Lots of data lately about the taker/producer ratios in the U.S. Nationally, there are 1.2 people working and paying taxes (or not) in the private sector for every welfare recipient and/or government employee. But some states, there are more FSA/government employees than actual workers in the private sector. Not surprisingly, these are considered “death spiral” states, because they are functionally, if not literally, insolvent. When takers extract more money than people pay in, the state is bankrupt.
I happen to live in one of these states. Terrifying to say the least. All this talk about “getting out of dodge”. If property taxes, and state taxes in general, are so high, people won’t/can’t buy your house or afford to relocate. No lifeboats for us people damned to living in a death spiral state.
The 11 “Death Spiral” States
Submitted by Tyler Durden on 12/04/2012
Eleven states made Forbes’ list of danger spots for investors including California, New York, Illinois, and Ohio. They warned (and with the cliff it is even more critical), if you have muni bonds in these states – clean up your portfolio; if your career takes you there – rent, don’t buy! Two factors determine their list of ‘fiscal hellholes’. The first is whether there are more takers (someone who draws money from the government) than makers (the gainfully employed). The second is a state credit-worthiness score (via Conning) based on large debts, uncompetitive business climates, weak home prices, and bad trends in employment. Conning rates North Dakota the safest state to lend money to, Connecticut the most hazardous. A state qualifies for the Forbes’ death spiral list if its taker/maker ratio exceeds 1.0 and it resides in the bottom half of Conning’s ranking. See below for the 11 states to avoid…no matter what Bob Toll, Larry Yun, Bob Pisani, or Alexandra Lebenthal tells you..
Number 11 – Ohio Taker ratio: 1.00
The battleground state has a fiscal standoff between takers (people collecting welfare, a government salary or a government pension) and makers (private sector employees).
Number 10 – Hawaii Taker ratio: 1.02
Dark clouds over Waikiki Beach: Hawaii has slightly more takers than makers.
Number 9 – Illinois Taker ratio: 1.03
Dubious ex-gov Rod Blagojevich personifies what’s wrong with this state: Too many goodies promised to insiders. Unfunded pensions contribute to the balance of 103 takers to every 100 makers.
Number 8 – Kentucky Taker ratio:1.05
Twilight in Lexington. People drawing from government slightly outnumber people chipping in with private-sector jobs.
Number 7 – South Carolina Taker ratio:1.06
Riptides on Folly Beach.
Number 6 – New York Taker ratio: 1.07
Blackout in the Flatiron district after the hurricane. Manhattan still has a vibrant financial sector. Manufacturing there is extinguished. Causes: taxes, unions, regulations and cheap apparel workers abroad.
Number 5 – Maine Taker ratio: 1.07
Casco Bay, Portland. This is a state with a beautiful coastline and a ratio of 107 drawers from the public fisc to every 100 contributors.
Number 4 – Alabama Taker ratio: 1.10
Second fattest state in the union have more takers than contributors.
Number 3 – California Taker ratio: 1.39
California is generous to a fault, at least to state employees and the needy. Union lifeguards make $125,000 per year. To private sector employees, who are outnumbered, it is not so hospitable.
Number 2 – Mississippi Taker ratio: 1.49
The fattest state in the union ranks second to worst on the list of states burdened by a high ratio of takers (welfare recipients and state employees) to makers (private sector workers).
And The Worst State to live in or lend to is…
Number 1 – New Mexico Taker ratio: 1.53
Wildfire near the Los Alamos Laboratory in June 2011. In our taker/maker ratio, federal employees are excluded from the taker count since their cost is not borne locally. That doesn’t save this state from having the worst ratio in the nation.
As Forbes advises:
To lend money to California, Illinois or the other nine states perched on the precipice requires a leap of faith. So does buying a house in those locales. Don’t count on a property tax limit to protect your home’s value. If other taxes are high enough, there won’t be any buyers.