Leadership instead of new taxes

One of the world’s largest and most vibrant economies has a
government that is lurching and wobbling as if it led a state
without resources, talent or Brain One.
One of the world’s largest and most vibrant economies has a government that is lurching and wobbling as if it led a state without resources, talent or Brain One.

• Blame it on the initiative process and allocated spending.

• Blame it on state constitutional restrictions.

•Blame it on locked-in government employee contracts.

• Blame it on the national economy.

California’s problems might be due in part to all those things, but it is mostly a case of clever leadership over conscientious leadership; no-bounds spending over financial common sense; and solutions that so far paper over the problem rather than boldly confront it.

It’s a sorry situation. If all the $8.3 billion in new taxes Gov. Davis proposed Friday in his fiscal 2003-04 budget are enacted, he would become among the largest tax increasers in state history, rivaling Gov. Pete Wilson and the $7 billion annual increase signed into law 12 years ago.

The tax increases and $20.6 billion in proposed budget cuts would go to erase the $35 billion budget deficit Gov. Davis projects over the next 18 months. The remaining gap would be covered by fund shifts, transfers and borrowing.

Gov. Davis calls his tax-increase proposals “realignment,” because the money would pay for health and welfare programs that would be shifted to local governments.

The biggest hit on the state would be the tax increases: Boosting the sales tax by one cent. That would increase the average California family’s sales taxes by about $200 a year. … Across the state, it could raise $4.6 billion over 18 months, assuming residents don’t resort more to tax-free catalog and Internet sales, or defer major purchases altogether.

Smokers would pay another $1.10 per pack in taxes, or $401.50 a year for a pack-a-day habit. It would raise another $1.2 billion in taxes over 18 months. The price paid by the consumer would approach $6 a pack, above the $5 that in Canada a decade ago precipitated a huge black market that eventually led to a reduction in the tax.

Taxes on the wealthy would be boosted.

Assuming more of the wealthy don’t slip away to Nevada, Texas, Florida and other states with no state income taxes, or find new ways to shelter their income, that would raise $2.6 billion over 18 months. This tax is supposed to be “temporary,” but we remember that a similar tax enacted in 1991 was allowed to expire only because Republicans briefly controlled the Legislature in 1995. …

As happened in the early 1990s after similar tax increases, the anticipated tax revenue may not come in, prompting further spending cuts. The first job, though, is to better clarify the depth of the shortfall amid reports that it is being exaggerated to sell the pitch for higher taxes. Then, for a change, legislators should start the hard work of putting the state on a strong and honest financial foundation.

– Orange County Register

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