RSS Feed MenuAs the national economy declines, President Obama seeks to stimulate the economy with a plan featuring huge federal spending on programs and projects, many of which reward his contributors and ideological supporters. The stimulus package has too much pork, too little stimulus, and too much politics.
But at least Obama knows not to institute counter-productive tax increases. (Well, except for the most successful income earning Americans, the wealthy, who pay the most in taxes and deserve appreciation, not condemnation).
Sure, some of the federal tax cuts are for those not working, and so are actually welfare checks, not likely to result in much job creation or revenue to the Government. Obama is therefore cynical to label handouts to non-workers as tax cuts. But at least the Obama team suggests it understands that tax hikes are bad public policy during a recession.
Here in California, the economic and state budget crises are also coming to a head, but California’s Democrats have been pushing hard for a range of tax increases.
As predicted, warned, and feared, the Budget plan negotiated by Governor Schwarzenegger and leaders in the State Senate and Assembly, under intense negotiations all weekend, after months of contentious debate, calls for some $14 -$15 billion in higher taxes.
This would be one of the largest state tax increases in American history at a time when California is suffering from high unemployment and virtually the highest income taxes, highest state sales taxes, and highest gas taxes in the nation.
The car tax (the famous vehicle license fees that helped to end the political career of previous Governor Gray Davis) would be nearly doubled, a shock to working Californians who thought the 2003 recall had resolved that issue in favor of the taxpayer.
As California Insurance Commissioner Steve Poizner (one the 2010 GOP candidates for Governor), points out:
“With car sales plummeting, dealerships closing, and unemployment rising, it is foolhardy in the extreme to think that adding $450 in new sales taxes to the price of a car, in additional to reinstating the onerous car tax, is going to be a net economic benefit to our California economy. It won’t. Instead, it will make a bad situation worse and prolong the economic pain for California families”.
Republicans have been pushing for a state spending cap, dependent on voter approval, but it is tied to extending these outrageous tax hikes by three more years. The politicians have once again cynically stacked the deck so that to avoid tax hikes, one has to vote against even a modest spending limit.
Poizner continues:
“With the retail sector among the hardest hit, it is equally absurd to suggest that raising sales taxes will help restore consumer confidence and help people keep their jobs. It won’t. Instead, it will accelerate lay-offs and store closures, making our economy worse, not better.”
With the mortgage crisis, a stagnant service economy and ailing manufacturing sector, it is foolish to think raising taxes on personal incomes or on employers will do anything other than deepen the recession and prolong the recovery. It won’t.
It is simply wrong to try and balance the budget by taxing people’s misery.
And a legislature that, for years, has spent money it did not have in utter disregard of the facts, and without proposing one dime in actual year-to-year cuts, shakes people’s confidence in our system. The people have every right to demand fiscal accountability first”.
At the other end of the political spectrum, Democrats like Assembly Speaker Karen Bass are blaming Republicans for standing on principle and opposing huge and varied tax increases. She has lobbed rhetorical bombs at “right-wing” talk show hosts, GOP activists, and those seeking to discipline their party elected officials with talk of public censure at the California Republican Party convention next weekend, or with primary fights in 2010, if they vote for tax increases.
Do party regulars, (donors, activists, opinion leaders, worker-bees) have no role other than to support elected officials? Is it truly a one way street? Give the party elected officials donations, votes, and shoe-leather district campaign support, but not your voice on matters large and small?
Speaker Bass may not want politicians to hear from their constituents, but is that not the arrogance of power that citizens repeatedly reject?
There may be some growing agreement on one point. The 2/3rds required legislative vote for any tax increases, and for the budget, has resulted in at least some difficultly for the Democrats to ram through their tax and spend, borrow and spend, and then spend-some-more budgets.
To pass the budget, just like in the U.S. Senate, the Democrats need to pick off a few elected California Republicans, specifically three in the State Senate and three in the State Assembly.
With super majorities almost in hand, Democrats are unhappy they have to negotiate at all to pass high spending / high tax budgets, year after year.
Some smart GOPers have begun arguing that the Democrats must be held accountable for their budgets, spending, and tax hikes. The cover of bi-partisanship for these liberal politicians would be removed if Democrats “owned” the budgets, and passed them without any GOP support.
Perhaps, then, when combined with fairer legislative district drawing, Republicans would finally have a brand and an argument to bring to voters. As things stand now, Republicans are irritated at their own, while the Democrats seem immune to public disgust with the never ending high spending and high taxes.
The GOP is getting the worst of this process. There is lack of clarity that Republicans are the party against profligate spending and higher taxes and many Nanny State regulations that are strangling small businesses.
And, gerrymandered safe seats continue to reward incumbents and remove political argumentation from politics. Argumentation that is the only path for Republicans who must overcome the emotion-based pandering of Democrats.
Democrats run the legislature, and, with the agreement of a few safe-seat incumbent Republicans, benefit from the “incumbent protection” district lines, rarely to face competition at the ballot box. But they are rigging more than the electoral district lines – they have avoided clear issue / ideological / idea lines as well.
How to educate voters about the consequences of decades of big government spending, promoted and supported by left-wing ideologues and special interest lobbying and politics as usual? Make politics meaningful again and give voters something to think about when they vote for state legislators whose names and political positions they currently do not know.
The fastest rising partisan group of registered voters is Decline to State. No wonder. The parties do not clearly differ yet in the minds of the voters.
Of course, voters still vote…..sometimes with their feet. They are walking away from the highest taxed state in the union. And the best and brightest are taking jobs, revenue, and the Golden State’s future with them.
fact based // Feb 16, 2009 at 5:42 am
your distortions(or lack of analytic skills) are at work again
With the insane prop 13 putting limits on real estate taxes california was unable to increase its revenues by adjusting real estate assessments to the massive increase in real estate values. But the fall in real estate values now permits homeowners to have their properties reassessment for a downward adjustment in re taxes the only direction permitted by law. Hence the reliance on other more regressive taxes. And if you think the insane reliance on a 2/3 vole to approve a budget is not dysfunctional, look at the insanity every year in sacramento.
And btw learn a little about economics “hand outs” to those not working (like the newly unemployed getting those tax credits and extended unemployment insurance) are far more stimulative to the economy than a cap gains tax which simply encourage someone to take their cap gains on a stock and reinvest the proceeds right back into a similar stock. The most stimulative money is the money given to the poorest. Simple logic would tell you that give their circumstances it will all be spent immediately.
one more thing…check the rate of job growth in low tax nevade….and check the distribution of higly skilled labor in CA vs low tax nevada and FL. Wanna lose jobs in high tech and other high paying industries and encourage those companies to relocate ? keep cutting funding for education at all levels.
fact based // Feb 16, 2009 at 6:01 am
Mr. Greenfield your chorus about people leaving because of taxed flies in the face of the continued growth in CA of high tech and other high skilled industries, Want to drive out business and the skilled workers ? contnue allowing the decline of our schools and our wonderful (and threatened) public universities and cut funding to deal with crumbling infrasturcture, public transportation and congested roadways. I always find the knee jerk high tax = flight of good jobs of you folk amusing since there is so little evidence for it : look at high tech in CA,the fin’l industry in NY, the drug industry in NJ, all the large corps in Ill all 4 are high tax states compare that to the jobs in FL NV and TX
sinz54 // Feb 16, 2009 at 8:47 am
fact based: The successful folks who work in the financial industry and the television industry in New York City, don’t live in New York City. They commute in, most from Connecticut, some from New York State suburbs. I was born in 1954. I got to see first hand how liberal policies in New York City, pushed by a succession of liberal mayors, drove middle-class white folks out of the city into the suburbs during the 1960s and 1970s. Because I was one of them. “White flight” was endemic in every major city in the nation. New York City had imposed the steepest taxes in the nation. Nobody in the middle and upper classes wanted to live there anymore, though they were happy to commute in to work there. But you’re right about one thing. It wasn’t just high taxes. It was the liberals’ tolerance of urban decay and the breakdown of civil order that drove middle-class white folks out. Liberals couldn’t get it through their heads that social progress is impossible without civil order.
HollywoodBill // Feb 16, 2009 at 8:54 am
According to the Tax Foundation, in 2008, California ranked sixth in total liability. Ahead of us were: 1. New Jersey 2. New York 3. Connecticut 4. Maryland 5. Hawaii. Historically, we pay lower taxes now than at various times since 1978 the year that Prop13 the bane of the Democrats was passed by the Dems. Any time that the Dems are feeling lucky, they could try to take on the Howard Jarvis Taxpayers Association and repeal Prop13. It has to be done by initiative though. The Dems always believe that Prop13 is the only reason that California hasn’t turned into their Utopian dream. However despite the fact that California has had Democratic majorities in the Senate and Assembly since the 1950s with one brief two year stretch in the 90s, it has only had 4 Democratic Governors during the entire 20th century. California voters like at least one Republican running the show and making sure that their insane dreams don’t bankrupt the state.
sinz54 // Feb 16, 2009 at 8:56 am
fact based: Proposition 13 was passed in 1978, a time when rapidly rising property taxes in a time of rapidly rising property values (due to double-digit inflation) were killing older folks approaching retirement or already in retirement. Typically these seniors were living on a fixed income, and they couldn’t devote a larger and larger share of their household budget to property taxes. Some retirees were actually forced out of their homes, when they could no longer afford to pay their property taxes. I agree with you that Proposition 13 doesn’t make as much sense now. But it sure made sense in 1978, 30 years ago, when America was mired in stagflation. Times change. Since you pride yourself on being “fact based,” I suggest you learn history. History has many lessons to teach you, as it has taught me. But I don’t have to read about 1978. I was 24 years old then and I lived through 1978.
sinz54 // Feb 16, 2009 at 9:00 am
I have one more comment: Proposition 13 is most needed in times of high inflation driving real estate values up astronomically (along with the values of all other hard assets). Proposition 13 was passed in such a time, 1978. I am convinced that the wild spending binge the young Obama liberals have cooked up for us is going to reignite inflation again. And so California continues to need Proposition 13, as a safeguard against America ever getting into a period of high inflation again. Which it will–in another few years.
HollywoodBill // Feb 16, 2009 at 9:06 am
While declining property values do allow homeowners to have their tax basis lowered. Prop13 also allows the munincipality to recapture the lost assessment when values increase again as they invariably do over the long haul. While there were many reasons for the recall of the ill fated Gray Davis, the tripling of the car tax could be called the fuse that ignited the whole process. Those politicians up in Sacramento would be ill advised to include that in any so called solution. The public is going to want cuts. And severe ones before any raising of the car registration tax. $200 a year is bad enough. $600 a year is unacceptable and leads to political upheaval.
fact based // Feb 16, 2009 at 11:01 am
sinz 54
1, the article was about the state fof CA so I compared to NY STATE
2. the workers may commute but the financial industry is still there
3, commuters from CT pay NY state and city commuter tax
4. commuters frm ny state suburbs pay NY STATE taxes
and nyc commuter taxes
5. the wealthiest in wall street have 2 residences in ny state one on park ave and one in the hamptons
6.And my main point is and I agree with you there taxes arent determinative of where people choose to live and companies choose to locate. Been to NY in the last 8 years:the ciry boomed and taxes didnt go down and the mayor was what you call a rino (actually no longer even that)
fact based // Feb 16, 2009 at 11:05 am
teachers and state police are laid off, roads and dams crumble,, hospitals close, state offices close, state colleges and universities raise tuition and limit enrollment. Yet it would be political suicide to raise auto registration by $200
that says it all
if you think you guys have a vision for the future of CA like that…. go for it
you tell me why people will move out of CA (hint: it wont be paying an extra $200 to register their car)
RLHotchkiss // Feb 16, 2009 at 12:39 pm
One of the few things that is mentioned is the huge role that prop 13 played in the housing crisis. In a market environment housing prices reflect the cost of the property plus the taxes on the property. If higher property taxes had existed the values of the houses would have risen much more slowly. And, some of the cost home owners paid would have gone to things that build the real value of a property such as transportation infrastructure, education and law enforcement.
The original property owners who already owned property when prop 13 did receive a land fall. It is common to hear about couples that sold their little home bought on a GI loan for millions and live in palatial comfort where housing prices are reasonable.
But the losers where everyone who came after them. Housing prices quickly rose to reflect the lower taxes. They were paying even higher total costs for housing, but living in communities that could no longer make the investments needed to build real values in the communities.
Now all that money is gone, and it is gone forever. When you see children going to school in trailers next to empty McMansions, see the total inadequacy of fire protection in Southern California, the near total lack of storm sewers in San Diego you see pro 13 in action.
If we had built schools, roads, and fire departments with that money these things would still be there. But by choseing prop 13 California essentially burned trillions of dollars. Those dollars are never coming back, but at least we shouldn’t keep making the same mistake.
HollywoodBill // Feb 16, 2009 at 1:05 pm
Any time the Dems want to try and repeal Prop13, all they have to do is put an initiative on the ballot and let the electorate decide its fate. It is the third rail of California politics. One of the goals of Prop13 was to stop the insane spending policies of the California legislature. The average stay in a California property is around 7 years. And since the sales price of the property is what determines its property tax, the system works. In new communities, additional property taxes for infrastructure are allowed under Mello-Roos. The problem in California isn’t the taxation. It is the out of control spending by a legislature that doesn’t even attempt to understand limitations.
fact based // Feb 16, 2009 at 2:42 pm
mr. bill
do the math even if the avg stay in ca property is 7 years (and that avg is not weighted by home price, obviously big appreciation is a big disincentive to move) then even if you just account for inflation and population growth the tax revenues cant keep up with expenditures. Plus I love all you “spending is out of control guys” where do you want to cut : road maintenance? dams ? the UCs and cal state ? state police ? prisons (thank 3 strikes for that one) ?
of course prop 13 is the third rail: folks like the pols you support sell people on the fantasy that their taxes need not go up but their standard of living will stay the same
HollywoodBill // Feb 16, 2009 at 3:27 pm
There are yearly tax increases even under Prop13. And any improvements on a property increase the tax basis. Localities are free to put tax increases to the electorate. So if you’re unhappy about Prop13, then get rid of it. It’s relatively easy to get an initiative on the ballot. This annual kabuki ritual of the budget fails to generate enough enthusiasm for more taxes. This mess could almost have been predicted. There was an increase in revenues due to the housing bubble similar to the dot com bubble a few years back. The moment the Politboro up in Sacramento saw more money, they immediate put in new pet programs. And when the inevitable bubble breaks, the whining starts up again for more money to keep these projects going.
debs // Feb 16, 2009 at 4:07 pm
The author might have mentioned that current budget deficit is $41 billion–thus, raising 15 billion in taxes or so doesn’t even close 40% of the gap. Unlike that of federal government, the budget in California, as in 49 of the 50 states, must be balanced each year. What does Mr. Greenfield suggest the legislature do?
Obviously, it will have to be balanced thru some combination of taxes and cuts, and perhaps borrowing too. There are no good options. Yes, taxes should not be raised during a massive recession. But $41 billion in cuts would not only result in vital services being unmet, but in an even further decline in the state’s economy, as thousands more state workers would be laid off, diminishing economic demand. If such a program were to be implemented, the howling would be even greater than that will result from an unfortunate tax cut that makes up part of the $41 billion shortfall.
This is exactly the reason that President Obama pushed a massive of amounts of countercyclical stabilization by the federal government within the stimulus bill. Only the federal government can prevent these kinds of terrible choices on the state level during a recession. I don’t recall Mr. Greenfield ardently advocating on behalf of that countercyclical spending–50 billion of which was irrationally cut by the Susan Collins, the most powerful politician in the United States.
As written, this is an intellectually dishonest article–not to mention the total deficit insults your reader’s intelligence–risibly so, if it weren’t for the profound issues that it elides.
HollywoodBill // Feb 16, 2009 at 4:50 pm
The gnashing of teeth is still continuing in Sacramento today. The whining about vital services being cut has been going on for decades, whenever the Dems have spent the state into the abyss of near bankruptcy. Since there are virtually no social conservative programs to run on in CA, Republican candidates are coerced into taking NO TAX PLEDGES by at least some of the conservative talk radio jocks, like John and Ken, who dominate KFI in Southern California and were instrumental in the Recall. They have a wonderful segment called “Heads on Sticks” should any lawmaker break a pledge. http://www.kfiam640.com/pages/johnandkenshow/index.html So far, there are not enough votes to get the Dems spending package through.
rush55 // Feb 17, 2009 at 12:33 pm
The problem I see is that CA Republican legislators will eventually cave, and go along with the tax increases. There will be a large number of them who can will be able to say, “I voted no.” But the truth is that is not enough. They let their leadership and a few of their Republican brethren vote yes, and give them no outside pressure, nor any criticism. they are safe because they voted no, yet, eventually the budget gets passed, and in the end avoid the “obstructionist” label. I think conservatives and Republicans need to start holding some of these “safe” R legislators’ feet to the fire. Fine, you voted no, but your CA Senate Minority leader voted yes. And he is the leader. If he remains the leader, then even a “vote no” legislator should get our wrath. Republicans have no power in this state. Sure, our governor has an R by his name, but he is on the other team right now. How they vote is not enough from our CA R legislators anymore. Who they hvae as their leadership, and how they fight for conservative, especially fiscal, values is what they should be judged on also.
HollywoodBill // Feb 17, 2009 at 3:07 pm
As of Tuesday 2/17, 2pm, PST, the budget with tax increases has not passed. The one GOP senator needed has so far not been peeled off. Interestingly, Steve Poizner, the only elected Republican consitutional candidate, Insurance Commissioner and one of three announced GOP gubernatorial candidates for 2010 has announced that no Republican should vote for this bill. The campaign for Governor for 2010 in CA has really started. And Senator Abel Mondanato, the likely GOP defector has come out and said that he isn’t budging. That he could have used Arnold’s help when he ran for Controller in 2006 and there was none, so he’s not helping Arnold now.
Pragmatist306 // Feb 17, 2009 at 5:33 pm
Larry, I have to give it to you: You’re of one mind. Taxes are bad, regardless of what they’re for.
Maybe you should stop driving on roads, and stop flying on airplanes.
Your arguments are actually tired and have been disproven, why do you keep repeating them?
Do you actually have any serious suggestions to deal with the budget woes; other than ‘cut spending’?
What type of taxes are you willing to pay, and what type of spending cuts do you feel are necessary? Please keep them realistic as well?
Pragmatist306 // Feb 17, 2009 at 5:37 pm
On another note: 50% spending cuts and 50% tax increases is actually a compromise.
Why is it that conservatives ‘vote no’ because they do not want to compromise? I’m sure that liberals would rather not have any cuts in the budget, but that is not realistic.
It’s also not realistic for conservatives to not be willing to pay for the services in their own State.
HollywoodBill // Feb 18, 2009 at 10:31 am
The so called deal is off. There was a coup within the Senate Republicans last night and the challenge to anyone who thinks they can do better was taken and now the Senate GOP has a new leader who will not partake of any tax increases. For more details: http://www.latimes.com/news/local/la-me-budget18-2009feb18,0,2637442.story
HollywoodBill // Feb 18, 2009 at 10:34 am
The CA Dems are in trouble over this one. A one cent statewide increase in the sale tax, a 12 cent a gallon increase in the gasoline tax and a tripling of auto registration fees are going to be suicidal for the party that wants them. The whining from the Dems is part of the annual kabuki ritual of passing the budget. This time the solution is going to be cuts or it’s over the edge. And the public ain’t fooling.