California Budget Deficit As Result of High Foreclosures

With home prices continuing to free fall, most Californians are feeling less wealthy and are spending a lot less on discretionary items, if at all. To make matters worse, job losses from both the private and government sectors are accelerating which means less income tax for the state. 72% of California's total revenue is from personal income and sales tax. So when a substantial amount of people are paying little or no taxes, it's only logical to see why California is experiencing a huge budget deficit. My guess is that as long as the housing bust continues for the next several years, the budget deficit will only get worse. Expect more government job cuts to come and salary reductions (to minimum wage) would not be a viable option.

Take a look at the foreclosure map and you can see that California is by far the worse area in the nation hit by foreclosure activity. Tens of thousands of households are in a dire situation struggling to make ends meet including their bloated mortgages. So what happens now? No savings, no job, no home, bankrupt. Food bank anyone?

The reality is that too many greedy people bought homes they couldn't afford which ultimately have driven up the foreclosure rate to record levels. And now we find ourselves in a huge budget deficit as a result of the rampant greed. Guess who pays for this mess and bail out California? The taxpayers. Expect higher income and sales tax rates in the near future.

Related Posts:
Foreclosure Interactive Heat Map
Home Foreclosures: Buyers Walk Away From Mortgage (Video)
Housing Online Petitions: Don't Bailout the Greedy Lenders and Homeowners (Video)

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Courtesy of Seeking Alpha