Elon Musk is twittering billions away.
Politicians — including those who inhabit that disconnected piece of real estate beneath the Golden Dome of the State Capitol — vilify him for his management style and reckless financial decision making.
In reality, Musk is a rank amateur compared to Sacramento politicians when it comes creating financial havoc.
You know the ones.
When tech moguls like Musk are riding high and selling stock that they’ve pumped up into the stratosphere through their business initiatives along with a liberal dose of hype, the self-proclaimed oracles in Sacramento play Santa Claus with the tsunami of capital gain taxes flooding into the state treasury.
And when they do a crash and burn number like Musk seems to be doing with Twitter, they double down on their scorn.
Who knows what they might do. Perhaps they could call for an investigation into how he treated his workers at Twitter. Maybe they will propose some ominous regulations or do what they do best — find a way to regulate and tax Musk into submission.
Sacramento’s holier than thou act — whether it is going after oil companies for high prices at the gas pump or acting indignant about the high cost of something that they blame on corporate greed of mismanagement — is a ruse.
It’s because the biggest sinner for injuring Californians in the pocketbook with reckless “business” decisions is none other than the State Legislature.
The “business” that they are running with little regard to reality is the state government.
In all fairness, California does a lot of things right.
But the one thing they don’t do right is the way they fund programs based on a taxing system that is neither stable nor reliable.
It is not a deep dark secret that 40 percent of California’s state income taxes are paid by 0.5 percent of its taxpayers.
And given we have an extremely progressive income tax, when capital gains come into play, Sacramento is flooded with an abundance of excessive taxes.
It happens primarily when that top 0.5 percent of taxpayers convert stock they own into cash or sells an asset they have built up for a significant profit.
It is why there was a $97 billion state budget this year and a $76 billion surplus in the previous fiscal year.
In October, the state sent about $10 billion in direct payment to taxpayers in the guise of relief from high gas prices.
You might ask how they arrived at the $10 billion figure.
It’s because The Gann Limit that was inserted into the state constitution requires that excess revenue in any given year above a certain amount must be returned to the taxpayers in some form or another.
Proposition 4 — adopted by voters in 1979 — established a baseline for state government spending at 1978-79 levels for local and state government. That bottom-line allowed for annual adjustments due to growth and inflation.
Cities like Turaren’t anywhere near their Gann Limit. That’s hasn’t been the case for the state.
It has happened twice: First in 1987 and this year. The state’s $97 billion excess in last fiscal year was bumped up by the infusion of federal COVID relief funds.
This is important to understand.
It’s because the $10 billion that is being distributed to taxpayers is being dismissed by critics now that there is a state budget deficit on the near horizon as being the equivalent of pre-election bribes to taxpayers.
And if not that, at least an attempt to silence the rage over high gas prices.
Returning the $10 billion wasn’t reckless. It was mandated.
The real issue is what was done with the $87 billion the state was legally allowed to keep.
It was used to expand government.
A good share of it was poured into existing programs but a lot of it went to new initiatives such as healthcare for non-residents.
This not debating whether such a policy is good or bad or even makes fiscal sense in the long run.
The point is the legislature has added to the permanent outreached hands of bureaucracy and special interests groups to fund programs that get people to rely on Sacramento for a variety of things that they didn’t before.
It is grossly irresponsible to do so. Mainly because this by far isn’t the first rodeo. It has happened time and time again.
The state is rolling in the dough and living high on the hog. Then the next thing you know they are bust.
And most of their spending sprees are tied into recurring financing commitments.
So, when revenue drops significantly — which it is expected to do to the point there is a $25 billion budget deficit in the fiscal year starting July 1, 2022 — there will be more programs clamoring for less money.
That $25 billion offered up by the California Legislative Analyst’s Office — the only bastion of fiscal honesty in Sacramento — is the starting point.
The analyst’s office forecast doesn’t take into account a recession where revenues “could be $30 billion to $50 billion below our revenue outlook in the budget window.”
Freely translated, California could be staring down the barrel of a $75 billion budget deficit next fiscal year.
One might think this won’t impact them. After all, they’ll just go after the 0.5 percent of the taxpayers that pay 40 percent of the taxes.
The state has a nasty habit of not paring back bureaucracies and not laying off workers in downturns.
They go after taxes that were put in place to fund local government. They’ve done it with sales tax. They’ve done it by disbanding redevelopment agencies. And they’ve done it by delaying payments to schools.
Meanwhile, teachers are laid off, cities have to cut back on staffing for sewer, water, street maintenance, and public safety while the state workforce stays whole.
Musk, for all the mess he’s making of Twitter’s financial future to the point he even admits just after less than month of buying it that the social media juggernaut may have to file for bankruptcy, is not a problem.
Regardless of how wantonly reckless his actions might seem, it is Musk’s $44 billion that is being wasted away, not $44 billion collected for the benefit of all Californians.
Come to think of it, Musk blowing a $44 billion investment is akin to the flight effort of the Wright brothers. It would be monumental but in the grand scheme of things it wasn’t that big.
The moon shoot honors for blowing through money belongs to the California Legislature and its spending policies that are on track to not just blow through $97 billion his year but could expand it into a combined $172 billion freefall by this time next year.