1750The Gold In Them Thare Hills Turned Out To Be Fool's Gold
- Dec 9, 2012The Gold In Them Thare Hills
Turned Out To Be Fool's Gold
As we all know, Governor Brown and the State of California was seeing dollar signs as a result of convincing the People to vote a tax increase in Prop 30. The California Teachers’ Association (CTA) trumpeted: "California students and working families won a clear victory today as voters clearly demonstrated their willingness to invest in our public schools and colleges..." After the celebration and the party was over, realization is just now starting to set in, i.e., a lesson in economics. It is called "the law of diminishing returns." Like a valve on a cam, once you reach TDC (Top Dead Center) the valve rises no further, but starts to recede. Illustrating with a swing set, pumping harder will get you no higher as you eventually go over the bar and drop on the other side. This is what is happening to the State of California, it is now bring in less spending revenue with the tax increase and going deeper into debt and nearer to collapse. It is like getting a raise in pay, and finding your paycheck is reduced because you have now entered a new tax bracket.
If the State of California thinks things are going South financially with this last month's financial figures, the voters only having voted the tax increase on November 6th, just wait until these next successive months, as the debt scale shall only increase exponentially. It is predictable that we shall now see many more courthouse closures, and cutbacks government benefits and in the education sector. California, as well as all states, will soon be hit with the enormous costs of Obamacare, which in and of itself, will financially bankrupt many states.
* * *
Despite Tax Increase, California State Revenues in Freefallby Chriss W. Street 8 Dec 2012
California State Controller John Chiang has announced that total state revenue for the month of November 2012 fell $806.8 million, or 10.8%, below budget.
Democrats thought they could hammer “the rich” by convincing voters to pass Proposition 30 to create the highest state income tax in the nation. But it now appears that high income earners have already “voted with their feet” by moving themselves and their businesses out of state, resulting in over $1 billion shortfall in corporate and income taxes last month and the beginning of a new financial crisis.
Passage of Proposition 30 set off euphoria and expectations of higher spending for public employees. The California Teachers’ Association (CTA) trumpeted: "California students and working families won a clear victory today as voters clearly demonstrated their willingness to invest in our public schools and colleges and also rejected a deceptive ballot measure aimed at silencing educators, other workers and their unions.”
State bureaucrats immediately ramped up deficit spending far beyond the state's $6 billion annual tax increase, with the Departments of Health Services and Developmental Services increasing this month’s spending by over $1 billion versus last year. The lower tax collection and higher spending drove the State’s deficit after the tax increase to $2.7 billion for the first 5 months of this fiscal year. State Controller John Chiang reported:
November's disappointing revenues stand in stark contrast to recent news that California is leading the nation in job growth, has significantly improved its cash liquidity to pay bills, and even long-distressed home values are starting to inch upward... This serves as a sobering reminder that, while the economy is expanding, it is doing so at a slow and uneven pace that will require the State to exercise care and discipline in how its fiscal affairs are managed in the coming year.
The improved “cash liquidity” Chiang referred to turns out to be $24.9 billion of debt. ....