Prepare for Demise of California; Liberals Will Get All the Government (and Tax Hikes) They Want

Townhall.com ^ | November 11, 2012 | Mike Shedlock

[Kaslin]

On Tuesday voters in California went the wrong way on three propositions.

1. Voters approved Proposition 30 "temporarily" increasing the state sales tax and income tax on individuals making over $250,000.
2. They voted against Proposition 31 that would allow the governor to cut the budget in fiscal emergencies.
3. They voted against Proposition 32 would prevent unions from making campaign donations via members' dues.

Moreover, and worse yet, Democrats picked up two more votes in the state legislature giving them a supermajority, capable of passing any tax hikes they want.

Those results are so awful I suggest you prepare for the demise of California.

Indeed California's Liberal Supermajority is about to run the state into the ground and taxpayers are going to get all the government they ever wanted.

The main check on Sacramento excess has been a constitutional amendment requiring a two-thirds majority of both houses to raise taxes. Although Republicans have been in the minority for four decades, they could impose a modicum of spending restraint by blocking tax increases. If Democratic leads stick in two races where ballots are still being counted, liberals will pick up enough seats to secure a supermajority. Governor Jerry Brown then will be the only chaperone for the Liberals Gone Wild video that is Sacramento.

The high Democratic turnout in moderate and right-leaning districts helped the party pick up three seats in the senate and four in the assembly.

So now Californians will experience the joys of one-party, union-run progressive governance. Mr. Brown is urging lawmakers to demonstrate frugality and the "prudence of Joseph." As he said the other day, "we've got to make sure over the next few years that we pay our bills, we invest in the right programs, but we don't go on any spending binges." That's what all Governors say. Trouble is, merely paying the state's delinquent bills will require tens of billions in additional revenues if lawmakers don't undertake fiscal reforms.

With no GOP restraint, liberals can now raise taxes to pay for all this. [$200 billion in unfunded liabilities, the California State Teachers' Retirement System in need of $10 billion annually for the next 30 years to amortize its debt, $73 billion in outstanding bonds for capital projects and $33 billion in voter-authorized bonds, etc.]

They'll probably start by repealing Proposition 13's tax cap for commercial property. Democrats in the Assembly held hearings on the idea this spring. Then they'll try to make it easier for cities to raise taxes.

The greens want an oil severance tax. Other Democrats want to extend the sales tax to services, supposedly in return for a lower rate, but don't expect any "reform" to be revenue neutral. Look for huge union pay raises and higher pension benefits.

The silver lining here is that Americans will be able to see the modern liberal-union state in all its raw ambition. The Sacramento political class thinks it can tax and regulate the private economy endlessly without consequence. As a political experiment it all should be instructive, and at least Californians can still escape to Nevada or Idaho.

Law of the Funnel in Action

Big government and absurdly strong unions destroyed Greece and Spain. Expect no less for California.

Many large California corporations that can flee, will flee. Those stuck in California will see massive tax hikes (with many more to come) just so public unions and administrators can collect absurdly high salaries and benefits that most citizens can only dream about.

Please see the Law of the Funnel for a description as to what just happened.

Economists Cut US GDP Forecast, Raise Inflation Forecast

Here is a headline news story that I found interesting for reasons I will explain following: Economists cut U.S. Q4 growth forecasts.

Economists expect the economy to grow at an annual rate of 1.8 percent in the current quarter, down from the previous estimate of 2.2 percent growth, according to the Philadelphia Federal Reserve's fourth-quarter survey of 39 forecasters.

While that left estimates for gross domestic product for the year unchanged at 2.2 percent, growth in 2013 looked modestly weaker with economists forecasting 2 percent, down from 2.1 percent.

Over the next three quarters, growth was seen averaging 2.1 percent, down from earlier expectations of 2.2 percent.

The unemployment rate was forecast to come in lower than expected, averaging 7.9 percent in the fourth quarter from the previous estimate of 8.1 percent. The monthly unemployment rate released by the government was 7.9 percent in October.

Still, unemployment was seen stuck at 7.9 percent in the first quarter of next year, and holding at 7.8 percent in the second and third quarters.

Economists raised their forecasts for inflation this quarter with the headline consumer price index seen averaging 2.3 percent, up from earlier estimates for 2.0 percent. For the year, CPI was expected to average 1.9 percent, up from 1.8 percent.

Given exports were recently revised up and imports revised lowered, I expected economists to think GDP would come in higher. It would have been interesting to see their reasons. Hurricane Sandy perhaps?

I expect the economy to weaken of course (and by far more in 2013 than the economists). Curiously the economists do not seem worried about the alleged fiscal cliff, at least for their GDP estimates.

For more on the fiscal cliff, please see "Saturation Point" for QE Nonsense; Fiscal Cliff Comparisons

[who_would_fardels_bear]

One of the reasons why there are still any businesses at all in California despite the high level of regulation, worker's comp, etc. is that California businesses probably pay far less on average than other businesses on property taxes.

Some fifteen years or so ago I read an article that claimed that 2/3rds of the tax benefits from Prop 13 are being accrued by businesses. It is probably even more now. This makes sense as businesses sell property less often than individuals.

However, some businesses have gotten more clever at avoiding taxes. They have come up with ways by which a property can be transferred from one company to another without it counting as a sale, thus avoiding a reassessment and property tax jump. I wouldn't doubt if 75-80% of the tax benefits from Prop 13 are now being accrued directly by businesses.

If Prop 13 went away, there is nothing that says that businesses will have to have their property taxes increased. When I was living in Colorado my property was reassessed every year. Even though my house value more than doubled over the time I owned it, my property taxes didn't. This is because I lived in a relatively conservative city. The board lowered the mill levy each year so that taxes went up at a rate far lower than my house's value.

I used to be a big supporter of Prop 13. Politicians, however, have completely undermined it. Money that is collected locally is now sent to the state. Money collected by state organizations is funneled back to cities and counties. Some people have to pay Mello-Roos fees which unlike property taxes are not deductible. Everyone has a hand in everyone else's pocket.

If Prop 13 were completely eliminated then each city could still set property taxes as it wished. Those cities that wanted to retain businesses could lower property taxes across the board or just on businesses in general, or on a case-by-case basis as is done throughout the country to attract companies.

For a long time the Democrats didn't have enough votes to increase taxes, but they had more than enough votes to pass hundreds and thousands of inane laws that increased the cost of California government without properly funding it.

I believe that the voters by-and-large were OK with this. I think that's why the Democrats never got the 2/3rds majority they needed: the voters wanted their cake without having to pay for it. Redistricting confused people and now we have enough Democrats to vote for taxing and spending. If they go too far out of line I believe that liberal voters in a few key districts will hold their noses and vote for just enough progressive "republicans" to keep the goodies flowing and the taxes from growing.

With or without Prop 13 we're going over the cliff.

If you've driven along Hwy 1 up near Monterey you know we can't have picked a more beautiful cliff to drive off of...

[ExCTCitizen]

Voters approved Proposition 30 "temporarily" increasing the state sales tax and income tax on individuals making over $250,000.

'Temporarily' = FOREVER....

[who_would_fardels_bear]

I have some decent ideas which I have shared on FreeRepublic, however, they have only gotten a little bit of traction.

For example, I believe that every conservative living in a solid blue state like California should support their local Green Party. If the Green Party becomes a truly viable party then leftist Democrats would feel more comfortable leaving their party to join the Greens. The Republicans could then retain a plurality for a bit longer.

Then conservatives could start a fourth conservative party to keep the Republicans honest without necessarily throwing the election to a weakened Democrat Party.

I also like the idea of trying to recruit Asians. I believe that Republicans won't have to cave on too many things to get Asians to join the party. Certainly far fewer caves than would be necessary to woo the Hispanic vote.

[CapnJack]

Hey Jim;
if you haven’t already got a plan ready to go, get one soon to move the FR operations out of Calif.

You better get while the getting is good.

[traditional1]

The problem is not that Kalifornia is already headed to become a shithole (it's already there, financially and socially), it's that the Fed's will take EVERYONES' earnings nationwide, to bail them out. Their Unions and Illegals are sucking the cash out of everyone there, producing NOTHING, and Amerika is following their lead.

Watch the same thing sweep the country as the Socialist Utopia is pursued to the ultimate end.

[Vaduz]

California is a banana republic it went in the s**t hole years ago can’t be saved it’s more like Mexico.

[morphing libertarian]

12-16 bill a year in services to,illegals and then we wonder why we have a deficit.

[Kickass Conservative]

First thing they will do is gut Prop 13.

They will eliminate the 1% Property Tax ceiling on businesses.

Then they will eliminate the 1% Property Tax ceiling on Rental Property. After all, that is a business too.

Finally they will get around to Homeowners and that will be that.

In order to insure that the Evil Landlords won’t up the Rent to pay for the increased Property Tax Bill, they will institute Rent Control.

Bank on it.

[Conservative4Ever]

Nice thought. Mexicans already refer to California as Northern Mexico. They are not joking. We lost CA decades ago, now even the last red districts are becoming blue.

[Conservative4Ever]

I’m in CA too and I completely agree with you. Just let it collapse. The sooner the better. Do you live anywhere near San Bernardino? The downtown is a crumbling ghost town. Entitlements and union pensions. The rest of the state will follow.

[Bikkuri]

That was my point... fine... let it happen... can they still blame Bush?!

[depressed in 06]

I am saying that spending by California will be federalized. Tax payers in the other states will make up short falls in California, Illinois, New York and any other state that cannot balance its budget. DumBO will use the Fed to monetize any debt that cannot be made up by taxes.

The best we can do it give California to the Chinese as payment for our debt they hold.

[Breto]

As we speak I am engaging a real-estate agent to sell and another agent in a red state to buy. I will be out of here before the end of the first qtr 2013. I am a bit depressed about it. I never imagined that something could drive me out of the state of my birth, my fathers birth and his fathers birth.

with a super majority they will
come for your money
come for your guns
come for your sanity...

[MachIV]

Thank God I’m over 1800 miles from that 5th column hell hole.

[DoughtyOne]

What we’re very likely to wind up with, is a pro nationalist party. God knows what that will result in, because history has shown us where that leads all too often.

Sound economic policy, and reasoned pro-U. S. policies are called for, but the pendulum once swing too far in the wrong direction, generally goes too far when swinging back in the other direction.

We are messing with fire folks. A lot of people are going to get burned. He’ll, a lot already have.

[DoughtyOne]

California has 38 million residents. Only ten million of them just voted.

I don’t know what the population demographics are for the state, but I’d be surprised if there weren’t ten million people out there who didn’t vote, but could have.

If only 2.15 million of them had voted with us on the 6th, Romney would be our president.

If folks would quit writing this state off, and devise a plan to get it’s decent citizens to vote, we could turn not only this state, but the entire nation around.

This is our number one job.

[ncpatriot]

I agree

[alphadog]

“When California becomes a complete hellhole Mexico can have it back”

Not my part!!

[hattend]

Anyone who has stayed in California this long is someone who is far too comfortable with big government.

Yeah, couldn't be we took it in the shorts when real estate collapsed and we're so underwater we can't get out yet. That's how it is with me. I can't afford to take a $40K hit selling short.

And no, Arizona is NOT bluer than California. West Tucson is very blue, but the rest of the state is far from being like California.

You're right...I was looking at an early county map, it's since been updated. Sorry.

Just to let you know...we're not all bad. My county (Shasta) went 63%-33% Romney with about 53000 total votes cast.

[Mr Rogers]

I actually understand. I was stationed at Tehachapi, CA. That county has no effect on how California goes. It suffers because of the fools in SF & LA. Happily, as a military guy, I was able to move in 2004.

There are actually many good people in California who stay for a variety of reasons. I just get frustrated with those who come to Arizona and immediately try to infect Arizona with the same policies that have made a mess of California - which was once an incredible, fantastic state.

[Tea Party Terrorist]

Just wait till they start construction on high speed rail. Then you will really see the California economy boom.

[CodeToad]

Republicans should simply vote as Obama did as a Senator: “Present”.

[CheneyChick]

Thank you. Sounding more tempting every day....

[Vaduz]

12-16 bill a year in services to,illegals

CA dems operates the same as other dems don’t make the poor rich but make the rich poor,it’s all about control.

[vette6387]

“Just wait till they start construction on high speed rail. Then you will really see the California economy boom.”

Yeah, it will be ( that is if it’s ever completed) the “illegal alien commuter.” Just think, non-citlzens will have the best commuter train in the country, and they will probably get to ride it for free!