Let’s take a brief break from our run of posts regarding the massive corruption and fraud in government programs and return to one of the hottest topics we have been covering over the past few years, coverage that has intensified recently: which major city or state government will 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, now lets check the progress some of the above listed government entities are making to achieve this bankruptcy goal against this process:
1)Let’s start off wit the recent bad news out of Mandani’s New York City tax base:
Keep in mind that a lot of the financial crowd on Wall Street have already moved some or part of their operations out of New York City to more tax friendly areas: Goldman Sachs has moved managers to Dallas, Elliott Management relocated to Florida and JP Morgan now has more employees based in Texas than in New York.
ARK Invest and Webull are two hot, so-called fintech businesses that established themselves in New York City.
Fintech companies are the latest thing in high technology and financial applications and thus, they have the potential for high salaries and high taxation.
But now two high visibility fintechs are leaving New York City and heading for low tax St. Petersburg, Florida.
Ironically, Webull was located in the physical center of Wall Street, right next to the New York Stock exchange.
And yet, the company is moving 1,000 miles away, a bad omen for the financial crowd in lower Manhattan.
ARK was not a novice in the world of high finance, once managing over $50 billion in assets.
The fact that the top state income tax rate in New York City is almost 15% and the top state income tax rate in Florida is 0%, those making good money will be saving a lot of money by working in Florida.
Ore proof that in our opinion New York City continues to be the leader in the race to bankruptcy court.
2)New Jersey, as we pointed out in our last post ,continues to be a viable candidate for bankruptcy court. They are losing their tax base because of their high levels of business taxation and regulation along with high individual tax burdens.
And while the following bit of government action does not involve a lot of taxpayer money, at some point some New Jersey taxpayers are going to get up and leave the state as they continue to see state politicians waste their tax money on trivial matters like the following:
New Jersey’s newest governor, Mikie Serrill, is going to allocate a lot more taxpayer money to provide legal protections for illegal immigrants.
According to reporting from the Post Millennial, the governor recently announced that the amount of time to provide free legal aid to illegal immigrants will increase by more than 100%, going from the current level of $8.2 million to $20.2 million, a $12.2 million increase.
She boasted that,"These actions will help ensure more people in New Jersey's communities receive due process under the law and more New Jersey attorneys are mobilized to stand up for the fundamental human rights of detainees and their families."
There are about 14,000 homeless New Jersey residents but she felt that giving an additional $12.2 million of taxpayer money to help illegal immigrants was a better use of the money than helping the state’s homeless.
New Jersey residents have the highest property taxes in the country and she felt that giving an additional $12.2 million of taxpayer money to help illegal immigrants was a better of the money vs. providing property tax relief.
New Jersey residents have some of the highest utility costs in the country and she felt that giving an additional $12.2 million of taxpayer money to help illegal immigrants was a better use of the money than providing utility cost relief.
New Jersey Congressman, Jeff Van Drew agreed: "Families across New Jersey are wondering how they’re going to pay their electric bill this summer. Meanwhile, our Governor is increasing funding to spend $20.2 million to protect illegal immigrants. Start fighting for New Jersey citizens."
$20.2 million in a state government budget of $60 billion is not very large. But the symbolism is huge: New Jersey taxpayers are some of the most heavily taxed people in the country and when they constantly see their tax dollars being spent on non-citizens like this or on other trivial efforts and programs, at some point they realize they are not getting value for their tax dollars and eventually leave, further weakening the state government tax base.
And yet, politicians like Sherrill just do not get it.
3)We always felt that Chicago was a great candidate to go bankrupt. In fact, in a previous post we discussed the results of an analysis by city actuaries that predict the city will go bankrupt between 7 and 12 years from now, given, among other things, massive unfunded pension liabilities.
However, before then we have documented that businesses and residents are already fleeing the city due to high tax burdens, high crime rates, and lowering quality of life. And the city is about to lose one of its most enduring symbols and residents:
The Chicago Bears of the National Football League have decided that they also will flee the city due to high taxes and other reasons.
After a century of being a Chicago business presence, they will move their operations and football games to a planned new stadium in Indiana.
Thus, they are not only leaving the city they are leaving the state, another one of our prime candidates to go bankrupt.
The official word from the Bears: “Yesterday, the Chicago Bears Board of Directors met and voted to advance our stadium development project in Hammond, Indiana, with the exact site to be selected. We believe a world-class stadium project in Hammond will transform the region, connecting Northwest Indiana to the South Side of Chicago through the Loop and across neighborhoods and suburbs stretching north of the city. It will bring Chicagoland together and deliver new opportunities to its residents and businesses.”
So, as if the city did not have enough headaches with the out-migration of residents and businesses, Chicago suffers the embarrassment of losing an NFL team, one that had been a major fabric of city life for 100 years or so, taking its tax payments and economic contributions with it.
Another day and another day of racing to bankruptcy court: New York, New Jersey, and Chicago, the bad news and dwindling tax base continues across all of them.
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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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