Let the Sun Shine In

Loren Kaye
President of the California Foundation for Commerce and Education

Readers of this blog already know that the legislative Budget Conference Committee voted along party lines to recommend a nearly $10 billion tax increase to provide most of the fill for a $15 billion budget deficit.

While a $10 billion tax increase may seem shocking, the sheer amount is the least of it. After all, surely noone believes that anything close to that amount would eventually be adopted by a bipartisan vote of the Legislature. More disturbing, though, is the direction that the tax increases are headed:

First, about one-fifth of the revenue increases are really just accelerations or gimmicks, which would create a $2 billion hole in next year’s budget.

Second, about two-thirds of the tax increase is aimed at high-income Californians, who are far more able to become high-income residents of other states than are other California taxpayers. Have no lessons been learned about the volatility of California’s income tax and the mobility and flexibility of the upper reaches of the economy?

Third, the Conference Committee has shown no inclination to embrace any structural reform of state programs or budgets to bring any of the spending trajectories under control.

The best that can be said of this action is that the Democrats have finally played the tax card, which means that legitimate negotiations and vote counting can finally be engaged. Next move is … Governor?

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