California Becoming the New Detroit? PLUS: California Sales Tax Revenue Drops 33.5%

Powerline Blog posted a good story on the downward spiral Democrats are bringing our fair state:

Dickens needs to be updated: it’s a tale of two states.  As Victor Davis Hansen writes, there is no California any more: “Driving across California is like going from Mississippi to Massachusetts without ever crossing a state line.”  But even the coastal enclaves show signs of weakness.  The Journal notes that even Silicon Valley is showing weaknesses.  There have been considerable layoffs in the old-line semiconductor industry.  True, Apple is about to open a new facility with 3,600 jobs—in Texas.  Jerry Brown is was counting on the Facebook IPO to provide a fillip to the state’s coffers through capital gains taxes like the good old days of the Internet bubble of the 1990s, but with the Facebook faceplant, that is proving to be another wistful dream.  So instead Jerry hopes to raise income taxes on—wait for it—just the rich, in a ballot initiative this November.  He’ll pitch it as the only way to avoid deep cuts to schools, public safety, and so forth, and I hope the opponents of the measure will have the wit to show renderings of the high-speed rail to nowhere that the state’s voters have turned against as a sign of Brown’s real tax and spend priorities.

Robert J. Cristino points out at that California is rapidly becoming “the new Detroit,” with this important parallel:

Like Detroit, California now has one party rule. The Democrats of California did not need a single Republican vote to pass their budget. Governor Brown’s plan is to address the nation’s largest deficit by raising taxes instead of cutting spending. If passed, the deficit would drop from $20 billion to a mere $16 billion. The budget does nothing to cure the systemic problems of a bloated bureaucracy. It does not eliminate one of California’s 519 state agencies.

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Breitbart has this story as well about the tax revenues in this state o’mine:

The state has avoided default by temporarily borrowing from state trust funds, but those accounts will soon need their cash back to continue operating. Today California quickly began trying to sell $10 billion in municipal bonds to fund the record $28 billion they need to keep the lights on.  With tax revenue plummeting and the state already the second lowest rated credit in the country, if the independent credit rating agencies downgrade the state to “junk bond”, California will be short up to $18 billion and default.


The governor justified signing the budget based on the twin assumption that the California economy was expanding and the voters would approve his tax initiative that would raise $8.5 billion.  Many analysts doubted the voters willingness to vote to raise sales tax on themselves, but we were virtually alone in warning California’s shallow economic recovery had peaked and the state was at risk for a double dip recession.

State Controller John Chiang tried to rationalize that even though California revenues were “disappointingly” down $475 million in July: “However, because spending appears to be tracking and the funds that the State depends on for liquidity are performing well, California’s cash outlook remains stable.”  This is sort of like the pilot of a jumbo jet announcing to the passengers that as a safety precaution they may want to cross your arms over your calves and grab your ankles and to brace yourself for possible impact.

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This is similar to an earlier story I did about the 22% drop in Revenues:

Via Big Government:

State Controller John Chaing continues to uphold the California Great Seal Motto of “Eureka”, i.e., ‘I have found it’. But what Chaing is finding as Controller is that California’s economy as measured by tax revenues is still tanking. Compared to last year, State tax collections for February shriveled by $1.2 billion or 22%. The deterioration is more than double the shocking $535 million reported decline for last month. The cumulative fiscal year decline is $6.1 billion or down 11% versus this period in 2011.

While California Governor Brown promises strong economic growth is just around the corner, Chaing proves that the best way for Sacramento politicians to hurt the economy and thereby generate lower tax revenue, is to have the highest tax rates in the nation.

California politicians seem delusional in their continued delusion that high taxes have not savaged the State’s economy. Each month’s disappointment is written off as due to some one-time event.

The State Controller’s office did acknowledge that higher than normal tax refunds for February might have reduced the collection of some personal income taxes. Given that 2012 has an extra day in February for leap year, there might have been one day more of tax refunds sent out. But the Controller’s report shows personal income tax collections fell by $325 million, or 16% versus last year. Furthermore, leap year would have added another day for retail sales and use tax collection, but those revenues also fell during February-by an even larger $813 million, 25% decline from 2011.

The more likely reason tax collections continue falling is that businesses and successful people are leaving California for the better tax rates available in more pro-business states.

Derisively referred to as “Taxifornia” by the independent Pacific Research Institute, California wins the booby prize for the highest personal income taxes in the nation and higher sales tax rates than all but four other states. Though Californians benefit from Proposition 13 restrictions on how much their property tax can increase in one year, the state still has the worst state tax burden in the U.S.

Spectrum Locations Consultants recorded 254 California companies moved some or all of their work and jobs out of state in 2011, 26% more than in 2010 and five times as many as in 2009. According SLC President, Joe Vranich: the “top ten reasons companies are leaving California: 1) Poor rankings in surveys 2) More adversarial toward business 3) Uncontrollable public spending 4) Unfriendly business climate 5) Provable savings elsewhere 6) Most expensive business locations 7) Unfriendly legal environment for business 8) Worst regulatory burden 9) Severe tax treatment 10) Unprecedented energy costs.

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