Monday, May 26, 2008

Tax Myths Debunked

Readers add their 2 cents to California tax and spend debate
George Skelton
Capitol Journal, Los Angeles Times
May 26, 2008

SACRAMENTO — This seems like a nice, quiet day to answer e-mail -- at least some of the civil comments that have been rolling in about state taxes and deficit spending.

Readers have been reacting to columns I've written contending that until Capitol politicians summon the courage to raise taxes to pay for services the public demands, the state will continue to wallow in red ink.

Sure, programs should be prioritized and some pared or even eliminated. But this addiction to borrowing to meet daily expenses keeps digging the state into a deeper hole.

Gov. Arnold Schwarzenegger, the all-time state borrowing champ, recently projected a $15.2-billion deficit for the next fiscal year -- roughly 15% of the general fund -- even after he and lawmakers already narrowed the gap by $8 billion.

Here's a representative sample of printable reader e-mail:



"Balancing the budget for California is very easy. Eliminate all handouts for illegal immigrants. Capture, convict, then deport those here illegally. . . . Saves us oodles of money."

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Jeff

Jeff, illegal immigrants don't get many government handouts: no welfare, no food stamps, no Medi-Cal healthcare. Federal law does require that they be cared for in medical emergencies, including baby delivery, and be educated in public schools.

They're a drain on the state treasury, but not as huge as many believe.

Besides, there's very little Sacramento can do about illegal immigration. That's the feds' responsibility. State and local governments just get stuck with the bill.

"We have way too many government employees making way too much money. Cut salaries to match the private sector."

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DW

Let's put it this way, DW: You could eliminate the pay of every state worker under the governor's control -- nearly 200,000 -- and still not erase the deficit. If you also fired every legislator and legislative staffer, you'd still fall short. You'd have to additionally ax all the personnel on state university campuses.

Why is that? Because roughly 75% of the state general fund flows out to local governments and schools. It's one of the unintended consequences of Proposition 13 that dramatically cut the property tax 30 years ago. Schools used to rely on the property tax. Now they rely on Sacramento.

As for matching state pay to private sector compensation: There aren't a lot of CHP officers and prison guards to compare with in the private sector. I doubt we want to emulate private companies and offer salary bonuses to civil servants -- say, for recruiting more welfare recipients. And multimillion-dollar severance packages for fired executives isn't anything government should copy.

"Get rid of commissions that have no use."

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Jeff

OK, Jeff. Former Gov. Pete Wilson once suggested that and was told facetiously by his finance director: "The state will save thousands and thousands of dollars."

Fact is, non-salaried advisory commissions operate on shoestrings and are politically popular. Regulatory boards are funded by the industries they regulate, are self-sustaining and don't affect the deficit.

From a lot of people, in summary: When "the governator" came to office he had a $78-billion general fund budget. Currently, it's around $102 billion. That's roughly a 30% increase. Where'd the spending go?

People, one place it went was for Schwarzenegger's car tax cut. Yes, that tax cut counts as spending -- about $6 billion annually. It's because revenue from the car tax -- the vehicle license fee -- had gone to local governments, not the state. The governor generously agreed to replace the locals' lost revenue with money from the state general fund. But he never replaced the tax he grandiosely whacked. Big hole. Big mistake.

Another reason spending has climbed is because of aggressive borrowing. In Schwarzenegger's first year as governor, the state paid out $2.5 billion on general fund bonds. Soon that will be up to around $6 billion -- on bonds approved by voters.

Also, prisons have been gobbling up tax dollars because of tough sentencing, court-ordered healthcare reforms and big pre-Schwarzenegger raises for guards.

"The people of California are overtaxed already."

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Kevin

Actually, Kevin, we're paying only slightly above the national average. Based on Census Bureau data, California ranks 17th in state and local taxes as a percentage of personal income. New York is third, Oregon 16th, Arizona 43rd. We're high in income and sales taxes, low in property taxes.

"Nothing could be simpler than balancing the California budget. Just raise the marginal rate on individual and corporate income taxes. It's the fairest possible way."

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Michael

Michael, you should run for the Legislature.

"The political thinking in this state lacks any imagination. A sales tax [hike] will just send business out of state. A [new] fuel tax would accomplish our CO2 reduction goals and shift most of the negative impact out of state. We don't produce Hummers and SUVs."

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Dallas

Right, Dallas, that's just what we want to do: Slap on another gas tax when motorists already are paying $4 per gallon, including around 70 cents in taxes. Pity the politician who tries that.

"I know personally of four families in the last two months who have decided to move to Oregon. They say California is just not a very good place to live anymore."

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Raul

Raul, then they should head on up the road. That'll leave more room on the freeways for the rest of us and reduce property demand, making homes more affordable. I'll send them a road map.

"I do not live in California, but I am fed up with every politician who says that she/he will not raise taxes. I take this as a direct insult to my intelligence. . . . I have vowed to not vote for anyone who says taxes will not be raised."

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June, in Illinois

June, you should move out here. A road map is on the way.

Thanks for reading and writing.

george.skelton@latimes.com
http://www.latimes.com/news/local/la-me-cap26-2008may26,0,17046.column

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