Sunday, July 5, 2015

California Debt March - Led By Socialists

Socialists, owned by public employee unions, have controlled all the levers of power in California for years.  As a result, they continue to spend money like drunken sailors, including increased benefits for Illegal Aliens and Compensation and Benefits for Public Employees that are not sustainable.  California Socialists recently enacted a budget of $115.4  Billion, which would have been $2.1 Billion higher if not for Socialist Governor Jerry Moonbeam Brown's potential Veto Pen.  While California currently has a $2.3 Trillion economy, which would place it among the world's nations, California, which has among the highest taxes in the country, has an eroding tax base.  In 1950, 10% of California's taxes came from income taxes.  In 2014, that number was 64%.  The wealthiest 1% of Californians paid 50% of the income taxes in California in 2012.  Most Californians pay none. 

Those people continue to vote with their feet because the tax burden imposed on them is very high at 13.3%, which in addition to federal taxes gets them to about 57%.  The so called Rich have options.   While they may choose to maintain second homes in California, they can easily establish legal residency in any number of states that have no state income tax to avoid California's income tax system altogether, which has been happening for year.   And, often when people retire that worked in California, they leave the state to avoid paying state income taxes on their 401K's, which has been adjudicated and is legal.  By being so greedy, California Socialists are killing the goose that laid the golden egg. 

California is riding high right now as High Tech, in particular, and real estate values are doing well, which provides a sizable portion of state tax revenues.  However, California only has about 100 major companies, with 5,000 employees or more, with headquarters in the state, down from about 250, 30 years ago.  And, what few major companies remain in California are just shell companies as most have moved operations out of California to other lower cost states and or overseas to avoid California state income taxes and burdensome job killer regulations.

These trends are not good for California, which now faces about $195 Billion in unfunded liabilities to pay state employee pensions and other Entitlements on the books; yet the Socialists keeping adding more.  The money is just not there to fulfill these promises, even with the highest taxes in the nation.  California bonds are generally rated as "junk" requiring a relatively high interest rate to attract investors.    The day of reckoning for California, like many other cities and states in the same predicament, is coming.   Socialists at the local, state and federal levels continue to lead the Debt March, often with RINO support, until like humpy dumpty, it all comes crashing down.  When it happens and it will happen, the same as in Greece, the Golden State will face financial collapse and civil strife on their streets.  It is inevitable. 

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