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 in the newest and possibly the strongest contender for bankruptcy court.
1)We have talked a lot lately about how Seattle has moved into the leading position of the next major American city to go bankrupt. High crime, high homelessness, and especially high taxes have driven businesses and wealthy taxpayers out of the city and state:
Billionaire Jeff Bezos of Amazon fame left Seattle and now lives in income tax free Florida.
Billionaire Howard Schultz of Starbucks fame left Seattle and now lies in income tax free Florida.
Billionaire Rich Barton of Zillow fame has left Seattle and now lives in Las Vegas.
Starbucks decided to expand its headquarters footprint not in its original city of Seattle but three thousand miles away in Tennessee, taking 2,000 taxpaying jobs with it.
Numerous other wealthy taxpayers and businesses, as we have discussed in previous blog posts, have left the state and city for less expense and better quality of life in other geographic areas.
But a recent article we came across points out to a pioneer in abandoning the state of Washington, an article that can be reviewed at the following link:
Ken Fisher is the CEO of Fisher Investments, a major financial advice firm. He saw the writing on the tax wall several years ago and got out of Washington then:
Back in March 2023, Ken Fisher decided to move his very, very valuable company out of the state of Washington as a result of a state supreme court ruling.
That ruling overturned the state constitution and allowed the state political class to impose a harsh state income tax on state residents for the first time ever.
As a result of that ruling, Fisher issued a one sentence strategic sentence: “In honor of the Washington State Supreme Court’s wisdom and knowledge of the law and in recognition of whatever it may do next, Fisher Investments is immediately moving its headquarters from Washington State to Texas.”
Thus, he was possibly one of the first smart people in the state to realize that it was not going to be a good place to have his business taxwise and immediately made plans to move his business, himself, his employees and their tax stream they currently contributed to the state and take it to income tax free Texas.
His business manages almost $400 billion in assets for their clients and has more than 200,000 clients worldwide so we are not talking a mom and pop operation.
As way of comparison, the almost $400 billion his firm manages is larger than the total GDP of Denmark.
Thus, the state of Washington lost almost many high salaried and highly taxed employees, employees that made huge contributions to the tax stream and the local economy.
Obviously, the move by Fisher several years ago did not directly result in financial hardship to Seattle. But there were probably secondary effects in that the state government lost a high value tax client and some of the shortfall may have trickled down to Seattle.
However, the lesson that should have been learned several years ago is that wealthy people and businesses trying to make a profit will eventually hit a tipping point and move out of the high taxation areas. That lesson was not learned either at the state government level or the Seattle government level:
Seattle instituted its JumpStart tax which hit highly paid employees in the city.
It raised its sales tax in the city.
The state instituted a capital gains tax on gains over $1million.
It instituted a state income tax on millionaires, which combined with the capital gains tax comes out to 9.9%.
The Tax Foundation says that the combined taxation on certain people in the state will come out to 18%, the highest in the country.
And that 18% is before sales tax, property tax, and Federal income tax.
And Fisher looked at Texas years ago and realized that Texas has no state income tax, no capital gains tax, etc. and said “Bye!” to the state of Washington.
As a result of learning nothing from the Fisher exit, the city of Seattle is now faced with the following realities:
The downtown office vacancy rate is now a record 35.6%, the highest in the country.
No new office space was constructed in the downtown area in the entire year of 2025.
Some estimates put the business commercial property values down almost 50%, further reducing the city tax base.
As a result of the tax base decimation, the city government of Seattle is facing a financial deficit of about $140 million in the next year and over a $300 million deficit by 2029.
You increase the size of your tax revenue stream by increasing the size of your tax base, not increasing the size of your tax rate. And despite the lesson that should have been learned years ago by Fisher Investments out-immigration, the city and state politicians in Seattle and Washington learned nothing. And as a result, Seattle continues to be the leader in the race to bankruptcy court.
2)But it is not just big businesses and wealthy citizens that are leaving Seattle as small business find it increasingly tough to make a business work in a city of high crime, high homelessness, and high taxes:
Seattle Businessman, Dennis Balon, opened his first Seattle bagel shop in 2001.
He grew that into the largest bagel chain in the Seattle area, selling about 7 million bagels a year.
However, 25 years later, the bagel business he started and which thrived in the city was shut down,
The chain had survived Covid, the 2008 financial crisis, and other hard times but still survived and was highly successful.
But it could not survive what the city politicians did to the business atmosphere in the city: businesses leaving and taking bagel customers with them, high crime and homelessness, a minimum wage that is the highest in the country and totally not realistic for a local bagel operation, high taxes, etc.
Thus, not just the wealthy are being negatively affected by stupid political actions: small businesses such as bagel shops, bars, restaurants have also closed across the city, taking thousands of middle class jobs with them. All because politicians in general have no business sense or experience, no basic economic understanding, and didn't learn their lesson from Fisher Investments departure.
And the bigger picture is invisible, it is not just these businesses who are shutting down because the city made it impossible for them to be successful. No smart business person is going to invest and try to open a new bagel shop or restaurant in the city given what happened to the established businesses that could not survive the economic stupidity.
We previously reported that the city of Chicago, a city also hurtling down the financial death spiral and was likely to go bankrupt in 7-12 years, according to city actuaries' analysis. The smart money says Seattle beats Chicago's demise.
3)But that does not mean that Chicago cannot be the next major city to go bankrupt. It is plagued with many of the same problems of Seattle: out-migration of businesses and residents, a dwindling tax base, high crime, high unfunded financial liabilities, etc. And the incompetence of the city politicians continues:
Two months ago, the totally inept mayor of Chicago, Brandon Johnson, signed a whopping $100 million Department of Gun Violence Reduction executive order.
Last week, 15 people in the city were shot in a single mass shooting.
In a violent city, this was the worst single shooting incident in the city this year.
Johnson had been bragging earlier this year about the supposed reduction in gun violence in the city, claiming an over 30% reduction in homicides and shootings.
But it turns out through May city homicides were up 6% year over year and non-fatal shootings were up 7% despite his $100 million effort.
And yet Johnson insists his actions are working and refusing any help from Trump and the Federal government to help stop the killing and maiming.
In mid-June, 40 citizens were shot and 8 died in one Chicago weekend.
Given that the city is facing a $1 billion budget shortfall in the next fiscal year and crime violence continues mostly unabated, Chicago is still a prime candidate to be hollowed out by businesses and residents seeking safer, less tax burdened, and less crime filled areas, further contributing to a dwindling tax base already a billion dollars short.
4)Writer Victor Davis Hanson was recently interviewed for an article by Daily Signal:
He shared his opinion on why California is heading for bankruptcy, given the ignorance and heading for a financial death spiral. The highlights of his reporting include the following:
California has the highest electricity rates in the country.
California has the highest gasoline prices in the country.
California has the income tax in the country at 13.3%.
California has, by far, the highest homeless population in the country.
21% of the state’s residents live below the poverty line.
40% of the state's residents receive Medicaid benefits.
According to Hanson, decades ago the state had a good secondary education system, cutting edge aqueduct and water projects, great college education system, and first class road system, none of which exist today.
And today Kentucky Fried Chicken is closing down 44 stores and U-Haul is reporting more people are leaving the state than moving in.
Mr. Hanson is just repeating what we have said for a while, California is a prime state government for bankruptcy: the tax base is being hollowed out, crime and homelessness are rampant, fraud within the huge and unwieldy California Medicaid process is thoroughly rampant, the state infrastructure is falling apart, taxation and business regulations are sky high, and the unfunded state government liabilities, by some estimates, are approaching a trillion dollars.
That will do it for today: the cities and states we have long predicted are in a race to bankruptcy court are still in that race with the associated politicians having no idea on how to fix what they broke and how to break out of the financial spiral they created and find themselves in.
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Vote Now!!!! Go to to the following link and vote on which state or city government you think will go bankrupt first:
https://www.facebook.com/profile.php?id=61592458935721
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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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