Thursday, August 2, 2012

More on America's Spain: California

America's Spain: California - "Instead of tackling debt, California lawmakers approved a $68 billion project to build a high-speed train connecting Los Angeles and San Francisco. (A flight from L.A. to S.F. takes about one hour and costs around $100 one way vs. a 10 hour drive.) Interestingly, the approval allowed the state to collect $3.2 billion in federal funding that would've otherwise been rescinded. The federal government* rewarded California for needless spending projects, leaving U.S. taxpayers on the hook! Like many states, California is burdened by falling tax revenue, a $3.6 billion unfunded liability (per capita) for retirement benefits and rising Medicaid costs. Lack of employment is something California and Spain both share in common. According to Department of Labor Department figures, California's average unemployment rate from July 2011 through June 2012 was 11.2%. But its broader "under-employment" rate was an elevated 20.3%. Translation: Income tax revenue cannot increase with an employment market this weak. To solve its financial problems, Gov. Jerry Brown ( D ) wants California voters to approve "temporary" tax increases on the highest income earners along with the sales and use tax rate by 0.5%. The vote is set for November 2012. Will other states copy California by trying to coax taxpayers into paying higher taxes? California may be an extreme example of the fiscal challenges facing states, but it's still a good representation of big problems elsewhere."

*Thank you President Obama and the Democrats who "rewarded" these needless spending projects!


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