
Originally Posted by
Melonie
... as is Schwarzenegger in CA ! The only reason that NY hasn't gone the same route has been windfall profits from Wall St. Brokers and Investment Bankers, which are likely to be vastly reduced this year compared to the previous few years.
Ultimately, once the situation is established where 'middle class' taxpaying state residents are given a strong incentive to make a hasty retreat across the state line (many taking their businesses with them !) due to the differential in state / local taxes, and where 'poor' / illegals are given a strong incentive to move into the state due to generous social welfare benefits and/or lax prosecution of illegal alien status, a vicious circle is formed. And as I said in the previous post, this becomes irreversible once 51% of registered voters consist of 'poor' people collecting benefits + gov't officials and civil service employees + the 'very rich' ... all of which have a vested interest in 'big gov't'.
Ultimately, the balance point is eventually exceeded where the current amount of tax money expenditures needed to sustain those generous benefits and pay those civil service salaries exceeds the ability of the remaining 'middle class' taxpayers to provide sufficient tax revenue to cover it. At this point state gov'ts usually try one of two options. They either try to bond for the additional money to spend - which transfers that tax liability to future 'middle class' state taxpayers (and actually increases the future tax burden due to bond interest), or they try to get the federal gov't to transfer federal tax money collected from taxpayers in other states so that this particular state can bear less of the burden (or expressed a different way, so that taxpayers in other states can help subsidize the social welfare benefit recipients in this particular state).
If all of these measures fail (as happened to New York some 30 years ago), then the state winds up going bankrupt. At that point, and ONLY at that point, will state politicians face the music of discussing actual CUTS in social welfare spending, of discussing CUTS in civil service employment levels, of discussing CUTS in state / local tax rates to re-attract businesses and 'middle class' taxpayers, of discussing the investigation / prosecution / deportation of illegal aliens etc.
And through all of this, the 'very rich' continue to benefit. Higher state / local income taxes mean very little since they can park some of their capital offshore and collect the dividends / interest without having to worry about income tax rates in NJ. The more desparate NJ's credit rating becomes, the higher the rate of interest the 'very rich' will earn on their tax exempt NJ municipal bonds. As more and more 'middle class' homes and apartment bldg's are vacated by exiting 'middle class' taxpayers, the 'very rich' can snap up the good ones at bargain prices and increase their state gov't guaranteed rental income from low income tenants enrolled in subsidized rent programs.
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