax Foundation. A rising share of those who pay the 10.3% rate are now hit by the federal Alternative Minimum Tax, so about one-third of California's income tax is no longer deductible from federal tax liability. This is one more reason for taxpayers to flee the state. The progressive tax structure also places the state revenue burden on the backs of relatively few taxpayers. In good times this inflates revenues, which the legislature then spends with abandon, only to see those revenues vanish when the economy slows.
"Our tax policies practically invite Californians to pack up their bags and leave the state," says Assembly Minority Leader Mike Villines. "We can't possibly balance our budget with new taxes." Ah, but Democrats are willing to give it a try. Assembly Speaker Fabian Núñez wants to institute a new tax on Internet sales, increase corporate taxes, and double the state's hated car registration tax.
Mr. Schwarzenegger is again preaching spending restraint, which is long overdue. The tragedy is that he and his Sacramento running mates wouldn't be facing this current fiscal mess had they done more to improve the state's policies during the last one.

[Joeaksa]

Kalifornia is a world upon its own... just hope that most of the people there stay there...

[turbo6bar]

State budget deficit could be solved by closing tax loopholes

Nevertheless, Legislative Analyst Elizabeth Hill's recommendations on tax breaks, which she says mostly benefit the rich and corporations, are drawing attention. She even addressed the largest, seemingly most untouchable tax break: allowing homeowners to deduct mortgage interest off their state personal income taxes.

Hill said in a report that the deduction, which exceeds $5 billion a year, no longer serves its intended purpose of encouraging home ownership. She believes there are more targeted, less costly ways to aid those who need the assistance, without subsidizing wealthy homeowners.

According to sales tax receipts, the CA economy is contracting or is currently stalling.

Californian lawmakers will need to dig deep to fix the deficit. They can't look towards Washington. After all, the federal budget has doubled since 2000. What happened to fiscal responsibility?

Repealing the mortgage interest deduction, however unlikely, would be devastating to California's housing market. It would be like sprinkling salt on a snowman.

[red-beard]

Joe, the article shows that the smart, upwardly mobile, professionals are leaving and being replaced by illegal immigrants. I suspect this will increase, as states adopt Arizona type laws.

[legion]

Originally Posted by turbo6bar

Repealing the mortgage interest deduction, however unlikely, would be devastating to California's housing market. It would be like sprinkling salt on a snowman.

Very clever. Where's that "quote of the year" thread?

[Buckterrier]

I'm no expert, in fact I don't know what the hell I'm even talking about, but I do know this... New Hampshire has no state income tax nor do they have a sales tax. I moved to Ct. and am plastered with taxes as are most Americans. When I mention to people in this state about New Hampshire I get this... "Well you didn't have any sevices in New Hampshire". And my reply... "I work for a living, I don't need services"
This has gotten me riled damnit!!!!!!!!!!!! I'm going to start an F'ing thread...

[Porsche-O-Phile]

I guess CA just follows the shining example set by our "conservative" leadership in Washing-toon.

[scottmandue]

It's all California's fault!

[Rick Lee]

Can someone please explain this mortgage interest deduction thing in CA? Is it different than in other states? In VA you just use the AGI from your federal tax return and write that in for your state AGI. You have to include a copy of your federal return with your state return. I don't even think they ask for your schedule A. So you're taking your mortgage int. deduction on your fed. return, which gives you your AGI, paste that number in your state return and you're taxed on that number. Is that a double deduction? Is that how CA does it?

[sammyg2]

Originally Posted by Porsche-O-Phile

I guess CA just follows the shining example set by our "conservative" leadership in Washing-toon.

The politicians in sacramento are predominantly democrats. they like to cater to the poor in exchange for votes. They are poverty pimps. They spend money they don't have to take care of illegal immigrants, crack whores, and 3th generation welfare families.
If they stopped doing that, there wouldn't be a deficit. there wouldn't be a need to increase taxes. there wouldn't be a need for state income taxes at all.

If the idiots who live in this state would just stop voting for the idiot democrats, this problem would eventually go away. Instead they are voting for people who support illegal immigration. they vote for people who insist on spending money they don't have. It's their own fault, but why do I also get punished by their actions?

[futuresoptions]

Ahhhh... The folks that will pay $750,000. for a $30,000. house in the ROW.....

[techweenie]

Ahnuld is just Gray Davis with muscles.

[red-beard]

So, who would be better?

I bet the Porn star wouldn't have been worse.

[Porsche-O-Phile]

Originally Posted by sammyg2

The politicians in sacramento are predominantly democrats. they like to cater to the poor in exchange for votes. They are poverty pimps. They spend money they don't have to take care of illegal immigrants, crack whores, and 3th generation welfare families.
If they stopped doing that, there wouldn't be a deficit. there wouldn't be a need to increase taxes. there wouldn't be a need for state income taxes at all.

If the idiots who live in this state would just stop voting for the idiot democrats, this problem would eventually go away. Instead they are voting for people who support illegal immigration. they vote for people who insist on spending money they don't have. It's their own fault, but why do I also get punished by their actions?

I don't disagree with you at all. It's despicable the rate at which "wealth redistribution" happens in this state. It's doubly bad when you start looking into what it costs to run & operate a business in this state. It's HUGELY business-unfriendly. I have very serious reservations about going "on my own" here in CA. I've got a couple of years to think about it yet, but I may very seriously decide to go to another state to go open my own shop. CA is WAY too high on taxes.

[Tobra]

Originally Posted by Porsche-O-Phile

I guess CA just follows the shining example set by our "conservative" leadership in Washing-toon.

No, the state has been run by power brokers from the Demoncratic Party for too long. This has been going on for a long time, long before W thought about even being the Governor of Tejas.

Income to the State of Kalifornication is tied to income taxes. Property taxes are tough, as Prop 13 back in the 1970's prevents the state from raising them, unless the house is sold for more money. The legislature sees a bump in the state's income, installs a bunch of programs that are structured to grow a set amount every year. They see a record high amount of money and plan for it to happen every year, spending accordingly. This coupled with the punitive taxes in the upper income brackets(the people who are the most able to relocate and escape the taxes, ironically) The stridently anti business atmosphere(for example the illegal health plan the city of SF that will begin next Wednesday, but has its funding tied up in court because the added tax on businesses violates federal law. Something they knew when they put it in place, but Gavin Newsome has little regard for what the law is, only what he thinks it should be) Net result is the people who make the money to pay for the programs leave the state, and are replaced by illegal immigrants earning minimum wage, and unlikely to pay any taxes at all, or certainly less than the cat they are replacing. The illegals have half a dozen kids, who are all on "free" healthcare already in place, going to schools that are already overcrowded and falling apart, while contributing nothing to the state coffers.

It is bad now, but will get so much worse when the golden retirement programs Gray Davis gave to the state labor unions to get campaign contributions start coming due.

[tabs]

Ironically those Retired State workers will be leaving CA to spend their retirment check.


I waved bye bye to CA a few years back. Actually I was just drying my nails...

I really wana see them elminate those Property Tax deductions....then we will REALLY see a decline in Golden State property values...they will probably wind up doing it, if they get desperate enough for the money. Propery in Mississippi will look expensive in comparison.

I told ya, the destinations of choich are other SW venues like LV and Phoenix. What do the politicians care in CA. if they continue to screw the Middle Class...its the illegals who are putting them in office.

why does the state of CA exist, so that Mississippi won't be last in everything.

[BeyGon]

Originally Posted by tabs

Ironically those Retired State workers will be leaving CA to spend their retirment check.


I waved bye bye to CA a few years back. Actually I was just drying my nails...

I really wana see them elminate those Property Tax deductions....then we will REALLY see a decline in Golden State property values...they will probably wind up doing it, if they get desperate enough for the money. Propery in Mississippi will look expensive in comparison.

I told ya, the destinations of choich are other SW venues like LV and Phoenix. What do the politicians care in CA. if they continue to screw the Middle Class...its the illegals who are putting them in office.

why does the state of CA exist, so that Mississippi won't be last in everything.

California with all it's faults is still the 7th or 8th largest economic country in the world. Canada is maybe 13 by comparison.
Democrats will always control California, I think about 40% of california jobs are directly connected to the government. Who is going to vote to cut their own throat, they need to tax more for their paycheck.
True, the people with money are leaving Californai, Tiger woods did it. I have left but came back. Just like the line in the song, "you can check out any time you like, but you can never leave"
We look for other places to live all the time but when you can live out doors all summer, leave the windows open with no screens and not have to turn the air on, it seems pretty cheap. My furnace stopped working last week, we spent the holidays without heat in the house. Someplace else that would be impossible.
It really isn't that bad here.

[mjshira]

where is all that money going? dirty little secret... social benefits to those who don't contribute via taxes... the state is taxing the hell out of those who pay...

[mjshira]

one more point, why not cut taxes to raise income to the state? everytime it is tried it works. stimulate business and personal investment. oh wait, that would mean having to waste less on gov't programs.

[red-beard]

I voted with my feet