January 17, 2022 - 6:12pm
Whisper it, but the $45 billion surplus Gavin Newsom has projected for California next year isn’t quite what it seems. In fact, the bulk of that surplus is largely due to the earnings of a few giants such as Google, Apple and Meta (formerly Facebook), as well as a handful of IPOs.
This inconvenient truth hasn’t stopped the Governor from proposing a record-high $286.4 billion budget that will focus on education, health spending for undocumented residents, and expanding the state’s already massive social spend.
Indeed, even with a surplus, the state legislature seems determined not to lower taxes but to raise them. Newsom plans to implement a single payer health care system funded by massive new taxes on business and higher income revenues, raising what is already the nation’s highest rate. On top of that, the legislature seems ready to impose other wealth taxes on the very rich who keep the state afloat.
Yet the reliance on the elites — the 1% who account for half the state’s income tax — could prove troubling once the current stock market boom ends, and the IPO picture darkens. The state tax and regulatory regime has already kneecapped most other sectors of the economy, including both blue collar industries like manufacturing, energy and construction. And much of this has been accelerated by a growing exodus of companies, including such iconic firms as Tesla, Oracle, HP Enterprises, Charles Schwab, Bechtel, Parsons Engineering, and others. Meta has reportedly purchased thirty-three floors in an Austin high rise.
Despite professing to be the start-up capital of America, California’s leaders simply ignore or dismiss any notion of economic peril. But the reality is stark: this is a state that suffers the country’s highest cost-of-living adjusted poverty rate, the largest gap between the middle class and the rich, among the most crowded housing, and the second lowest homeownership rate. Post-pandemic it also has the nation’s highest unemployment rate.
These facts are rarely discussed in the predictably pro-Newsom media. The party line is that such attacks reflect the political bias of Right wing “haters”. Yet what California needs is not media or academic shills, but a willingness to confront the state’s emerging neo-feudal structure that, amid unprecedented wealth, has done little for most residents. Only a course correction, and change of consciousness, can restore the state to its former greatness.
Joel Kotkin is a Presidential Fellow in Urban Futures at Chapman University and a Senior Research Fellow at the Civitas Institute, the University of Texas at Austin.
joelkotkin
Join the discussion
Join like minded readers that support our journalism by becoming a paid subscriber
To join the discussion in the comments, become a paid subscriber.
Join like minded readers that support our journalism, read unlimited articles and enjoy other subscriber-only benefits.
SubscribeIn what way does the existence of the ultra rich make the rest of us poorer?
Attempts by governments to extract more money from them inevitably seem to lead to more squeezes on ordinary responsible savers
“In what way does the existence of the ultra rich make the rest of us poorer?”
BECAUSE THEY HAVE DOUBLED THEIR MONEY IN THE LAST 18 MONTHS BY REDISTRIBUTING THE MONEY FROM THE MIDDLE CLASS AND WORKERS AND POOR TO THEMSELVES !!!!!!!!!!
They are stealing your wealth if you are typical Middle Class, and here is how it works:
They get the government, which they own as they are ‘The Donor Class’ and finance all the campaigns, etc, like Zucker gave $450,000,000 YES, half a billion to defeat Trump – that is how they roll, Plus they make sure every politico who does their work becomes filthy rich – think of every one of them, Pelosi worth over two hundred million, Blair, Clintons, Miliband… all of them…
Sooo – The Fed, BoE, ECB, all print TRILLIONS, which can never be paid off – so they must use Inflation to make it melt away. Inflation is a TAX. It eats your savings, pensions, spending power, and pay. The Trillions ended up in the filthy Rich pockets where they keep it by getting VAST loans for no interest that they buy assets with, which inflation will melt the debt away leaving the free assets – appreciating and dividend paying assets!!!!! That is on top of just getting the money handed to them – by QE and all the issuing of $ mostly goes right to them…
Sooo – the Corrupt Government prints $10,000,000,000,000 into existence by creating debt, which 90% goes to the filthy rich – then it is all paid back by the Inflation Tax inflation away the working folks savings and pay and spending power to erase the debt, See????
YOU PAY FOR EVERY CORRUPT 10 TRILLION THEY HAVE STOLEN BY THE COVID RESPONSE – YOU ARE POORER, THEY RICHER!!!!!!!!!!!
You silly economically illiterate sheep watch some good education, or just stay sheep and get eaten…. https://www.youtube.com/watch?v=-WyEPltVWMM
Realize that the proposed tax on unrealized gains is probably unconstitutional and is certainly totally inappropriate. Not only will be billionaires find loopholes and ways to get round the tax, but the downstream consequences may be incalculable. After all, once established for billionaires why not to millionaires, and then ultimately to anybody who holds any stock at all.
But the fundamental problem is that the proposal entail double taxation. Let us say one has to pay 1% tax on unrealized capital gains. First, one would probably have to sell stock every year to be able to pay that which would not only rapidly deplete one’s unrealized capital but more importantly would involve also paying additional capital gains taxes on stocks that one has sold to come up with the cash to pay the “wealth” tax. Second, it fails to take into account that unrealized capital gains are vaporware. The stock market doesn’t remain constant. Yes it goes up, but it also goes down. You can bet that there won’t be rebates if one’s unrealized gains drop by 50% in a year. But they certainly can do so – all one needs to do is look back to 2008 and for that matter to Feb/March 2020. Third, such a tax is simply unamerican. It is completely unreasonable for the Government to make money off the risks made by others – i.e. the government takes all the money but bears none of the risks. The same is also true of capital gains taxes which in the US, in contrast to the UK, are not indexed for inflation. That’s important because stock held for long periods of time and then sold may appear to have made massive gains but in fact when indexed against inflation represent only very meagre gains.
Lastly, the politics of envy which is all that this is, is simply destructive. Sure Elon Musk is unfathomably wealthy. But he deserves every penny, and when it comes to electric vehicles he is light years ahead of all the major car manufacturers. The Tesla is a combination of not only superb engineering (with 0 to 60 mph is less 3 sec) but the hardware/firmware/software controlling the car is astounding. Right now, there is only assisted driving which is very helpful on long freeway (motorway) trips, but it wont be long before driving will be on almost complete auto-pilot. And Musk is leading the way. Similarly he is leading the way in terms of rocket development and ultimately space exploration as NASA and the US Government have clearly failed to live up to their initial promise after the first set of Moon landings and space shuttle trips.
So let Musk keep his billions. He puts it to a lot better use than any Government ever could, and in the process advances mankind (which is certainly more than can be said for the current Biden administration).
There is a great video series on Musk at his spaceX site here.
https://www.youtube.com/watch?v=t705r8ICkRw
i think its very illustrative of the difference between private enterprise and government projects. When Musk talks about the cost of lift/weight to cost ratio, the ambition is to make space travel as cheap as possible, to make it accessible to as many as possible ( not necessarily everyone) was that even an ambition under NASA, they didn’t need to make it cheaper because they had effectively infinite money to accomplish their goals. That isnt to knock NASA’s historical achievements only to say, where are they now? they are effectively going to be a regulator for spaceX or Virgin or Bezo’s one.
“Sure Elon Musk is unfathomably wealthy. But he deserves every penny, and when it comes to electric vehicles he is light years ahead of all the major car manufacturers.”
His money is mostly money given to him by Government and all manner of weird devices like C)2 Credits. He loses money on each car but makes profit on them by the C02 credits….
I think him the least evil of the tech monsters though. Zukerberg, Google, Amazon, Dorsey, Gates, are all totally tied up in creating the global surveillance state which will enslave us all. They are the Dogs the Pigs (Global Elite) use to maintain their total power in Animal Farm…
“If she herself had had any picture of the future, it had been of a society of animals set free from hunger and the whip, all equal, each working according to his capacity, the strong protecting the weak […] Instead – she did not know why – they had come to a time when no one dared speak his mind, when fierce, growling dogs roamed everywhere, and when you had to watch your comrades torn to pieces after confessing to shocking crimes.”
There’s a load of “Debunking Elon Musk” -type videos on YouTube.
The rich like Bezos are only getting richer to such extremes is because of globalisation. Big companies can get exponentially bigger, and can get so big they can destroy any competition and dictate to governments. It’s the inevitable monopolisation that often occurs, just on a global scale. Crony capitalism, state subsidisation, lobbyists, backhanders, lack of competition. It always happens, whether it’s private or state run, because power corrupts
When you say ‘get richer’ you mean in terms of unrealised valuations. This is not really the same thing, someone like Musk is more of a paper tiger as the cashflow woes of Tesla demonstrate.
“someone like Musk is more of a paper tiger”
OK, that is today’s crazy post. He is one of the worlds most dangerious Tigers – he may be less evil than the other most blood-lusting and powerful Tigers, but he is one of them!
I’m all in on replacing all intra-country wealth transfer taxes with mark-to-market, algorithm-based wealth taxes and the end of central banks.
I look more nostalgically at the French Revolution every day.