This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

California Municipal Bond ETFs Not Worth Risk

NEW YORK (ETF Expert) -- How does the state of California intend to combat its exorbitant debts? Left-leaning leaders have proposed higher income taxes on the "rich" as well as increasing sales taxes.

Unfortunately, California already sits near the top of the country's taxation ladder. At present, top marginal bracket payers are shelling out nearly 10% -- close to three times the national average.

State corporate tax rates are approximately twice the national average at 8.84%. In fact, wherever one looks -- property, gasoline, sales -- the tax rates may be higher than anywhere else in the nation.

So why would anyone with money stick around California to experience additional fleecing? It doesn't appear that they are.

Arthur Laffer, widely recognized for his work on the Laffer Curve, recently pointed out that California witnessed a net loss of nearly 900,000 tax filers between 1992 and 2008. Even scarier, it isn't known how many productive tax filers left the state during the economic meltdown and tepid recovery period circa 2008-2011.

What is known is that more working adults have left California than have entered the cash-strapped state, reducing the size of the tax base. Additionally, those who exited are/were 14% wealthier (on average) than those who came in.

Simply put, the California government is not able to tax as many people let alone tax as many wealthy people. The better earners and entrepreneurs -- many of whom indeed have a choice with respect to residency -- are pursuing tax-friendlier environs.

You don't have to take my word for it. The statistics already speak for themselves. Many are planning to relocate to Nevada, Arizona or Utah; others already have; I am mapping out a long-term strategy for limiting my exposure to California taxation.

Granted, some "rich" people will not abandon their roots. Those folks may figure that their problems can be solved through investing in California municipal bond funds. Indeed, California munis have had a remarkable run as of late.

Following are three exchange-traded funds that track California municipal bonds and their percentage gains over the past year.

Stock quotes in this article: CXA, PWZ, CMF, PZA 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,501.65 0.00 0.00%
S&P 500 1,878.61 +3.22 0.17%
NASDAQ 4,148.3380 +21.3710 0.52%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs