As we start out a new week, the 120 members of the California legislature are back at work, as is Governor Schwarzenegger. I think that it is important to start off this Monday morning, frankly, right where we left off before the weekend. This year’s budget debate started out on such a positive note. Well, as positive as a budget could be if you consider that without any changes, it would be over $15 BILLION in the red.
When I say starting out on a positive note, I mean that the Governor charged hard out of the gate with a very important, and very accurate message: we have an over-spending problem. The Governor was unequivocal — that he would not raise taxes and make California taxpayers shoulder the burden for over-spending in the Capitol. He then proposed a budget that would have shaved off 10% from what might otherwise have been introduced. From our perspective, given the spending increases, this is actually a modest proposal. Yet, the yells and screams from lefties in the Capitol could be heard by dairy cows in Yolo County.
Here at the FlashReport, we devoted some serious editorial space to praising our Republican Governor for, in the context of the state budget, standing by his pledge to oppose any tax increases (he hammered this point in his election battle with Democrat Phil Angelides over, and over, and over again…). We’re not done either. Governor – THANK YOU for framing this budget debate as being about overspending and the need to cut back some of the massive increases of the past years.
Last month, Elizabeth Hill, the state’s "activist" Legislative Analyst (pictured to the right), decided she was so unhappy with the Governor’s proposed budget (apparently) that she would introduce her own "Alternative Budget" into the mix. I will save for another day the inherent problems with an unelected "analyst" weighing into the public policy debate with her own proposals, when in reality she should be limited to providing factual information on the proposals introduced by the elected representatives of the people…
Hill’s version of what the legislature should do was comprehensive and she, among other things, takes issue with the Governor’s "across-the-board-cuts" technique to reducing spending. There may be some merit to her concerns — again, a topic for another day.
What I do want to talk about today is that the unelected Analyst has taken it upon herself to weigh into the big political issue of this year’s budget debate — will the state’s massive overspending problem be resolved by significant reductions in spending, significant increases in taxes, or some mix of the two? Hill has weighed in against California taxpayers, and has proposed well over $2.5 BILLION IN TAX INCREASES. I cannot think of any worse message to send the big spenders in the Capitol than hers, "Go ahead and overspending wantonly, because when the chickens come home to roost, and there is no money to cover the costs, we’ll just punish taxpayers."
The policy suggestions of the unelected Legislative Analyst would be of much less concern to me if it were not for a few key points. The first is that Ms. Hill has the nerve to call her tax hikes "closing tax loopholes" which is a rather brazen attempt to use some sort of kabuki magic to call a tax increase something else than what it is. The second was the eagerness of the left-leaning main-stream-media to give big play to Hill’s suggestions, painting them as rational, and continuing her verbiage "creativity" by also using the phrase "closing tax loopholes" instead of just calling them tax increases. Finally, last week, Governor Schwarzenegger, at a speaking engagement in Los Angeles, also embraced this misleading and inaccurate description of tax increases. He also indicated a willingness and openness to supporting some of Hill’s proposed tax increases. Very unfortunate.
So what exactly are the tax increases proposed by Elizabeth Hill? There are a bunch of them — and enacting them all, as I mentioned above, would grow the size of state government by billions of dollars (although probably not by as much as Hill claims since these kinds of tax increases would clearly have a negative impact on the state’s overall economy, and reduce tax-revenues elsewhere).
Here are some of them:
- Raise taxes on every family or individual in California with dependents by changing state law to reduce the dependent tax credit – $1.3 billion tax increase.
- Raise taxes on every Californian over the age of 65 by eliminating the state’s personal tax exemption credit for seniors – $125 million tax increase.
- Raise capitol gains taxes on small business (yeah, this makes a lot of sense, make it even MORE expensive to run a business in California) – $55 million tax increase.
- Raise taxes on all California businesses that carry net operating losses forward to a future year (same commentary — with the economy in a downturn, why on earth would we want to make it more expensive to operate a business?) – $330 million tax increase.
- Raise taxes on California businesses by reducing the current Research and Development tax credit (once again, let’s punish those who HIRE PEOPLE because of our state’s overspending) — $335 million tax increase.
Here’s another brilliant idea:
- Increase taxes on diesel fuel purchases. *Hmmm, let’s see… The costs of transporting goods by truck go up…so the goods IN the trucks go up in price… Who pays for this? Not the truck drivers!) — $73 million tax increase.
There are another half-dozen specific tax increase proposals made by Hill, that you can check out her entire package of proposed "revenue enhancements" here.
Look, if the Governor and California lawmakers want to have a serious discussion about flattening the tax system in this state, then have that discussion. But it shouldn’t be the unelected "activist" Legislative Analyst, using beguiling and misleading verbiage, driving a debate about increasing billions of dollars tax increases and growing the size of state government.
That said, Governor Schwarzenegger should be very clear that he opposes all tax increases to balance the state’s budget this year, which includes the over $2.5 billion in tax increases proposed by the Legislative Analyst.
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