The media has well chronicled over the last few years that millions of people are fleeing California for red states. Idaho, Texas, Florida, and Missouri are some of the top states picking up California’s refugees.
It appears that things are continuing to get worse in the Golden State. Its economic condition, thanks to liberal and progressive economic and tax policies, is proving to be a deadly cancer. On February 15, California Legislative Analyst’s Office (LAO), a government state agency that operates much like the Congressional Budget Office (CBO) for the legislature, released a damaging assessment of the state’s disastrous policies.
Democratic Gov. Gavin Newsome said last year he expected the state to run a deficit. Still, how did Democrats not see this one coming? In 2022, California ran a $100 million surplus due to federal COVID relief and surging capital gains. Now, the LAO says the state will run a $22.5 billion deficit in the next fiscal year.
Here’s the striking part, it’s $7 billion worse than Newsom predicted. Here’s why — the state lost $10 billion in projected tax revenues.
The economic decline is already accelerating. In this fiscal tax year, California is experiencing economic trouble. In January, the monthly tax revenue was $14 billion lower than in January 2022. The current fiscal year started in July 2022, and the LAO says state revenues are currently $23 billion lower than expected.
Now, consider this…
- California has the highest income tax rate of any state in the country at 13.3%.
- The top 0.5% of taxpayers cover 40% of the total state income tax.
- 1% of the total income tax returns filed in 2020 accounted for 40% of all personal income taxes.
- Silicon Valley’s share of capital gains taxes is declining significantly as the tech sector has been hit hard economically, and companies cut tens of thousands of employees and bonuses.
If the state enters a recession this year, things will get even worse. The coffers could drop between $30 billion to $50 billion.
Despite the headwinds, state Democrats are still calling for an expansion of social programs.
Needless to say, liberal and progressive Democrats are creating a nightmare situation.
Unlike the federal government, a state cannot simply print money or manipulate the US dollar. It must live within its means. So, California must either cut its budget or raise revenues through increased taxes.
Pretty soon, all that may be left are the poor and ultra-rich. The state is driving out the middle-class class who can’t afford the high cost of living due to policies that are driving up energy, food, and shelter prices to unsustainable levels.
Yet, Democrats nationwide appear to want California policies at the federal level.
If it’s a disaster in California, how much worse could their policies make things nationwide?
Let’s hope we never find out, but God help us if we do.
The Conservative Era, Copyright 2023