Legislative Democrats have proposed another one of their goofy tax swaps in an effort to lessen the gaping $19 billion budget deficit. Oh, pardon me, did I say “goofy.” Well, what else would you call a proposal that increases state income tax by 1% and lowers sales tax, claiming it will lessen the tax burden on Californians yet increase revenues by $1.8 billion?
I’m unclear on how you can lower taxes yet increase revenue at the same time. Besides, it only raises $1.8 billion (assuming their numbers are accurate) and the deficit is $19 billion. It’s nowhere near enough.
At least this plan isn’t as wacky as their previous proposal to raid the state soda bottle fund for the next 20 years, and use the projected income to get Wall Street to float bonds partly financed by an oil severance tax, and then swapping state and local taxes. This was so bizarre and convoluted that I doubt anyone actually understood it, and it has died a merciful and well-deserved death. I wonder how many bong hits that one took to dream up?
Seriously though, there is an air of unreality emanating from Sacramento. Like if we put on a happy face or ignore the problem or make rosy predictions for the future that somehow the deficit will magically go away. It won’t, and in the meantime, among other things, California’s credit rating continues to drop. That means borrowing money becomes harder and more expensive to do.
Republicans in the meantime are building the stone wall to end all stone walls and refusing to budge an inch on taxes. “No new taxes, at all, ever” is their motto. “Grow the economy not reduce it with extra taxes” say their leaders in a YouTube interview, along with imposing bludgeon-like spending cuts. This is as equally unrealistic and fuzzy-minded as Democratic plans.
Growing the economy, while it certainly sounds like a wondrous thing to do and makes a great sound bite, is a process that will take years. But the budget needs to be passed now. And while it may be true that some people and businesses will leave California if taxes increase, they may also leave if a decimated budget means that important and needed services are no longer available or are severely cut back.
CSU campuses are accepting applications for next spring, but won’t know until a budget passes whether or not students will actually be able to attend. Imagine being a college student and trying to plan your life around that, especially since Schwarzenegger says he won’t sign a budget unless state employee pensions get rolled back. But until a budget passes, California will continue not to pay its vendors. How long can that continue until the vendors simply stop providing the services?
It gets worse. Two obscure ballot propositions on the November ballot, if approved, will repeal a $1 billion budget fix enacted earlier this year. Prop 22 and Prop 26 would retroactively block a fuel sales tax for excise tax swap. Prop 22 was funded mainly by California cities who don’t want the state raiding their money. Prop 26 requires a supermajority to pass new taxes. If either passes, years of lawsuits will no doubt follow, further confusing budget negotiations.
One big problem is there is no real pressure on legislators to pass a budget. They took the entire month of July off even though the state constitution mandates that a budget be passed by June 15, an arrogant and contemptuous move, as well as being uncaring (or is a better word “oblivious”?) to the needs of Californians.
For the good of the state, they need to agree on a budget immediately, because things will only get financially worse for California until they do.
