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The Nightmare of California Dreamin’

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By Adonis Villanueva @ Shutterstock.com

Californians are proud of their state. It is the world’s fifth-largest economy in large part fueled by Silicon Valley’s Apple, Facebook and Google. The progressive, one-party state is a neo-socialist model for a nation moving hard to the left.

But there is a snafu. A big one. California is about to face a devastating shortfall in annual income. A new federal tax law now caps deductions for state and local taxes at $10,000. This radical change promises to cost many high-earning taxpayers tens of thousands of dollars, Victor Davis Hanson explains in American Greatness.

1% of Taxpayers Pay Nearly Half of State Income Tax

California’s 40 million residents depend on less than 1 percent of the state’s taxpayers to pay nearly half of the state income tax, which for California’s highest tier of earners tops out at the nation’s highest rate of 13.3 percent.

California Has No Margin of Error:

No More Fed Deductions? Taxes Intolerable

Spiraling entitlements, unwieldy pension costs, money wasted on high-speed rail, inadequate water storage and delivery, and lax immigration policies were formerly tolerable only because about 150,000 Californians paid huge but federally deductible state income taxes.

Illegal Immigration – Health, Educational, Legal Costs Squeeze the Budget

About a third of the California budget goes to the state’s Medicare program, Medi-Cal. Half the state’s births are funded by Medi-Cal, and in nearly a third of those state-funded births, the mother is an undocumented immigrant.

No Effort to Fix Water-Storage Capacity

California has again been experiencing rain and cold that could approach seasonal records. The state has been soaked by some 18 trillion gallons of rain in February alone. With still no effort to expand California’s water-storage capacity, millions of acre-feet of runoff are once again cascading out to sea (and may be sorely missed next year).

Thousands Live on Streets/Sidewalks of Major Cities

California is facing a perfect storm of homelessness. Its labyrinth of zoning and building regulations discourages low-cost housing. Its generous welfare benefits, non-enforcement of vagrancy and public health laws, and moderate climate draw in the homeless. Nearly one-third of the nation’s welfare recipients live in the state, and nearly one in five live below the poverty line.

Selfish Rich Taxpayers to Pay More?

Californians may have once derided the state’s 1 percent as selfish rich people. Now, they are praying that these heavily burdened taxpayers stay put and are willing to pay far more than what they had paid before.

Read more from VDH here.

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Debbie Young

Debbie, editor-in-chief of Richardcyoung.com, has been associate editor of Dick Young’s investment strategy reports for over three decades. When not in Key West, Debbie spends her free time researching and writing in and about Paris and Burgundy, France, cooking on her AGA Cooker, driving her Porsche Boxter S through Vermont and Maine, and practicing yoga.