For many years we would occasionally talk about a theme that discussed the possibility of a major U.S. city or an entire state government going bankrupt. Our reasoning and logic on how that would happen goes as follows:
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
The most recent posts on this topic can be read at the following links:
https://loathemygovernment.blogspot.com/2026/03/the-race-to-bankruptcy-court-new-york.html
https://loathemygovernment.blogspot.com/2026/02/the-race-to-bankruptcy-court-bears.html
https://loathemygovernment.blogspot.com/2026/02/the-race-to-bankruptcy-court-update-on.html
Unfortunately, we have gone from occasionally discussing this topic to visiting it much more frequently since the race to bankruptcy court seems to be accelerating. Let’s see who is making moves to try and get to financial doom quicker than other cities and states.
1)We have not discussed the state government of Washington at all in our discussion of states likely to go bankrupt. They have no state income tax which allows them to compete with states like Texas and Florida that also have no state income tax. They have a lot of millionaires and well-to-do residents who work in the technology industry which provide a rich tax base. They were sitting pretty good.
And then the whole situation began to unravel:
It looks like the state government politicians have decided that it would be a good idea to implement a state level income tax for the first time ever.
And they are not going to tip toe into the state income tax game, they want to come out of the gate swinging with a whopping 9.9% income tax for anyone earning over a million dollars a year.
So a tech millionaire earning say $5 million a year would pay almost almost $40,000 a year in state income taxes, 9:9% tax rate on income over a million dollars.
As always, rather than reduce government spending and make government programs more efficient, the state level politicians took the easy way out and decided just to raise the tax burden on state residents, the first two steps listed above for the blueprint of going bankrupt.
Which makes the following news story quite interesting:
Howard Schultz was the market force behind Starbucks coffee that made it a household name.
This highly successful business has made Mr. Schultz a very wealthy man, living in the state of Washington.
He announced that he is moving out of the state of Washington and headed to Florida, making the announcement one day after the Washington legislature agreed to impose a state income tax on millionaires and in his case, probably billionaires.
Now the timing of the two actions could be just a coincidence.
However, State representative, Republican Chris Corry, suggested that this move of a prominent state resident could be a bad omen: “He is just a harbinger of things to come.”
Showing his economic ignorance, state Senator Jamie Pedersen, said no big deal: “He's passed his years of earnings, so I don't think that this is what’s causing him to make a decision about where he wants to live.”
And while it is true that Schultz is past his prime earning years, does anyone think for a minute that his stock holdings and other wealth generating ability will be below the $1 million threshold?
Politicians like Pedersen can deny the relationship between higher taxes and out-migration of businesses and residents all they want but that is just economic ignorance: people want to be free and able to keep as much of their hard earned wealth as possible, that is the economic reality and it is a reality already playing out around the country.
Oh, and by the way Mr. Pedersen, as all of this is going on, Starbucks the company recently announced that it was moving some high paying corporate jobs out of the state of Washington and the city of Seattle to tax friendly Tennessee, as outlined in the following news article:
2)But in an interesting twist, it is not just wealthy tech types who may avoid living in the state because of the whopping almost 10% state income tax:
John Schneider is the general manager of the Washington NFL football team, the Seattle Seahawks
And not surprisingly, professional football players may now want to avoid playing in the state since their income would almost certainly be subject to the 9.9% state income tax.
According to Schneider: “There were a bunch of agents texting me the other day like, ‘Hey, can’t use that [no state income tax in Washington] anymore, buddy. I think it is for all the pro teams here in town. So, it’s going to sting, from a recruiting standpoint and what that looks like.”
One player’s agent told him that there would be “no chance” his client would sign with Seattle if it meant paying 10% or so in state income taxes on a high paying pro contract.
For the same contract value, would an athlete such as a football player rather play in sunny Florida where there is no income tax or rainy Seattle that will hit them with a 10% millionaire's tax? Pretty silly question but a question that Democrats in the state who pushed for a 10% state income tax obviously did not understand. Tech billionaire or football player millionaire, not paying the tax is worth the effort to avoid paying the tax.
3)But it is not just the new state income tax that has entered Seattle and Washington state in the race to bankruptcy court:
Seattle city politicians recently approved a proposal to increase the city sales tax by .1%.
In July, 2025, King County, the home county of Seattle, also raised its own sales tax by .1% so that someone living in Seattle and King County have now seen their sales tax rate go up .2%.
And while .2% may not sound like a lot, these increases push the sales tax on purchases made in the city a whopping 10.55%.
So a new income tax, one of the highest sales taxes in the country, one of the richest state residents fleeing the state and his former company moving employees out of the state, the financial death spiral is forming in the city of Seattle and the state of Washington.
4)And while Seattle and Washington are making great strides in the race to bankruptcy court, it is probably too little, too late to overcome the lead of New York City and New York state, given the lead they currently have in the race to bankruptcy and the idiotic tax ideas they continue to promote and implement:
We have previously reviewed some of the idiotic ideas and economic ignorance of the current New York City mayor, Zohran Mamdani.
Keep in mind that the population of New York City over the past five years or so has declined by about 400,000 people so their out-migration pattern is already strong.
He is coping with a $5.4 billion dollar budget deficit and as always rather than cut government spending or make existing government operations more efficient, his immediate reaction was to take the simple route, raise taxes.
Mamdani wants the state of New York to raise the taxes on wealthy residents to help cover the city’s budget deficit.
And if that does not happen he will raise the city property tax rate by 9.5% on everyone in the city who owns property.
Obviously, either move will likely continue the out-migration from the city and the continued reduction in the tax base, be it the wealthiest moving out to avoid higher taxes on their income or the less wealthy to avoid higher taxes on their property.
But the insanity from Mamdani just got worse since he has suggested that the death tax rate for dead New Yorkers be an obscene 50% and that the tax take effect at $750,000 in assets.
These numbers represent an increase from 16% to 50% on the tax rate and a dramatic decrease of about 90% from the current tax threshold of $7 million in the city and state.
These numbers, if implemented, would put the combined Federal/state death tax rate in the city and state of about 70%, the highest level in the world.
The $750,000 threshold would be the lowest in the country.
Now ask yourself: what rational person with assets of over $750,000 would continue to live in either New York City or New York state? No one would, the economic stupidity of Mamadani and others in the city and state of New York continue to amaze.
5)One last bankruptcy update:
California has always been a favorite candidate to go bankrupt.
It’s politicians frequently helped accelerate that process by proposing a first ever “wealth tax” where a person's total inherent wealth is taxed in addition to their income.
Obviously, billionaires living the state do not wanto t be subject to that atrocity and have already started leaving the state, taking their taxable income and wealth with them, many heading to income tax free Florida.
Some of those that have left include Peter Thiel, Mark Zuckerber, and the founders of Google.
And that exodus has continued with California billionaire Travis Kalanick leaving California and heading to income tax and wealth tax free Texas.
Mr. Kalanick is the co-founder of Uber.
Estimates say that Mr. Kalanick would have had to pay a wealth tax in the hundreds of millions of dollars.
Not only does California potentially miss out on taxing the wealth of all of these billionaires leaving the state but now they would also lose the regular state income tax revenue that these folks generate every year, a double whammy on the tax base and an acceleration towards bankruptcy court.
That will do it for today: New York City continues ignorant economic tax policies to maintain its lead in the race to bankruptcy, Seattle and Washington
state enter the race, and California continues to leak wealth with its inane tax policies and proposals.
**********************
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
**********************
