Wayne WinegardenEditor’s note: This has been excerpted with permission from the Pacific Research Institute. To read the entire report, click here.
With the introduction of its first set of reparations bills, the California Legislature is officially considering the recommendations of the California Reparations Report from the state Reparations Task Force. Given these introductions, it is imperative to understand the financial implications. Some basic arithmetic demonstrates that the idea of reparations is fiscally unrealistic.
According to the U.S. Census, there are 2.5 million “black or African Americans” currently living in California. CalMatters estimates that 80% of the current black or African American residents would be eligible for reparations. Further, based on the California Reparations Report, CalMatters estimates that reparations should pay $1,381,198 to each eligible person, which does not even include estimates for the unjust property taking issues that the Commission could not estimate due to data constraints. Paying 2 million people $1.4 million each creates a $2.8 trillion reparations bill.
This dollar figure is approximately 72% of the state’s entire economy, so presumably the Legislature would not consider paying this sum in one year. Assuming the state takes 30 years to pay out the reparations, and ignoring inflation and the time value of money, the annual state cost would be $93.3 billion. However, the value of $93.3 billion paid over 30 years is less than the value of 2 million people getting $1.4 million today. To ensure that the value of reparations over 30 years equals the value of receiving $1.4 million today, the annual cost would be $182 billion.
To put these excessive sums in perspective, Gov. Gavin Newsom’s total recommended state expenditures for the 2024-25 budget are $291.5 billion. Reparations would either expand total spending by between 32% and 62.5% (an unprecedented expansion of state government) or require a radical reduction in all other expenditures.
As a radical reduction in the state budget is unlikely, the Legislature’s more likely response would be to raise taxes to fund most of the reparations. However, the necessary tax hikes would need to be more extreme than any increase in state history.
Since no specific proposal to fund reparations has been suggested, we leverage the Pacific Research Institute’s Tax and Budget Model to analyze the impacts from a broad-based tax increase assuming the policy is implemented in 2025.
To continue reading, click here.
Using these vague “policy violations,” Google is now threatening to demonetize us. It’s part of Big Tech’s effort to silence conservative voices.
In my opinion, California has been bankrupt for years.
The people (at least the majority of people) voting in Progressives and their ideas and corruption is what has bankrupted California.
I’m sad to see it. I recall in the 1950’s & 60’s California (and all the states near the Pacific) were regarded as beacons and envied as go-getting states.
Unfortunately, the politicians in California lost their direction-and they guided the populace to infamy and bankruptcy.
California will go bankrupt and then run to DC for a bailout. DC Democrats will then save their Blue State. NYC got a bankruptcy bail out in the 1980s after years of mismanagement. It’s the same trick that Blue States pulled with the COVID money. They diverted it to under funded pension plans for state and city workers instead of using it to address COVID. If Democrats win in 2024, this country is finished.
Oh puuuuhleeeeze, California went bankrupt many decades ago, their pension debt alone is over $1 TRILLION and what little tax base they have remaining to get out of that hole is voting with its feet as rapidly as possible.