I am going to make two predictions – one about the California economy, and the other about the projections for future revenues coming into state coffers. Hold onto your seats here folks, because what I am going to say it going to shake the very underpinnings of your understanding of state finances
California legislative Democrats, are you reading this?
Prediction #1 – The recession is getting worse, not better. At a time when the public sector should be shrinking so that as much burden as possible can be lifted from a struggling private sector can recover and turn around the state (and national) economy – public spending is up. In Washington, D.C., Democrats seem to be crazy-drunk in their spending orgy, telling the public that more government spending is going to actually help the economy. Not. Of course, as the economy continues to sputter, this will continue to have a detrimental impact on the various taxes and fees that provide the income stream for state government. We’ve already seen a huge-drop off in state and local government revenues – and there is no reason that such a contraction will not continue has severe belt-tightening takes place in the private sector. And with California’s tax structure being overly dependent on the state’s top income earners (who are being particularly hard hit by this recession), the situation is only exacerbated.
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June 10th, 2009 at 12:00 am
Love the preaching…typical running of the mouth estolling the virtue deficit of legislator liberals….when you have no ideas…criticize the opposition…but do we really know our enemy…they are close, they love fine wine, golf, Monte Cristo’s and rubbing shoulders with fellow rock star power trippers…what is going on to recall all the traitors who voted for new taxes, transfers, hedges and faint of hands. Adams only?
We need a massive RINO purge of the Republican Party, the vary party that funded the recent campaign to raise our taxes for two more years….oh! The vary same legislative leaders who turned and hid under their desks bowing to the tax and spend crowd, unions and related ilk…What short memories Flash Report has…..short, short, short. Patriots should never ever give a dime to the Republican Party until it is fully purged once and for all included all the fund career, chubby fund raising career flakes, glad handers and slippery smilers among us!
June 10th, 2009 at 12:00 am
Yes Jon it could very well get worse and we could very well experience a double dip recession. I have been warning about economic problems for a year now. How would I know that??… Because I live in the business world, I interact with my colleges, and I see and experience what is going on.
I happen to be one of those high-income individuals that CA counts on to make loads of money and then pay taxes on that income. In normal years I have a low to mid 6-figure tax bill. Last year I paid zero (0) taxes and in fact I sold a $250,000 capital asset and paid zero (0) capital gains tax. I ended the year with a loss of $200,000 that I will carry over to this current year. In our current year things might have stabilized, but that loss carried forward will insure no taxes will be paid this year.
To answer the question of could my personal business situation be an anomaly or is it wide spread, I did some checking. When going to parties and meetings I have asked friends, colleges and partners not only in CA but also across the country. I asked my attorneys and my accountant that only deals with high net worth clients. The answer is the same, few are making any money therefore few are paying taxes. I will flat out tell you I am not a macro economist, but I deal in the private sector business world… it will be at least until next year before we see tax revenues increase to any extent. (Tax revenue being an indication of business activity.)
Yes we hate to see the hardships and pain caused by this recession that was caused by government in Washington and CA, but it does bring a smile to our faces in that this time we are not being squeezed by politicians to cough up punitive taxes and being forced to abide by onerous regulations… this time it is the politicians that need to make the difficult decisions on how to stay afloat. Personally I am enjoying this!
June 11th, 2009 at 12:00 am
I don’t think that the proposal to kill all welfare in California is going anywhere or that it should go anywhere. I have never lived in a state or country that didn’t have some form of welfare and it is extremely unlikely that California will be the first.
What is good about the proposal is that it puts all other government spending in perspective.
According to the Sacramento Bee http://www.sacbee.com/1098/story/1666241.html we have over 30 dentists who work for California who make between $331,000 and $400,000 a year.
Is it possible that, compared to the needs of a single mother who has no work and no education we can find better to fix teeth?
Compared to many, I am not too stressed by the recession, so I know that it is easy to be glib. But there is nothing like a good crisis to focus one’s attention.