California: Paradise Lost

In the wee hours this morning,in an egregious act of irresponsibility,the California Legislature imposed new taxes on the People of California to the extent of a minimum of $70 Billion.

Rather than doing the hard work of reducing spending, lawmakers felt it was easier to solve the problem mostly by raising new taxes. The legislators voting to impose these additional taxes on Californians were 100% of the Democrats in the Assembly, 100% of the Democrats in the State Senate, three Republican Senators, Maldonado, Cogdill and Ashburn and three Republican Assemblymen, Niello, Villines and Adams, all of whom broke their word because they signed a “no new taxes” pledge. No other Republicans supported the tax increase proposal. I want to congratulate those Republicans who stood strong and tried to defend the people of California against these taxes. In particular, Assemblyman Chuck Devore, candidate for U.S. Senate, and State Senator Dennis Hollingsworth, new Minority Leader, although all Republicans who chose not to vote for the measure should be commended.

It is, in my view, unconscionable for Republicans to have supported the imposition of this huge additional tax burden on the residents of California. I know that those who voted for it thought that it was the only way that anything was going to get passed that would close the budget gap and prevent the State from having to go bankrupt, and I also know that they were strongly pressured by the Governor. I think they chose the easy way out rather than doing the hard work.

What were the alternatives, you ask? Well, let me say that one possibility was going back to the 2003 budget, which was the year we recalled Gray Davis and Arnold came in, and increase each line item in that budget by two factors: 1) the increase in population since 2003, and 2) the inflation rate for those years. The other possibility was to start over. Do Zero-based budgeting. That is you start with each line of the budget and decide what is necessary and what isn’t. Each line starts out at zero and then you justify each addition.

Let me give you some examples of why the budget is out of whack (a professional term). In 2003 the population of California was approximately 35 Million. Today the population of California is about 38.5 Million. An increase in population of approximately 10% in five years, or roughly 2% per year.

The State spent a total of $78 Billion in the 2002-2003 fiscal year. The State spent a total of $105 Billion in the 2007-2008 fiscal year. That is an increase of 35% in spending in 5 years, or roughly 7% increase in spending every year. The population is increasing at the rate of 2% per year and spending is increasing at the rate of 7% per year. Is something wrong here?

The number of employees of the State of California in 2003 was approximately 321,000. The number of employees of the State of California today is approximately 360,000. An increase of 40,000 employees in five years, or an increase of an average of 8,000 new State employees per year, or roughly 30 new employees on the State payroll added EVERY DAY. Is the legislature saying that the State can’t run without adding 30 new employees every day? Is the legislature saying that the State can’t run if we lay off 20,000 of the new employees that we have added since 2003? Why not? The state ran with 40,000 fewer employees in 2003.

Are you telling me that the only way to make up the budget deficit is by raising taxes? Is reducing spending not an option?

The special interests in California who have Democratic legislators in their pocket are running the state and driving it into bankruptcy, and driving businesses out of California. California was the sixth highest taxed state in the nation before this bill was passed. We will soon have the distinction of being the highest taxed state in the nation.

Here are just a few of the new taxes Californians can look forward to:

* You will pay a state income tax “surcharge” of 5.25%
* Your sales tax on most everything you buy will boosted a full 1.00%
* Your car tax (Vehicle License Fee) will mushroom to 77% higher than now.
* Your dependent tax credit will be slashed by two-thirds, in effect, costing you $200 per child

I don’t understand why any Republican would vote for a bill that will cost the average family between $1,000 and $2,000 per year in additional taxes. If you want to get an idea of what this new bill will cost your family, you can calculate it here.

But wait, there’s more.

This tax increase will not solve the problem. I can almost guarantee that the projected tax revenues will not be received. There will be another shortfall within a few months and they will be back to take more money out of your pocket. This is not the end of your being over-taxed by a Democratic legislature that wants to take your money, because they feel they know how to spend it better than you do, and because they would rather take more money from you than make the difficult choices about cutting spending. More to come.

Because Abel Maldonado knew that he could not win a statewide election in the future where there were only Republicans voting, he made, as a condition of his agreeing to the tax increase bill, that there be open primaries in the State of California. That will be on your ballot soon. What does that mean? It means that Democrats will be able to vote in Republican primaries, and vice versa. That means that, if the measure passes, from now on, Democrats will choose who the Republican candidates are.

This bill is going to cause severe economic problems in the State of California, along with AB32 which places impossible burdens on businesses in California. Business are already moving out of state. California is now ranked as one of the most business-unfriendly states in the union.

This tax increase bill, coming on top of the huge devaluation in our currency (inflation) which will result from the gigantic federal stimulus spending package, will mean much economic pain for Californians over the next five or six years.

The car tax increase will not generate the revenue that the legislature and the Governor think it will. I heard two people today tell me that they are now going to postpone buying a new car because of the car tax. How does that help the auto industry? There are always unintended consequences of raising taxes.

What can we do about it? There is only one answer. Elect fiscally conservative honorable Republicans to the State legislature to replace profligate Democrats. California Democrats, as well as Republicans, will be hurt by this bill, and they may be more willing to listen in the future to candidates who care about their financial well-being and who will take a stand for them in the legislature.

My daughter and son-in-law left Los Angeles to move to Nevada in 2008. While I personally hadn’t considered leaving the State before, I feel it is now something to think about. Nevada has no state income tax.

5 thoughts on “California: Paradise Lost

  1. Gary,Good blog. Good article. I am going through the blogs of Alan’s “followers” list to see what they have to say. I will be adding your blog to my favorites list. One thought though. All this talk about people losing their jobs in California can’t be true. It must be part of a vast right wing conspiracy. After all; going green creates jobs…right? Millions of jobs….right? And philosophically California is the greenest place in the universe….right. So these millions of green jobs that MUST have been created HAVE to be offsetting the additional costs imposed by government….right? Then again….maybe this isn’t really being caused by a vast right wing conspiracy after all. And maybe none of that green stuff is true. Maybe people really are losing their jobs. Maybe people really are fleeing the state. Maybe green actually destroys the economy and costs jobs! Wow…what a thought!Nah….that can’t be true. After all their intentions are good….right?


  2. It’s terrible to watch a huge accident about to happen and feel so helpless that there’s nothing you can do but just get out of the way.There’s only two possible futures: we can reverse the terrible direction of our state (and our country) or try to find some other places to live.As for Nevada, I lived in Vegas for several years and, with the bad economy and water shortages, I think it’s safer to find a better place to move.


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