UPDATE:  The Great California Exodus

This is very bad.

This is not an exaggeration. Californian’s total level of debt, on an off the books, is pushing a fifth of the total annual economic output of the state, which is about $2 trillion.

Some of the usual suspects are responsible for this: overspending and undertaxing during boom times, colossal pension liabilities, taking on too much debt. But the report zeroed in on an important area that I’ve written about before: a California tax system that relies far too much on the incomes of the wealthy, and in particular on income derived from capital gains, or the sale of stocks, bonds, and other assets (see the chart above, which I grabbed from the report).

This is from the report:

As for the tax structure, more work needs to be done to match the tax base with the California economy. Governor Brown’s 2012-13 budget includes an estimated net $5.6 billion benefit to the general fund resulting from additional new temporary taxes that he believes will plug a gap over the next seven years. The pitfall in this approach is that this measure is temporary, like solutions enacted in the last decade that were used to plug budget gaps. Since most of the temporary taxes fall on higher income individuals it is likely to increase the volatility of the income tax….

California is actually $335 billion in debt.