I'm being glib in talking about the collapse of California as inevitable: I certainly don't know that those states won't be able to tax their way out of the problem. States are somewhat limited in their taxation abilities compared to European countries though, in that they have no ability to control the flow of labor/capital across their borders. That being said, I'd point out that Tennessee doesn't have a San Francisco/LA or a Chicago or a New York. A lot of its economic competitiveness is built on being a low-tax environment.