The Race To Bankruptcy Court - New York City Tax Stream and Population Continue To Get Hollowed Out and Chicago Has Yet Another Financial Liability

It seems we are in a little bit of a rut in that we seem to be getting overwhelmed with news about our choice for states and major cities that are likely to go bankrupt relatively soon. As always, our top state governments that we think are nearing bankruptcy include New York, New Jersey, Illinois, and California. Our top major cities we think are rapidly approaching bankruptcy include New York City, Chicago, Los Angeles, and San Francisco.

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:

1)One of the major indicators that a city is heading towards bankruptcy, as listed above, is that residents and businesses leave that teetering state or city for other areas. The New York Post recently ran an article that highlighted how this is happening in New York state and its cities including New York City:

• More than 125,000 New York residents have left the state and resettled in Florida over the past five years.
• Those folks have taken about $14 billion worth of income with them that can no longer be taxed in the state of New York.
• Over 41,000 of those migrating out of New York ended up in the greater Miami metro area, an area that has seen tremendous growth from out of state people moving in.
• These numbers come from an analysis done by the Citizens Budget Commission (CBC).
• Of the $14 billion that left the state, a whopping $10 billion is estimated to come from New York City residents hitting the road.
• A CBC spokesperson cited affordability, quality of life, and safety from crime as primary drivers for those leaving for Florida.
• The CBC also noted that the percentage of New York City residents who said life in the city was “good or excellent” dropped from 50% prior to the pandemic to 30% in 2025.
• Not only does New York state and New York City lose the tax revenue stream from those leaving but overall economic growth is stunted as these mostly higher income folks that are leaving spend their wealth on restaurants, clothes, and other needs outside of the state and city.
• About 26,000 of those people that left New York for Florida had incomes roughly three times the national average.
• Since the top 1% of earners in New York City pay 40% of the state’s income tax, the loss of higher earning and higher taxed residents is particularly harmful to the tax base.
• But those leaving New York City for Florida are not the only ones leaving the city and taking their tax dollars with them since 138,000 city residents have left the city for Long Island, taking over $11 billion in income from the city according to the CBC.
• Another 120,000 former city residents of the city have moved to Westchester County, NY, Fairfield County in Connecticut, and Bergen County in New Jersey, taking another $11.7 billion in income with them.
• The average income for these migrants was over $100,000.
• In 2010, New York City was home to almost 13% of the country’s millionaires but by 2022 that percentage had dropped to under 9%.

Keep in mind that much of this migration of wealthier residents from the city and the state happened before the current administration of Mamdani took over city hall in New York City. And if the state legislature does not raise the income tax rate on wealthy city and state residents, Mamdani has threatened to raise the city tax burden even more across the city by raising the property taxes by over 9%.

Which, if that happens, the increased tax burden will drive more New Yorkers out of the city and further accelerate the city’s financial death spiral into bankruptcy. In our last post we came across a detailed analysis that forecasted Chicago will go bankrupt in 7-12 years. Given the out-migration of wealth and residents from New York City, it is still our contention that New York City will get to bankruptcy court faster than Chicago, given the above wealth migration trends.

2)Let’s take a look at another recent New York Post article that further reinforces the trend of city residents actually leaving the city or thinking about leaving, given the cost and quality of life issues in the city today:

• According to a recent Marist opinion poll, one in three New York City residents plan on leaving the city and state within the next five years.
• Reasons cited most often of those desiring to leave include the cost of living and declining quality of life.
• 86% of those polled said the state is no longer affordable for the average family, up from 82% in 2025.
• This desire of 33% of those polled planning on leaving the state is up from 27% that planned to leave 15 years ago.
• According to the United Van Lines 2025 Movers study, more people moved out of New York and New Jersey than any other state.
• 56% of those polled said they think New York is heading in the wrong direction.

More bad news for the city and state: not only are people already gone or are leaving, many claim that they also will be leaving shortly, hollowing out the tax base and the tax revenue stream, an omen of an impending financial death spiral.

3)Our strong candidate for going bankrupt is the city of Chicago. Our previous post explored that real possibility in depth, including an analysis that forecasted the city would go bankrupt within seven to twelve years, given the shrinking tax revenue base and the unfunded liabilities the city is committed to paying.

While the following financial it is pretty small int he big picture, it certainly does not impede the city’s drive to bankruptcy:

• A city judge recently ruled that the revenue-strapped city of Chicago will have to refund $163 million to residents due to the fact the city had overcharged them on parking fines.
• Another $94 million in uncollected fees and fines was also wiped out.
• According to state law, there is a $250 cap that can be charged for illegally parked vehicles.
• For years, the city of Chicago violated that state statute.

Again, these millions of dollars are relatively small compared to the billions and billions of dollars of future and current costs and liabilities the city will have to pay for. But this is just another example of bad financial mismanagement by the city’s political class, that is symptomatic of their larger financial incompetence that they have shown over the decades.

That will do it for today: lots of people and tax dollars have already left New York City, a lot of New York state and New York City residents say they are going to leave and take more tax dollars with them, and Chicago finds itself with even more liabilities that have to be paid.

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July, 2015, Bonus Post, By The Numbers: Illegal Immigrant Numbers and How Large They Actually Are

On a semi-regular basis we revisit the theme "by the numbers" just to check in on the state of the country and political class using actual realities and their underlying numbers, not the spin or lies from our politicians. You see, politicians usually have nothing to gain by looking at reality and the numbers since they are more than likely to have screwed up reality and our lives in the first place.

That is why they would rather lie and deceive than tell the truth. But that approach can be destroyed by looking at the hard numbers behind the mess they have created. I once worked for a boss whose favorite saying was: "There is nothing more devastating to an opinion than the right number.” And that is what we try to do with this theme, devastate politicians’ opinions by looking at the right numbers.

So let’s take a look at the numbers that have recently cropped up and again prove that the political class in America continues to be one of the worst set of people to ever hold office, given the state of the country, the many ways they screw up our wealth and government functions, and their inability or non-desire to step up and tell the truth.

Today's bonus post has ended up focusing mostly on illegal immigrant numbers, not on purpose but because those numbers have recently cropped up in the news.

1) Wind power has been around for hundreds of years so calling it a “new technology” is really quite a stretch. But many in the political class have done just that in order to justify giving the wind industry billions and billions of taxpayer dollars. What does that generosity look like in the real world:

• Over the past thirty years, the wind industry has received $30 billion in in taxpayer subsidies.
• Unfortunately, despite getting $30 billion, the wind industry now accounts for a meager 5% of U.S. electricity demand.
• Congress passed an extension on wind subsidies in 2014 that will cost taxpayers another $6.4 billion over the next decade.
• In 2003, U.S. Senator Chuck Grassley, a primary sponsor of Federal wind subsidies, stated that the wind industry would need “maybe 10 years” more of subsidies.
• Thirteen years later, the Washington politicians are willing to give the wind industry another ten years, making it twelve years beyond what Grassley promised in 2003.
• After hundreds of years and tens of billions of dollars, maybe we should finally face the reality that wind power will never be the energy savior that many wanted it to be. The numbers, both financial and chronological, all point to that reality.

2) The IRS recently reported, as told in a recent edition of BusinessWeek, that it hung up on 8.8 million calls into its 800# help centers during 2014. This comes out to an average daily hang up rate of over 24,000 calls a DAY. Since I would assume that the majority of these calls came in the months leading up to tax filing day on April 15, I think we can safely assume that the hang up rate during those months was much, much higher than 24,000 a day.

Horrendous customer service even for this dysfunctional Federal entity. But possibly even worse than these pathetic metrics, the IRS calls these hang ups “courtesy disconnects.” Not even close. Nothing courteous about calling a Federal government hotline for help, probably waiting on hold for a long time, and then being hung up on. Certainly disrespectful to the taxpayer callers who pay the salaries of all IRS employees.

3) Paul Bedard, writing for the Washington Examiner on July 20, 2015, reported on estimates from from the Center for Immigration Studies and Pew Research that showed 2.5 million illegal immigrants entered the U.S. during the Obama Presidency, about 400,000 a year, more than a thousand a DAY.

The only good news out of the study is that the annual flow into this country during the Bush administration years was probably in the 500,000 to 600,000 range, making the Obama administration king of the pigs when it comes to leaky borders. The only difference is that during the Bush administration, ISIS did not exist. During the Obama administration, ISIS does exist, is financially very well off, and would probably have little trouble sneaking its terrorists into this country via the leaky Mexican/U.S. border.

It is pretty clear, based on these numbers that both administrations have been absolute failures in securing our borders and protecting U.S.citizens from physical and financial harm.

4) The organization, Judicial Watch, does a wonderful job in prying documents out of the Federal government despite the Obama administration’s tendency to want to work in secrecy and non-transparency, often illegally or immorally. They recently obtained Federal immigration records that showed:

• The Department of Homeland security released over 250 illegal immigrants Arizona area detention centers during just the last week of February, 2015 and the first two weeks of March.
• The details in these documents show that the Obama administration lied again when it denied that mass releases of illegals had occurred.
• 40 of those released have a history of violent criminal behavior but yet were still released onto the streets of Arizona and around the country.
• Their criminal offenses included assault, domestic violence, weapons offenses, battery, and drunk driving: Drug Trafficking: 9 cases, Weapons Offense: 6 cases, Domestic Violence: 4 cases, Prostitution: 4 cases, Battery: 2 cases, Contributing to Delinquency of Minor: 2 cases, Robbery-Street Gun: 2 cases, Firing Weapon: 1 cases, Hit and Run: 1 case, Possession of a Weapon: 1 case, and dozens and dozens of lesser offenses.
• And these are just the crimes we know these people committed, the real number is probaly much higher.
• Despite the dozens of criminals who were freed, the Federal government has refused to tell local law enforcement authorities the names and locations of these criminals, making local law enforcement departments less capable of doing their jobs and protecting the public. 
• These findings go along with a 2014 Judicial Watch finding that showed the Obama administration had released a whopping 165,900 known criminal illegal immigrants onto the streets of America. including many convicted of such violent crimes as homicide, sexual assault, kidnapping, and aggravated assault. 

As these numbers show, the Obama administration has done a pathetic job of following existing laws and protecting the American public from immigrant criminals, the numbers are too large to claim other wise.

5) What happens once these criminal illegal immigrants are released onto our streets? According to Maricopa County, AZ Sheriff Joe Arpaio, out of the 5,000 illegal immigrants turned over to the Federal government out of his jails, “2,000 have been coming back:”  “I have ICE agents in our jail. We check everybody that comes in, then detainers are placed for those here illegally on state charges, turn them over to ICE, and guess what? Out of 5,000, 2,000 have been coming back to my jails, all serious types of crime. One guy came back 20 times. So, evidently they keep crossing the border, or the ICE is letting them out on the streets.”

That will definitely do it for this month’s “by the numbers” review with today’s bonus post focusing on illegal immigrants. As the number of crimes committed by illegals on our streets increases, many of whom were put there by the Obama administration, the question of why Donald Trump has seen his rating climb becomes clear: the number of crimes committed by these known criminals is on the rise and it is the fault of this current administration, the numbers do not lie.

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