Many times we have discussed our theory that a major city or an entire state government will soon go bankrupt. The city and state politicians running these government entities continually raise taxes on businesses and residents, waste that wealth on stupid programs that never succeed, and usually end up reducing the quality of life while increasing the burden on productive people in their areas.
As a result, residents and businesses move to other cities and states, taking their tax dollars with them. This reduces the tax revenue flow to the government they are leaving, which causes the city and state politicians to raise taxes and cut services to cope with the smaller tax base. They then increase taxes and lower the quality of life which then drives more residents out to other areas, which further reduces the tax base and the financial death spiral is underway.
The major cities we think are leading candidates for bankruptcy include:
New York City
Los Angeles
San Francisco
Chicago
State governments we think are leading candidates for bankruptcy include:
New York
New Jersey
Illinois
California
Massachusetts
All of these cities and states are losing their tax base as residents and businesses move out and the latest data prove that their financial death spirals are still going on:
A new database process, Vote With Your Feet, developed by Unleash Prosperity recently announced their latest analysis.
Their analysis looked at IRS data from 2012 to 2022.
The analysis tracked population movement and what they called aggregated gross income (AGI) of households as they moved around the country.
And the results are quite consistent with our theory that some state is going to go bankrupt pretty soon.
For example, New York state lost a whopping $111 billion worth of AGI from former New York residents that left the state for greener pastures.
California did not do much better, losing over $102 billion in that decade.
Illinois lost $63 billion of AGI, New Jersey lost $31 billion, and Massachusetts lost $19 billion.
These are funds that are no longer being spent in these states to build the tax base, the economy and quality of life.
And these states not only lost AGI but also big chunks of their population.
New York lost 1.8 million residents and California lost 1.6 residents.
Conversely, states that have lower taxes, lower business regulations burden, better government services, and lower crime rates did quite well from AGI and population gains.
Florida added $196 billion in AGI in the decade along with 1.6 million new inbound residents.
Texas gained $54 billion in AGI, Arizona gained $30 billion, North Carolina gained $28 billion, and South Carolina gained $28 billion.
Both North Carolina and Arizona gained about half a million residents from elsewhere during the analysis period.
So our theory of bankruptcy continues to look viable. These states are so-called sanctuary states so that status is probably accelerating the out migration from these states as taxpayer residents and businesses watch their hard earned tax dollars being spent to provide free food, free shelter, free medical free cell phones, etc. to millions and millions of illegal immigrants living in their states.
The states listed above also generally have the highest level of unfunded future liabilities on their books, i.e. they have future financial commitments that cannot be covered by the current level of taxation. An example would be underfunded pension and retirement liabilities for state government employee programs. This means at some point in time, taxes will have to be raised on current residents and businesses or benefits cut for state government retirees, two nasty decisions. That will have to be made and which will drive even more AGI out of those states.
California recently cut back the amount of taxpayer wealth it directs to providing free healthcare for illegal immigrants as their budget needs get worse. Massachusetts recently announced that it will spend almost a billion dollars this year to take care of illegal immigrants while the needs of Massachusetts taxpayers and residents get short shrift. By just about every possible measurement, Illinois government pensions systems are the worst funded pensions in the country.
It is an exciting time to be alive: which state government or city government will soon be financially crushed by political mismanagement of its taxpayers’ dollars and win the race to the bankruptcy courthouse steps? Keep tuned in!
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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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