Detroitification: State Tax Revenues Imploding

Good thing Massachusetts voters didn't eliminate the income tax. Otherwise, they would have forced the state to immediately cut spending and prepare for a decline in revenues. Instead, they're still spending to the hilt while the economy implodes around them. Long story short: state spending is going to cliff dive or they're going to literally tax the suckers workers back to the stone age.

Mish has it covered:

California is, like many states simply spending beyond its means. Promises have been made than cannot be kept. Raising taxes is not the answer in California or anywhere else.

Eventually someone will give in. Will it be the one needed Republican or a group of Democrats who agree to cut more spending?

Either way the point is moot except for an initial cheer of exhaustion. Falling sales tax revenue and falling property tax collections ensures another budget crisis is coming up in a few more months, not just in California but 46 states.

Think Obama's stimulus plan will counteract this on top of everything else that is going wrong? Think again.

Here is the very important point to understand, in light of Guvnah Deval's plans to close the budget shortfall. (And be clear that this is to close the shortfall that appeared around October-December. The even bigger hole that exists today hasn't even been publicized yet.) If the state's GDP declines and undergoes a permanent downshift, then maintaining government spending is the same as a massive increase in taxes and spending. The size of government relative to GDP will grow massively this year and in future, and may finally break the back of companies and industries that struggled to stay in the area. Considering the tax breaks for biotech and other favored industries, unless you are a high-wage employee in this field or others such as law, you'd best consider selling your home and finding a nice place down South before rising property taxes or job loss force you into foreclosure.

Prepare for Detriotification.