Governor’s Executive Order Will Create Commission To Propose New Tax Model
All across the country, states are facing declining revenues as a result of our troubled economy. Yet, California is uniquely burdened because our revenues swing from extreme to extreme – boom or bust – more than other states. For example, the state of Washington is projecting a revenue shortfall of less than 1%, while our state may face a shortfall of nearly 10%. The difference is that our state’s tax revenues reflect Wall Street’s economy more than California’s economy.
This is because more than 50% of California’s personal income tax revenues come from the just 1% of taxpayers (fewer than 150,000 taxpayers), and that 1% of taxpayers gets a substantial amount of their taxable income from Wall Street investment gains. When there are big investment gains, California’s budget picks up revenue. When there are no investment gains, California’s budget suffers even if California’s economy is still growing.
For example, during the last economic slowdown in 2001, the economy in California grew 1.1% but tax revenues fell 17%. On the other side of the coin, when the economy grew 8.7% in 1999, tax revenues rose twice as fast. Simply put, our tax revenues are too decoupled from our economy and too volatile for our state.
Damn the Economy! Full Taxation Ahead!
These are creepy times for taxpayers — the creepiest in memory.
Between the state and local ballots, there are hundreds of measures
that would increase the burden on taxpayers. If all or most of these
tax increases and bonds pass, it will be Halloween every day as
taxpayers are compelled to dole out big dollar treats to our
political class.
Much of the cause of this tsunami of tax increase proposals is due
to the Obama phenomenon. Political consultants have told their
clients in government that this is an ideal time to put tax measures
on the ballot because the presidential candidate is driving
low-income voters to the polls who will be inclined to support
higher taxes for those they see as more prosperous than themselves.
Cynical politicians have gleefully taken the advice, and are
proceeding with a policy that can best be summed up as — with
apologies to Admiral Farragut — "Damn the economy! Full taxation
ahead!" How else can they ignore the fact that our state is in a
recession and taxpayers are in a vice?
Sick to my Stomach
Watching TV in California these days is enough to make you physically ill. The problem? The ads for and against Prop 2, the initiative to regulate farm animal confinement. The Yes ads, produced by the Humane Society of the United States (perhaps the leading practitioner and defender of ballot initiative campaigns in the country), have — in a small box on the screen (the full screen was deemed too disturbing for viewers) — video of farm animals in distress.
The no campaign warns about salmonella and other diseases if Prop 2 passes and animals are free to walk around. The yes campaign has responded to this by saying that the current use of caged animals actually contributes to salmonella. So, both sides are talking about salmonella.