We are going to take a little break from the past five posts which showed the disgusting waste of taxpayer wealth that is criminally siphoned off from Medicaid, Covid, and other government programs. Instead, we will update some of the latest news and probabilities on what states and cities are likely to go bankrupt first.
As always, our top state governments that we think are nearing bankruptcy include New York, New Jersey, Illinois, and California. Our top major cities we think are rapidly approaching bankruptcy include New York City, Chicago, Los Angeles, and San Francisco.
Before reviewing the latest news and seeing which state or city is making the best progress towards government bankruptcy, let’s review how these cities and states got themselves into this financial death spiral position to begin with:
A government entity keeps expanding its budget, eventually putting pressure on the tax revenue stream it receives.
At some point, rather than cut government spending or make its programs more efficient financially, the politicians in charge raise taxes to meet the ever growing government expenditures.
The raising of taxes causes some residents and businesses to leave the city or state for less tax burdensome areas, reducing the tax base and reducing the revenue stream.
Rather than cut expenses and become more efficient to match the reduced tax revenue stream, politicians in the above cities or states raise the tax burden even more.
This causes more residents and businesses to flee the city or state, further reducing the tax base and tax revenue stream.
At some point politicians panic and raise taxes more and start cutting vital government services (e.g. police, fire, education) in order to try and balance government spending against the shrinking tax base and revenue stream.
The reduction in quality of government services in particular and quality of life in general drives more residents and businesses out of the area.
Eventually, the expenses, costs and financial liabilities outstrip the reduced tax stream and bankruptcy occurs.
Okay, that's the process, let's look at the mounting evidence across the country on how this is playing out.
1)One of our top cities, and possibly the top city, to go bankrupt first is New York City. High taxes, high crime rate, out migration of residents and businesses, a shrinking tax base, etc., a lot of the reasons a city goes bankrupt are actively fermenting in NYC now. In addition, their newest mayor, Zohran Mamdani, is devout socialist/communist with little experience operating any sized city, never mind the biggest city in the country.
And a recent stunt of stupidity shows his inexperience and his latest contribution to the city going bankrupt:
His first city budget as mayor is short billions and billions of dollars.
Rather than reduce government spending and make it more efficient, he is trying to raise taxes anyway he can, specifically targeting the wealthy.
As a Tax Day stunt, he went to the penthouse home of a very wealthy city resident, Citadel CEO Ken Griffin, to push for a new tax on the wealthy homes of rich people in the city, singling out Griffin specifically.
Rather than have an adult, mature conversation, he pulls this nonsense, which is his poor excuse for leadership.
He obviously is insensitive to the reality that many wealthy folks have already left NYC and the state of New York because of higher and higher taxes on their wealth, taking their tax base and economic energy and input with them.
Now Mr. Griffin is the CEO of a major hedge fund investment firm that supports major economic ventures.
One of the major projects that he is possibly going to support and make happen is a $6 billion development effort at 350 Park Avenue in the city.
Or maybe we should say “was” going to support since there are stories that because of Mamadani’s stunt, Griffin may junk the Park Avenue/NYC project and take his investment resources elsewhere.
This possibility is based on comments Mr, Griffin recently made at an investment conference where he categorized Mamdani's antics as a “personal attack” and a profound “lack of judgement.”
If he does pull the project, then an estimated six thousand construction jobs do not materialize and the 15,000 permanent jobs that would be based at the location after the construction is completed go somewhere else along with their tax dollars and economic impact.
And it is not just the 350 Park Avenue job that could be negatively impacted. Griffin employs over 2,500 tax paying employees in NYC. He personally donated $400 million to the Memorial Sloan Kettering Cancer Center. He personally contributed $25 million to the Success Academy Charter School Network to help minority kids get a better education and future.
As a result of a one day political and embarrassing childlike stunt, Mamdani could cost the city thousands of jobs, billions in taxes, and millions in charitable donations. Quite possibly a very expensive and classic FAFO on Mamdani’s part. But given his immaturity as a leader and person, not surprising.
We have previously discussed the realization that the New York governor, Kathy Hochul, recently realized, that wealthy folks have moved out of state and taken their tax dollars and economic power with them. Obviously, Mamdani has not had that epiphany yet. This reality is likely to push NYC further ahead in the race to bankruptcy court.
2)Let’s jump over to the west coast and see what progress California is making in the race to bankruptcy court. Remember one of the major points made above that residents, businesses, and companies will leave a high taxing state for less taxing areas in order to maximize their profitability.
California, as one of the highest taxing states in the union, if not the highest taxing state in the union, has seen a migration of small and major sized businesses leave the state over the past few years as the state politicians have driven the tax burden higher and higher. Many of these businesses fled to states like Texas and Florida to avoid the heavy California tax burden.
The following list gives you an idea of how many businesses have left the state in just the past few years and went to Texas. Eight Fortune 500 companies have moved all or major parts of their companies to Texas in the past few years. Since 2020, more than 100 good sized companies have relocated to Texas. It does not include the businesses that fed to Florida, Nevada, Tennessee and other less tax heavy states:
Financial services company Charles Schwab moved its headquarters out of San Francisco in 2019 to Texas.
Tech company and software giant Oracle moved its headquarters from Redwood City to Texas in 2020.
The world’s largest commercial real estate and investment company CBRE moved its headquarters from Los Angeles in 2020.
Hewlett Packard Enterprise left San Jose in 2020.
Incora, once Wesco Aircraft, left Valencia in 2020.
Aecom, an infrastructure consulting company, left Los Angeles in 2021.
Elon Musk moved three of his companies, Tesla, Space X, and Starbase, to Texas between 2021 and 2024.
Fitness chain F45 left El Segundo in 2021.
Data Realty, a data center company, left San Francisco in 2021.
Software company NinjaOne left San Francisco in 2021.
Pre-paid debit card company, Green Dot, left Pasadena in 2021.
McAfee left San Jose in 2023.
Chevron left San Ramon in 2024.
Management Consulting firm resources Connection left Irvine in 2024.
Tech firm Simplilearn left San Francisco in 2024.
Real estate firm Realtor.com left Santa Clara in 2025.
Hair care firm John Paul Mitchell Systems left Los Angeles in 2025.
Public Storage left Glendale in 2026.
Other companies to move include Toyota, McKesson, Palantir, Yamaha, In-N-Out Burger, and Playboy.
It is unreal and amazing how many companies, large and small, have fled California in the very recent past. These out of state moves reduce the resident and business tax bases of the state, the moves reduce the positive economic impact of the companies and their businesses have in their communities, and it reduces the talent base, making it less attractive for potential employees to move to the state.
This last reality is very important. As more and more tech companies move out of California, the state becomes less and less attractive for tech professionals to move into the state. Not too long ago, if someone wanted a career in technology, you almost had to go to Silicon Valley in California. But as more and more tech companies move to Texas, Florida, and other locations, the need to move to California for a tech professional is less critical.
3)One more quick reality in California as far as bankruptcy court racing:
The Wallethub website recently released their analysis on what states were best for starting a business.
Florida cities captured the top five slots for best locations to start a business according to the analysis: Tampa, Orlando, Jacksonville, Hialeah, and St. Petersburg are WalletHub's best five cities to start a business in America.
Florida also had another city in the top ten.
Tampa, the best city to start a business, has a lot going for it: low business taxes, plenty of investors, and lower business regulation hassle.
The Tax Foundation ranked California as 49th relative to the business tax climate so not surprising that no California city made Wallethub’s top ten list.
Thus, no surprise, business tax revenue, personal income and tax, and economic power goes where it is easiest to make money and be successful and that translates to businesses leaving the state and heading for business friendly places like Texas and Florida.
Based on today's discussion, our top candidates to go bankrupt are unchanged: New York City will be the first major city to go bankrupt in our list and California will be the first state government to make it to bankruptcy court … ever.
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If you agree that we need to deseat every member of Congress for their lack of success and accomplishment, then please consider going to the following petition link to help the cause:
https://www.change.org/p/deseat-congress-reset-freedom
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