Tuesday, April 02, 2013

Stockton CA, Bankruptcy – State of California 127 Billion in Debt – Highest Tax Rate in Nation – Comparison on States – Texas on Top, Budget Excesses, No Program Cuts – Find Your State to Compare





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Some residents are fleeing California for Texas - images: calisscreaming and daydreamtoy.

The City of Stockton, California has court permission to file bankruptcy according to the Los Angles Times The City is one of “a half-dozen” that are currently seeking bankruptcy protection, creditors were fighting to have Stockton cut its payments to the State Employee Pension plan, which had to be funded under CA state law. “The $900 million Stockton owes to the California Public Employees Retirement System to cover pensions is its biggest debt -– as is the case with many cities in California.” Ruling on the case, U.S. Bankruptcy Judge Christopher Klein, suggested to creditors that the state’s employees pension plan may also end up on the chopping block This may set a precedent for other cities that are under water with public employee pensions and benefits, allowing cities in California and elsewhere to restructure under Federal bankruptcy laws.

Meanwhile, the state of California has a negative net work of 127 Billion dollars. A negative net worth equates to 127 billion in the red Not included: the States “much-disputed unfunded liabilities for state employees' future pensions, nor the $60-plus billion in unfunded liabilities for retiree health care.”(Sacramento Bee).

Since the State of California has the highest State Sales Taxes, Gasoline Taxes, Personal Income Taxes, Corporate Sales Taxes and even property taxes despite proposition 13, (California Tax Payers Association), why it is that they are in the red, with cities that are filing under bankruptcy protection? California bought and sold the concept of higher taxes on Millionaires – therefore, they should have a boatload of cash – unless of course, when a State levies burdensome taxes on corporations and individuals, added to the taxes on Obama care and Federal Income and Corporate taxes, those individuals tend to move to less taxing environments. As do corporations that employee individuals who would then become taxpayers. Therefore, with the highest tax rates, one would think California would have an excess.

Compare Texas with California : NASBO, (THE NATIONAL ASSOCIATION OF STATE BUDGET OFFICERS), survey of states (in PDF) Texas at year end 2013, had a “rainy day fund” of over 6 billion, second only to oil rich Alaska, at 14 Billions. The chart on state general funds is found on page 4; California has a negative balance, the only state that has that distinction. On page 12 are enacted budget cuts for 2013, showing states with possible cuts in K-12 Education, Higher Education, Public Assistance, Medicaid, Transportation Corrections and Other. With this table one sees both Texas and California cutting programs, however, moving to the next table on Page 13, one finds that in the Case of Texas and California, the cuts are negative (an increase in those programs). In the case of Texas, this is across the board, while California has actual cuts in Higher Education and Other, but budget increases for other programs. Check your state by clicking anywhere in this paragraph.

The reasoning behind this particular comparison is the fact that Texas has one of the lower tax rates nationwide, is right next door to California and finally, many of those Californian’s earning and hoping to keep at least a portion of their paychecks, or wishing to find a job periods, are moving to – Texas.

This overview of the State Governments, and the size of the State Governments (not unlike the current size of our Federal Government) suggest that state where the tax rates have been cut or are lower for individuals and corporations, create a climate of prosperity, whereas, those that have high tax rates for both simply do not.

Other factors for states in the black with surpluses, not surprisingly, are those where the State’s government tends to be run by fiscal conservatives, have right to work laws (Non-Union), and actively court new business and residents with the promise of lower taxes.

State employees according to Government Executive Magazine, out-earn private sector peers by 6%. How do states compare? Governing, the State and Localities, “By the Numbers”, offers a chart here comparing states based on which offers Public employees the highest percentage above the Public sector: California is the Highest differential of the 50 states, while in Texas, the private sector earns slightly more. (Other states that offer a competitive edge (even slightly) to the private sector are: Alaska, Louisiana, North Dakota, and New York (which includes Upstate).

The proof as they say is in the pudding. If one were to restructure the public sector employees’ salaries and pensions to those of the private sector, offer realistic corporate and personal tax rates, the states, like Texas, might find themselves out of the red and into the black.

One might also suggest that if the Federal Government budgeted similarly to the states (specifically Texas, (based on the size, population density, industry, ports, and natural recourses’), the nation would experience growth. John F. Kennedy realized this, so did George W. Bush - more money in the hands of Washington DC does not make for national prosperity. One need only examine the States to see where success may be had, and note that programs do not suffer as a result. This is a classic Jeffersonian philosophy of moving the power to the States rather than the Federal Government. (See Jefferson on States’ rights at www.loc.gov/exhibits/jefferson.jeffed.htm

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