Saturday, 8 December 2012

Stuff You Don't Calculate On

California, for those who aren't watching business news...is in trouble.  The budget for the state folks is bad off and there just isn't alot of money in the tax revenue bucket.

Months ago, it was decided that it'd be best to tax the wealthiest in the state and help make up for tax revenue that the state needed.

This week....the state controller....got around to announcing the total for the month of November.  There's a problem here though.....the state is $806.8 million short from the anticipated point they should be.  That's almost one billion less on tax revenue.....by their numbers....roughly ten percent below the budget.

Some analysts have quietly hinted now that various business operations and rich folks....have decided that increased taxes just weren't going to be part of their business model.  So they moved.

A new financial crisis?  Right now....no.  It'll take six months of bad numbers for the state controller to stand up and admit taxing the wealthy folks didn't help much.  Sometime around May of 2013, I would expect a public statement via the governor's office and the state controller.  They missed their budget target and doing awful on tax revenue collection.  They actually had to borrow more money to survive each month's expenditures....so by summer of 2013....they are deeper into debt than they were in the summer of 2012.

The rich folks?  I would imagine that they got creative.  They might still own property in the state but there's likely a for-sale sign on it, and the folks have taken up residence in Arizona or Nevada.  The business operations that could pack up and move?  They probably spent some time thinking about the future and likely moved two or three states over.  So the lesson learned out of this mess?  You can tax the wealthy as much as you want.....but they can always think of a better way to handle their tax situation.

At this point, it might be a wise idea to start identifying state services that you just can't afford anymore, and just shut down.  Of course, this is all stuff that you don't normally calculate on, and can't do it because folks get angry about less services.  In the end....you chased your business folks out of town, and kept thinking the town can sustain itself.  You guessed wrong.

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