Tough Year Ahead for California Taxpayers and Wealth Producers

The Golden State's big government keeps getting bigger.


California's Democratic leaders are giddy about the future now that they have gained everything they wanted in the last election—voter-approved tax increases and a two-thirds supermajority in both houses of the Legislature, thus rendering Republicans little more than an annoying irrelevancy that can no longer block tax hikes.

Will Democrats just ramp up the taxing and spending spree or will some semblance of a "moderate" Democratic caucus emerge to offer a limited check on those tendencies? Either way, it's hard to find good news for taxpayers or business owners, although the state's public-sector unions ought to be stocking up on champagne.

Given that backdrop, I offer some subdued predictions for the New Year.

Prediction 1: Gov. Jerry Brown and the legislative leadership will continue to argue that the state government is on a bare-bones diet, and therefore continue to look for additional revenue to fund it regardless of mounting evidence of waste and excess.

"Today, the state's highest-paid employees make far more than comparable workers elsewhere in almost all job and wage categories, from public safety to health care, base pay to overtime," according to a recent Bloomberg series. Payroll data by the news agency shows that "California has set a pattern of lax management, inefficient operations and out-of-control costs." The most stunning example: A highway patrol officer with a pay and benefit package of nearly a half-million dollars.

Prediction Two: The state's optimistic budget projections will not come to pass. This isn't much of prediction given that they already are falling short. As Controller John Chiang explained, "November's tax receipts fell 10.8 percent short of expectations contained in the 2012-2013 State Budget, although they were above the year-ago level. Total revenues year to date are now 2.6 percent less than anticipated at this time, with shortfalls among all of the major sources." And he found that government spending continues to outstrip revenues.

Prediction Three: Democratic leaders will begin increasing every tax imaginable to fill the gap in what will amount to death by a thousand cuts. When Sen. Ted Lieu proposed tripling the car tax, he backed down as a backlash grew. But that was only because he started the taxing spree too quickly. Soon enough, the leadership will start floating trial balloons including limited assaults on Proposition 13, the 1978 voter-approved property tax limitation that sparked a nationwide tax revolt.

Prediction Four: Legislators will make good on their promise to "reform" the referendum and initiative process, thus assuring that there will be less opportunity for voters—who still tend to be more conservative in their votes on ballot measures than for candidates—to keep a Democratic majority in check.

California's special brand of direct democracy was born in the Progressive era, by politicians who wanted the public to have a check on robber barons. Today's California Progressives are the hand maidens of modern-day robber barons (unions), and are devoted to keeping pesky voters out of the way. That's not to say that direct democracy isn't problematic, but it's better than relying on this Legislature to protect our rights and wallets.

Prediction Five: Waves of California millionaires and business owners will throw in the towel given that there's no longer anything to protect them. Businesses often threaten to move, and many leave but more stay. Yet the November election seems to have been the last straw for many wealth producers.

The long-awaited implementation of the bogus "cap and trade" market—essentially a massive tax and a policy that will generate increased utility costs—is yet another impetus for manufacturers in particular to head to friendlier states.

Prediction Six: We'll see a return of every bad idea including some resurrected version of redevelopment agencies—those property-rights-abusing, central-planning agencies that Brown eliminated as he sought new funds. Now that there's no problem raising taxes, Brown and legislative leaders will bring them back. California will become an even bigger laboratory for crazy proposals.

Prediction Seven: Hopes of local reform efforts will fade away. For instance, San Diego voters chose as mayor a union ally (Bob Filner) over a reform-minded policy wonk (Carl DeMaio), which carried a message to politicians elsewhere who might otherwise have been willing to deal with excessive public-employee costs. New filings in Stockton's bankruptcy show that the city is stiffing bond holders and slashing services to protect out-sized pensions, which proves that even municipal bankruptcy is no panacea for government fiscal woes.

Prediction Eight: Liberal pundits will continue to blame Republicans for everything that happens.

Prediction Nine: The state Republican Party will circle the drain as it focuses on the wrong issues and continues to follow the advice offered by pundits who never liked the party any way. Expect the GOP to nominate more self-funded "moderates" who differ from the Democrats only by degree and who will continue to lose elections but enrich consultants.

Prediction 10: Those of us who love the state will hang in there and await the inevitable—when a continued fiscal crisis finally leads to the emergence of adult leadership that embraces long-needed fiscal reform.

NEXT: Dutch Catholics "De-Baptize" Themselves

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  1. It would seem a wise move to enact exit taxes now before they go any further. It is unconstitutional but it’s worth a try. Why let all those people and businesses flee without “paying their fair share?”

  2. Sheep need herders.

    1. I would have said, herders need sheep.

      1. Either way, the sheep get sheared.

  3. Nah, we actually still have productive worker left in California. The union backed Democrats will not rest until we’ve stop working or leave. It’s not a goal too lofty to dream.

    1. Nah, we actually still have productive worker left in California.


      I’ve seen a study recently that said less than 25% of CA adults are employed in the private sector (as opposed to government employees, on some type of income support, retired or wealthy enough not to need to work.

      Add in that some percentage of those people are employed in areas that are disconnected from the nuts and bolts economy and there is no reason to think that the voters won’t keep punishing productive people until they’re all gone.

  4. Why I left my home state. Sadly not every Californian is a left wing lunatic. Northern (and I mean far northern near my home town of Mt.Shasta) Cali is conservative and libertarian mainly. Go North of Sacramento and you’ll see a whole bunch of people repulsed by the current situation yet they get out voted by Los Angeles and San Fransico. I love Cali but I hate the creeps in Sacramento, I didn’t want to leave but I’d had enough. The Dead Kennedy’s had it right the first time around.

    1. I left just out of college and boy am I glad. Being from the Central Valley there were a bit more conservatives growing up but the welfare hungry that had spilling out of L.A. were moving in and getting liberals elected to office. I don’t have much hope until they decide to split Cali into four states. Sad, it was great that I could drive a few hours and be in a giant metropolis, at a beach town, or in the High Sierras.

  5. They’re about to find out the hard way that California government is already well above the hump on the Laffer curve.

  6. Carl DeMaio should move to someplace in North County. Enron by the Sea is a lost cause.

  7. California’s public sector union employees ought to be saving up for their own retirements, because the California government is going bankrupt, and the federal government will also be bankrupt when they’re counting on them to bail out California.

    1. My wife is a teacher here in California. I bumped my 401k withholdings up considerably going into this year precisely because of this reality.

    2. At least it will be fun to watch.

      1. Watching socialists destroy their own futures with insane schemes sounds fun but it never is.

        1. You’re right. It would be fun if it didn’t take the rest of us with them.

  8. Prediction 10: Those of us who love the state will hang in there and await the inevitable?when a continued fiscal crisis finally leads to the emergence of adult leadership that embraces long-needed fiscal reform.

    I really hope you are right on this one, but I’m cynical. There are too many ‘voters’ who are too easily manipulated. I considered Prop. 30 a no-brainer (vote NO). Any thinking person should vote against it given there was to even any pretense of a guarantee to use the funds for the stated purpose (education). Also, the funds used for ‘education’ (increased salaries I would expect) could just be pulled back out from another area defined as ‘education’ anyway. If you really wanted to raise taxes for education there was another proposition on the ballot, but Prop. 30 gave Democrats and unions more while undercutting any honest and responsible reform of the education system, regardless of what your ideological position might be how you might define that.

    1. I have my own pet theory about CA. (Don’t mean to offend, it’s not all inclusive.)

      When I was a kid (70s) it was a common meme that those who failed at their jobs (primarily in business), packed up their shit and moved to California to start over.

      Hence, you have a state full of losers.

      1. ….. damn… Good thought.

      2. ‘When I was a kid (70s) it was a common meme that those who failed at their jobs (primarily in business), packed up their shit and moved to California to *work for the government*’

        You were close.

  9. ” Those of us who love the state will hang in there and await the inevitable?when a continued fiscal crisis finally leads to the emergence of adult leadership that embraces long-needed fiscal reform.”

    That’s not inevitable. See Detroit for details.


    1. I took a pen and wrote “Fuck you, cut spending” on a Starbucks cup the other day

  11. Go ahead and stiff the bondholders in bankruptcy. It serves them right for lending to broke governments that have no intention of paying their debts. Furthermore, it will dry up credit for spendthrift governments, thus forcing them to live within their means at least until the feds decide to bail them out.

    1. When bond-holders realize they’re not going to be bailed out by the government – read taxpayers – and have to live with the consequences, then they’ll start being more responsible in choosing who to lend money to. Left by itself, the freedom in the free market self-corrects.

      So will Detroit and Stockton and California going bankrupt be the lesson they so vitally need? Or will they need even more.

  12. Soudns like a plan to me dude.

  13. “Will Democrats just ramp up the taxing and spending spree…”

    Is this a trick question?

  14. Merry Christmas,NBA ,NFL 2012

  15. You forgot prediction 11: we nuke the state from orbit.

  16. I’ve been living in China a couple of years now and have come to realize how similar it is to California. Both are one party systems with socialists in control, except in China we have a lot more economic freedom. We’re also getting close to having the same amount of political freedom not because China is getting more free but because the US is getting more like China every year. After eight years of Bush and now eight of Obummer, we may end up on par.

  17. How does a state blessed with San Diego County, Big Sur, Julian, Ojai, Yosemite, and nearly 1,000 miles of the most beautiful coast in the world manage to wreck itself so completely in a span of three decades?

    1. Easy: Elect Democrats and wait.

  18. You forgot one very obvious prediction that can be made: California will seek a bailout from the Federal Government.

  19. Like a previous commenter said “sheep need herders”, it seems we are in the days of The Last Man

  20. Prediction 11: With no legislative power, look for republicans to threaten secession.

  21. Wait for what? I’m outta here. Got here in 1957 at age 4, but it is over and this state is finished. I don’t even know where to go specifically — but it will be a no-income-tax state, maybe a no-sales-tax one, to boot. I say GOODBYE to this sickening place.

  22. When I lived in California and made a high salary it looked like I made a lot of money on paper but it just didn’t feel like it. When I moved and made significantly less it somehow felt like I was making more.

  23. I look forward with great anticipation to California business and the well to do leaving in droves. Then this Marxist state will go totally bankrupt and all of the states public sector union goons and corrupt politicians will be out of work. A positive side effect will be the illegals leaving in huge numbers also, because they won’t be getting handouts.

  24. The state’s a cesspool of draconian measures. I just can’t afford the sunshine no more . .

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