The Coming Blue State Collapse

Here’s a quick and dirty guess: Upper-middle-class families in blue states–those President Obama calls “the rich”–will soon be paying 20% more a year in state and federal taxes. If you pay $100,000 off
of a $300,000 income now, look for $120,000 in a couple of years.

Federal income taxes are going up, and deductions are going down. That much we know. What we don’t know yet–but I would bet money on it–is if the 7.65% Social Security and Medicare tax ceiling will be
lifted from $102,000 to $150,000 or so.

Taxes are headed up at the state and local level too. Residents in blue states like California and New York will be socked hardest.

Take California. Its top income tax rate is the nation’s highest at 9.3%. More appalling, it kicks in at only $47,056 a year. Make too much gold in the Golden State–a million a year–and you are pinched by a 1% surcharge. California also has a 7.25% sales tax, but that’s just a base.

Capital gains get no preference. They are taxed like ordinary income.

For all that, California spends more than it takes. The state is on the verge of bankruptcy and just passed a budget with $12 billion of new taxes.

The trend of higher taxes has not escaped California taxpayers. For each of the last five years, California has led the nation in the outflow of its residents to other states. Since 2004, California has lost about a million and a half people from taxpaying households. At the same time, the state has taken in two million people, mostly non- or minimal taxpayers who are newborns or immigrants, legal and illegal.

I focus on California because I live there. The same trend is at play in other high-tax, high-cost blue states such as Massachusetts, New York and New Jersey....