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Why I’m Overthrowing the Government
I finished my indoctrination on how to overthrow the government last weekend. Specifically, I attended a grass roots meeting of activists in Berkeley, California planning to collect 450,000 signatures by April to put the “California Democracy Act of 2010” on the November ballot.
The measure seeks to amend California’s broken constitution by permitting passage of budget and tax measures with a simple majority. The current two thirds requirement, which California shares only with the miniature states of Rhode Island and Delaware, is widely blamed for the legislative impasse in Sacramento that has driven the state to financial ruin.
Overdependence on capital gains—up to 40% of revenues in good years—enabled the state to just barely balance the budget at stock and real estate market tops, but to death spiral into hemorrhaging deficits during the inevitable busts that followed. Furthermore, since proposition 13 capped real estate taxes at 1.25% in 1978, the state’s population has grown by 16 million to 38 million, placing a backbreaking strain on all services.
Our hulking, language mangling, steroid injecting governator, viewed by both parties as a complete failure in his seven years in office, blames it all on Washington. There is some merit to what Arnold claims. The Internal Revenue Service is basically a giant machine devilishly designed to suck money out of California and spend it everywhere else. The Golden State is far and away the largest revenue generator for the federal government, but only gets back 78 cents out of every dollar it forks over. The rest is blown in the Midwest, the South, and Alaska—huge net recipients of tax dollars—and usually the first and loudest to complain about free government handouts. The second biggest net payer into the system is, surprise, surprise, New York. This has been going on for decades.
Only six obstinate legislators from the farm belt and the Deep South (Orange County) are holding hostage the world’s sixth largest economy, right after France. During the frequent 24 hour debates over the budget, they show up with Costco sized bags of Cheetos, soggy baloney sandwiches, and six packs of Diet coke so they can camp out, and if necessary, sleep at their desks in order to cast a “no” vote at every opportunity.
Decades of relentless gerrymandering have made virtually every seat in the state safe, so elections offer no solutions. Daryl Steinberg, president of the California Senate, told me that voters of all political stripes are fed up to the gills. Once boasting the best public education system in the country, California now ranks 47th in spending/pupil and 49th in pupils/teacher. The University of California, the top public university in the world, and a veritable PhD and Nobel Prize factory, has endured two 20% back to back budget cuts. Students are rioting, and for good cause. Schools, police and fire departments, parks and aid agencies are closing throughout the state. My local high school had to cancel its sports and music programs to keep class sizes from rising above 40.
Antiquated infrastructure is falling apart, with the San Francisco Bay Bridge closed for five days in November, forcing the local economy to take a huge hit. The barbaric prison system, which has been ruled by a federal judge as inflicting “cruel and unusual punishment,” is letting 24,000 prisoners out early, since it can’t afford to house or feed them. The public outrage is so violent the initiative will almost certainly pass.
When it does, taxes are going to go up a lot. Target numero uno: property taxes and the top 5% of income earners. Expect a battle royal, as the top 1% of taxpayers already pay a marginal state tax rate of 10.3%, the second highest in the country after Vermont, generating 50% of state revenues. This will make our sunshine the world’s most expensive.
That will be great news for the Golden State’s beleaguered bond holders, who will love to see new sustainable sources of revenue. Take a look at the California municipal bond funds (VCV), (NCP), and the (NVX). Any hint that the Land of Fruits and Nuts is about to make a major dent in this year’s anticipated $21 billion budget deficit will cause the yields on its long dated tax free paper to shed its distressed premium very quickly, sending prices soaring.
If California were a stock, I’d be buying it now, but you can do the next best thing with bonds. If you want to join the revolution, or just learn more about the issue, go to www.CAMajorityRule.com
For more iconoclastic and out of consensus analysis, please visit my website at www.madhedgefundtrader.com
According to numbers A'nold quoted in his speech, 0.38% of CA taxpayers are paying 50% of the taxes, not the 1% as stated here.
Texas may not have state income tax but boy-howdy, they have outrageous property taxes in Dallas for sure. Also, everybody is looking to screw you out of every dime you might have. Don't try and get any work done on your house or have your lawn mowed or take pets to the vet or need any kind of service.
I am from Texas and was away for 25 years in Atlanta and went back for 3 years and ICK.
It must be those bushies ruined it while I was gone or something.
As the prince in "Amadeus" said to Mozart at a concert Wolfie performed:
"Too many notes. Take some of them out".
The population in Californica needs to be depleted by 10-15 million people. Only pain will accomplish what needs to be done, political, personal pain. i.e., no water, no jobs, no support from other states already dealing with their own problems.
Like a big bank: if it's too big to fail, it's too big. Period.
Too many notes.
Silent Weapons for a Quiet War, 'nuff said.
The money taken through the energy crisis,( enron), rolling blackouts,
the stalling and do nothing attitude of the state legislature, to get the billions stolen in the first place through bogus deregulation, the ousting of davis, funded in part by ken lay and then bringing arnold
in to pilot the sinking ship as tech moves offshore.
You just have to wonder what was said at those private energy talks with cheney, lay and others from the energy sector before 911.
Me thinks cali would be in better shape if we had the 7 billion back
An idea for a real cap on California spending:
Don't allow spending any money which hasn't already been collected the prevous year.
This removes any problems with projecting the future income of the state and easily allows a balanced budget. California could, of course, save up an emergency fund in case it needed to spend more in one year than it had collected the previous year but additional spending over amounts already collected would be impossible. No borrowing...
This has the side effect of removing the interest costs on "cash management" debt too.
Ignoring the transition problem, there is the problem of how you hold this around 100B you are collecting this year for next year's spending. As a fiduciary for the people of California this money must be secure. If any is lost, it's gone, and will directly cut next year's spending.
A simple plan is probably a good idea too -- this isn't long term money, so something like short term US treasury debt sounds financially secure. Except for inflation.
Why should California pay the inflation tax?
OK. Put it in gold.
That's three times the current holdings of GLD which has the #7 spot in the World Gold Council's World Gold Holdings. California would be #6 ahead of Switzerland (GLD would be pushed down to #8).
The only way to save the citizens of California from being taxed into oblivion is to preserve the current supermajority. This is the silliest idea ever to come down the pike. It's not the California constitution that is broken - It is the socialist legislature that is broken. Californians will take care of that in the 2010 elections.
You have to be kidding. The only thing that has saved California from becoming the State equivalent of Detroit is the 2/3 voting requirement and Prop 13. What people like you don't realize is that there is no discipline in CA on the spending side and any loosening of the 2/3 requirement and Prop 13 means a mass exidous of the accomplished from CA to other lower tax States. You are welcome to saty here and pay all the bills yourself after we all leave.
+1.
Ain't it scary that some people this stupid is managing hedge funds? I'll pull my money if my fund manager were like that.
Amusing that your movement doesn't recognize the absurd level of California spending, particularly on public employees, and thinks the problem is inability to raise taxes.
Since I don't live in California, I am all for the secession movement--good riddance.
Amusing that your movement doesn't recognize the absurd level of California spending, particularly on public employees, and thinks the problem is inability to raise taxes.
Since I don't live in California, I am all for the secession movement--good riddance.
Property bubble, .com bubble - California.
The notion that they overpay in taxes is illusory.
Inadequate taxation when you're already one of the highest in the nation is absurd.
Cali is a failed state. I recommend all freedom-loving Californians move to Texas and join the secessionist movement. We are going to leave this "Union" (aka fascist dictatorship) before we go down with the ship. In Texas, homes are 1/2 the cost in California and are twice as big. No income tax. Also, we have jobs. What are you waiting for?
It's Texas, that's what we're waiting for. It's one step up the foodchain from Arkansas but bigger.
Getting rid of Prop 13 would go along way toward helping California. I am not a big fan of getting rid of Prop 13 to increase revenue (i.e., pay for more Vallejo and City of Vernon mafiosos to collect six-figure pensions), but rather to increase equality and get rid of the structural distortions it creates. Specifically, by forcing the new to subsidize the old (i.e., pay their taxes), it creates a huge barrier to entry by business and higher-income individuals. It also distorts (i.e., artificially inflates) property values by limiting supply, further adding to the burden on new businesses (which have to pay their employees more to live here). It also discourages productive use of land because people aren't forced by realistic property taxes to make use of their land; they just sit on it.
For those who don't live here or refuse to recognize the extent of the problem, the disparity is obscene -- in any established, higher-end neighborhood (e.g., Pacific Palisades) there are swaths of owners who own $2 and $3 million houses and pay less than $2000 a year in property tax. Less than .1%! Where else are property taxes lower? Recent buyers of a comparably-priced house would pay $25K to $35K. Property tax on a comparably priced house in "low-tax" Texas would be $40K to $60K.
The disparity among businesses is in many cases worse, with new businesses having a property tax burden (either direct or through leases) many multiples higher than a comparable business that has been around for more years. Here is a link to a study from 2004. The problem is worse now. http://caltaxreform.org/wp-content/uploads/2007/01/Commercial%20property...
Let's get rid of Prop 13 and free California!
Texas has no state income tax. So any top taxpayer who moves here will experience an automatic 10% increase in income. This does not count a generally-lower all-around tax rate and no six-figure gummit retirement programs extorted by public employees unions. BTW, the hill country around Austin looks a lot like Santa Barbara and parts north, but with lakes.
While reading the comment I know the language does not imply actual overthrow of the Gov't. But I have asked a lawyer friend of mine and he has told me using that language is a Federal crime. I'm told you can advocate trials for treason of specific people, and appropriate punishment. But you can't call for overthrow of the Gov't of violence to any official.
Because if we could talk about it freely then we'd all realize about 50% of American's feel the same way and we might do something about it.
It is also my understanding that to mention you would never put someone in Jail who harmed a public offical may be viewed as inciting violence. Even if you believe that person would be a hero.
This was what a lawyer told me, I can not tell you for sure what the law says
They'll jack up property taxes and income taxes, and find out that they don't get any more tax revenue than before. The high incomes will leave the state, and those that stay will be in their own circle of recession.
However, they will expand (or not cut) spending in expectation of tax revenue increases that never arrive, so they will end up with a larger deficit (real not budgeted) than before.
Republicanism sure has raised its cute little head in this comment thread. Gotta love it - it brings us back to our Constitutional roots. Hopefully, statism will die and we citizens can regain our country, which should include all states (I'd rethink the secession idea from a military standpoint).
Figuratively speaking, if we all stand on our own two feet we would be better off. Having to carry those that won't makes the journey harder.
Ok... right raise Taxes on Real Estate values - that will help home valuations for sure...yep,,, fix it good!
What ever happened to Resource Allocation to highest and best use in the Free Market system... so the Wall St. colluding with Big Gov. screw this up - so, resources are miss- allocated, and now even "bigger gov [by share of Tax to GDP] is going to "fix it" to make sure all society under produces - problem is - WE HAD BEEN UNDER PRODUCING - hence the 15yr Trillion in Trade Deficits and Gov. Deficits - and Foreign borrowing as a need to support our deficit...
Translation - The US dropped a notch in the world standing - and unless we figure out how to better allocate limited resources into real productivity [not labor Arb]- we are screwed - raise taxes till we all work for the Gov. and Gov. owns all assets? Hmm - did USSR not fail for a similar reason.
Bottom line - Back in the day the entire Fed Gov. was 100% funded by import tax alone - thus, the FED could not grow faster then a trade deficit - by design. Then US wins after WW II - start the printing...hit a gold snag - enter Volker / Decouple - fight the USSR - win a cold war - the world has no bounds following the same model of Deficit Spending- become a single Soverign Super Power -put target on head - realize only credit expansion will keep Trade and Gov. Deficits sustained - enter Ponzi scheme - Banksters and Politics - take out all the stops - Glass Stegal no more - etc, etc - UNTIL - credit can expand no more and the Risk premium [aka interest rate] Big R enters the equation...BOOM
Reminder - India has Bollywood... China made LA's air "clearer" b/c Bejing's is riddled with SMOG [not environmental success] -
Call it degrees of separation - at the greatest scale - if you can take the risk away from the net bennefactor - you win politically and financially.
You sorry folk are now in a populous mode - only to enable the Gov to "save the day" once again - from Swine Flue to Global Warming to terrorism to you name it - it never ends.
The two things that help me sleep - Americans HAVE GUNS and we still have the internet - and sites like this one are doing the GODs work that GOLDMAN does not!!
I don't think you understand the problem, or maybe I misunderstood your post.
If you don't need a supermajority, then the legislature can pass whatever they want, which is more pork and unnecessary spending. The answer is the line item veto. Didn't you see arnold's veto letter to tom amiano with "FUCK YOU" spelled out in the first letter of each line in a spending bill, when the state is obviously very near default?
If the state's credit rating goes down further (to junk), then default on the bonds is a very real possibility. Do you think the federal govt will have money to bail them out. Think again buddy.
Wow. Hard to imagine how an argument could more backwards. So, you're going to balance the budget on the backs of (by your own admission) the second-highest taxed group in the country?
That's "sustainable"?
And these people will stay in California...why?
Give your degree back and start over. This entire argument is hopeless.
"grass roots meeting of activists in Berkeley"? Did anyone there listen to anyone else at the meeting? Or was it as usual just a cacophony of noise? Listening to someone who wears Ho Chi Minh sandals, Andean fair trade cotton, with a hemp "protect Mother nature" shoulder bag and who has not owned a razor since junior high, attempting to sound concerned, while sipping their fair trade Columbian latte, is not my idea of a serious threat to the powers that be.
Yes. I can here the after meeting discussion, "Oh wow man! That's some good s..."
If you want to increase property taxes in CA, then by all means go FUCK yourself. I mean it from the bottom of my heart. Do something about the illegal aliens in the state that is putting undue stress on our services, jackass.
Right. The two parties have sold out the border states for decades. Republicans to benefit their corporate patrons, Democrats for the votes. Two parties, one master.
Fuck the federal government and fuck the Union.
Getting rid of Prop 13 would go along way toward helping California. I am not a big fan of getting rid of Prop 13 to increase revenue (i.e., pay for more Vallejo and City of Vernon mafiosos to collect six-figure pensions), but rather to increase equality and get rid of the structural distortions it creates. Specifically, by forcing the new to subsidize the old (i.e., pay their taxes), it creates a huge barrier to entry by business and higher-income individuals. It also distorts (i.e., artificially inflates) property values by limiting supply, further adding to the burden on new businesses (which have to pay their employees more to live here). It also discourages productive use of land because people aren't forced by realistic property taxes to make use of their land; they just sit on it.
For those who don't live here or refuse to recognize the extent of the problem, the disparity is obscene -- in any established, higher-end neighborhood (e.g., Pacific Palisades) there are swaths of owners who own $2 and $3 million houses and pay less than $2000 a year in property tax. Less than .1%! Where else are property taxes lower? Recent buyers of a comparably-priced house would pay $25K to $30K. Property tax on a comparably priced house in "low-tax" Texas would be $40K to $60K.
The disparity among businesses is in many cases worse, with new businesses having a property tax burden (either direct or through leases) many multiples higher than a comparable business that has been around for more years.
Let's get rid of Prop 13 and free California!
These Cali-Boys must be on drugs. Hey, speaking of that, you could solve the budget problem by legalizing your biggest crop -pot. Of course, if it is legalized, the irrigation system will have to be checked to make sure there isn't an endangered pollywog. Any state that votes in Paloser, Boxer and Arny deserves to go down in smoke. Now stay out of our state-it's too cold up here for most of you pussy's anyways.
"Any state that votes in Paloser, Boxer and Arny deserves to go down in smoke . . ."
Or up in smoke, a la Cheech and Chong. Speaking of which, it's time for a smoke break.
Cheers!
I see a lot of "me" in the Free Cali responses. From complaints about how much the Union is taking vs what they get back, to how other parts of the Union are living off the hard work of the FreeCali's.
That's the same attitude that has us to this point in our nation. "Me" rather than "US"
Sure Cali could succeed from the union, drill like crazy for oil offshore, pan for gold in the hills and build fences to get rid of all those immigrants who don't like things "Me" way.
But now Cali would have to do run themselves like a country, print their own money, police thier own industries, etc, etc, etc. How much would a Cali dollar be worth? It sounds good, but the devil is in the details and the "Me" crowd has on rose-colored glasses as to what the future would be like.
This is no Hollywood movie and there is no script for what is being suggested. I believe it was Thomas Paine who had the perfect comment regarding this. "If we do not hang together, we shall surely hang separately"
I've a size 18 neck, so fit me for a tie. Better to die free after one day than live a lifetime connected to Texas.
Seriously, this is simply a states' rights issue. The Confederacy was right: Long live the South (as a seperate country, please).
What? Make it EASIER for the state mafia to raise taxes? Sounds like a Trojan horse idea those Berkely leftists would come up with.
Here are some CA initiatives I would support.
CA declares state to be an income tax free state. All state and federal income tax withholding to cease immediately.
Establish a state militia to police and prevent Federal prosecutions.
Repudiate all state debt.
CA issues it's own debt free money and removes the ability for the state to borrow money from any source. Provide small no interest loans to individuals and small businesses.
All tax/fee/pension proposals to be decided by referendum.
Privatize education.
Got my vote.
I don't think Leon is going to be meeting with you anymore Mr. madhedgefundtrader. -Oink.
Let me see if I understand this correctly...you're going to overthrow the government by making it easier for them to collect more taxes? This is a joke. Right?
Cal:
You say "Since Prop 13 capped real estate taxes at 1.25% in 1978, the state’s population has grown by 16 million to 38 million, placing a backbreaking strain on all services.
I say reduce services.
You say "The rest is blown in the Midwest, the South, and Alaska"
We agree. Let's eliminate the FIT. Even though I am in a state that benefits (Texas) we do so primarily because of military spending. In other words, we're busy keeping your effeminate California ass safe. I'd gladly give you the money back and send you the military. It's not the gravy train you seem to think it is.
Sorry, pal. California made it's own mess. You can blame Ohio if you want, but the real culprit is the guy staring back when you look in the mirror each morning. So self-righteous. So smug. So full of shit. That's California. Adios.
If unions vote yes... I vote no!!!
The states on what Cali gets back from the Feds forgets the insane amount they get from their several national disasters they have per year. Have you forgotten the 100's of Billions to help when you have your earthquakes and fires?
The rest of the country bails you out then...and its no lopsided equation.
Live within your means. Unions have destroyed your state.
C'mon! We have the odd earthquake, big fing deal. How about hurrican alley down south? How about we all go our own seperate ways and deal with things on our own? We don't want to share a country code with you because we don't like a lot of you. Texas, South Carolina, Alaska, I'm looking at you.
And as far as unions destroying our state, maybe, but so what, it's OUR state.
I think we should spend ten times beyond our means, something really special (Boob jobs for every girl, hair transplants for the bald guys and Harley's for the rest) and force the Feds to either pay it all off or strategically default and get the hell out of the USA.
But please, just leave us alone.
You calling out Texas? What a joke. Texas works. California does deals. We will never be like you. Go our separate ways? I'm all for it.
I think you have California confused with New York, the capitalist asshole of the planet. What's the most recent innovative technology developed in Texas, a safer lube for cow-fucking? Like it or not, Californians dream up some wild shit, and then get it to work.
+1
being a results-oriented individual, i see that one is solvent, the other is california...
both have "hot chicks"
both are illegal immigrant hell
maybe we should have amnesty for illegal hot chick immigrants...
somewhere in MHFT's article, there was mention of millions in population growth 'stressing the system'. If those millions are paying their share, shouldn't that balance out in the tax base? according to the dems, more citizens implies more tax-base and votes... that one got me scratching my head.
CA can secede if they like, wouldn't care either way, but it is still a failed state, and 2000% entitlement growth with 24% state GDP growth in the same period looks like a rational explanation for the mess. don't blame arnold - he's just a symptom.
does anyone have a state-by-state fed dollars flow graph? i recall west virginia gets "bank" in road $$, and doesn't contribute a whole bunch... who are the PIIGS of america. let's polarize some more...
having some state (TX/CA/??) seriously start the process of breaking away from the union to make the point could be a great thing for the country at large. might temper the Fed's arrogance a bit. probably destroy the particular state though.
didn't rhode-island start the process a few years back over moped regulations or something? seriously. i can't make this stuff up...
" . . . maybe we should have amnesty for illegal hot chick immigrants..."
+1
" . . . having some state (TX/CA/??) seriously start the process of breaking away from the union to make the point could be a great thing for the country at large. might temper the Fed's arrogance a bit."
+2
You're all for going our seperate ways? That means Texans and Californians agree on something. And they said it would never happen.
BTW, Go BAMA!
Katrina gave New Orleans a chance to kill the teachers union that did not go to waste! Now finally children can get an education instead of an indoctrination.
Count me as another one leaving the state this year. The taxes are way too high and I don't see many opportunities left here. It's sad because I've lived here for the past 25 years of my life.
And the worst advice of all: buy California muni bonds. Giving money to entities that are broke and expect them to pay it back with interest makes no sense at all. I doubt they're going to be able to repay, especially at higher interest rates.
Don't let the door hit your ass on the way out.
Buy bonds?? So I get paid back with cheaper inflated dollars??? With all due respect sir, this is zero hedge not huffpo.
Maybe Mexico can pass amnesty for Californians.
What for? All the hot Cali chicks are in Vegas doing girl-on-girl around Tiger's Wood.
Pardon my dismay, and I apologize if I am misunderstanding something but...
Eliminate the supermajority vote requirement on budgets? Are you Nucking Futs?!
You would seek to make it easier for Sacremento to spend more money to buy votes by; overpaying entrenched unions,that refuse to cut back (as everyone else is doing) until they are in fact forced to by state default, supporting entitlment programs for those who are not paying into the system, flatly over-regulating to the point business leaves the state. ?
Sending money to any government is always welfare for the looting class. It sounds however, like you have a solidly immoral investment thesis to promote systematic taxpayer rape without KY. If this is the case, I would advise people to NEVER invest a dime of their money with you.
Governments that govern best are those that govern least. Your energies would be far better spent collecting signatures on a 10th amendment resolution with teeth, which by extension would require another law to relax our ridiculous gun laws...just in case.