Let’s check in with our discussion on which city or state government is going to get to bankruptcy court first. Our primary cities in the race to bankruptcy include New York City, Chicago, Los Angeles, San Francisco, and newcomer, Seattle. The state governments that we think are soon heading into bankruptcy include New York, New Jersey, Illinois, and California with Washington state a newcomer to the race.
The reason for returning to this topic in the midst of our corruption series is because there have been some significant developments in the race to bankruptcy court. However, 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 see what is going on with the top candidates in the race to bankruptcy court.
1)We have often discussed the reality that California has one of the highest taxation burdens in the country for both residents and businesses: high state income taxes, sales taxes, property taxes, business taxes, etc. In fact, according to the Tax Foundation, the state has the third highest state tax burden in the country.
And depending on what happens in a few days after the elections, the state may impose the so-called “wealth tax” on its billionaires. Or at least on the billionaires still living in the state since many billionaires have already fled to avoid the wealth tax if passed by voters.
But the rush for more taxes by the state politicians may not stop there:
Xavier Becerra is running for the governorship of California.
According to reporting by the NewYork Post, Becerra has voiced his support for a potential new tax on mail driven by state drivers.
Theoretically, this new tax revenue would be used to fix the collapsing road infrastructure in the state.
According to Becerra, “Everything should be on the table,” which is politicians’ code for it will happen.
Workers that commute long distances to get to work because they cannot afford to live close to their jobs and those that drive for their careers, e.g. home visiting nurses, florists, Uber drivers, etc. would probably be the hardest hit and least able to afford the mileage tax.
Republican politician, Carl De Maio, is leading the opposition to the mileage tax.
He claims that the mileage charge would likely be between 6 and 9 cents a mile.
Thus, a driver that travels a moderate 15,000 miles a year would see a mileage tax charge of between $900 and $1,350: “Because of the extreme policies of Democrats in Sacramento, California has the highest cost of living in the nation – and now the Democrats want to make it worse by imposing a crazy new Mileage Tax on all drivers.”
There is an old saying: “When stuck in a hole, stop digging.” Good advice for any politician in the state: you have one of the highest tax burdens in the country and you want to add possibly two new taxes on top of the current burden? You already know that residents and businesses are fleeing the state because of high taxes so why feed the out migration with new taxes?! Stop digging.
Also, one of the reasons for their perceived lack of enough tax funds is that the state politicians have presided over one of the most corrupt and inept government operations in the country. The high speed rail line effort wasted tens of billions of dollars with nothing to show for it. The Federal government came in and shut down almost 500 bogus, criminal, tax revenue sucking Medicaid operations in the state and not one of those operations complained that they were legitimate. Remember, one of those bogus Medicaid criminal enterprises had a burrito stand as its business address while another had a tire store as its Medicaid address.
Maybe if the state politicians had a little gumption, brain power, and initiative they would clean up the misuse and criminality of current government programs. That would free up existing tax revenue to fix what needs to be fixed without adding more taxes.
But brainpower and gumption has never been a trait of these politicians, much easier to just raise taxes than fixing what is broken. And continue digging the financial hole deeper and deeper until the sides of that hole collapse into bankruptcy.
2)As stated above, the traits of a city or state going bankrupt is the inability of that government entity to protect the lives of those that they serve, a basic tenet of any government entity. And of course, Chicago, a prime candidate to go bankrupt, fails not only along the lines of high taxation and the impending financial collapse, but the city also continues the inability to protect its citizens:
As of mid-October, 319 residents of Chicago had been shot and killed by the rampant violence in the city.
This comes out to about one murder a day in the city this year.
Another 47 residents had been killed by non-shooting means.
An additional 1,292 residents had been shot and wounded, about four wounded every day.
These murder and wounded numbers are about the same as the same period in 2025.
Just a reminder that Chicago is not just financially suffering but also suffering from a quality of life perspective. Thus, there is no reason to think that Chicago is not still headed towards bankruptcy as businesses and residents not only flee because of financial stress but also because of safety stress.
3)Let’s finish today with some more stats that continue to show why people are leaving some states and heading for other states, leaving the original states in a financial bind of a shrinking tax base:
According to the Tax Foundation’s latest analysis, Florida, Texas and Tennessee, three prime states where tax weary residents and businesses are heading towards, rank as the 5th, 7th, and 8th best states from a tax burden perspective,i.e. lesser taxation burdens.
However, the four states that we believe are hurtling towards bankruptcy court, Illinois, California, New Jersey, and New York, rank as the 38th, 48th, 49th, and 50th worst states from a taxation perspective.
These rankings are based on four broad tax categories: corporate taxes, individual income tax, sales tax, property tax, and unemployment insurance tax so it is a comprehensive picture of the overall taxation picture.
So it is no surprise that tech companies and talent are fleeing California and financial types are fleeing New York, the tax burden in these states are high and not likely to ease anytime soon. But given that the political class in these states are addicted to taxation as a way to resolve inept government and unnecessary government programs, that addiction will eventually drag their state governments into bankruptcy court.
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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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