Taxable Talk

California voters rejected Propositions 1A-1E yesterday. Voters told Sacramento in no uncertain words it’s time to cut programs, and spend only the money you have. It will be interesting to see if the Democrats in control of both houses of California’s legislature get the message.

Given the economic climate borrowing money—especially given the likely $23 billion budget deficitg@mdash;will be difficult. Still I expect the Democrats to propose a budget that is equal parts budget cuts with equal parts of smoke and mirrors.

Republicans are going to propose a series of bills that would appear on paper to go after the causes of the problems. We’ll have to wait and see if they (a) actually get looked at by the Democrats and (b) if they do what they appear to on paper.

In one piece of good news California’s elected officials will be getting an 18% pay cut next fiscal year. Commissioner Kathy Sands said, “I think they should share in the sacrifices that everyone else has had to encounter.” Hurrah for some common sense.

Unfortunately, common sense hasn’t pervaded everywhere. The Los Angeles Times had a headline this morning, “California voters exercise their power — and that’s the problem.” The analysis piece blames California voters for demanding too much in service while not being willing to vote for tax hikes. Most of the spending increases were thrust upon the state by our liberal legislature, not the voters.

California voters said one thing very clearly yesterday: It’s time for a change. It may be a few months before we know whether our legislature got the message.

On Tuesday Californians will vote in a special election on six initiatives that, even if they pass, will still leave the state with a $15 billion deficit.

The Flash Report quotes Americans for Tax Reform:

The California government has lived beyond its means for far too long. Last year politicians in Sacramento spent $33 billion more than the state brought in. If a business were to operate like this it would go under. If a family were to budget like this it would go bankrupt.

State spending in California has increased 300 percent since 1991. Had spending been limited to the rate of population growth and inflation, the state would be sitting on a $15 billion surplus rather than staring down the barrel of a $21 billion deficit.

The above is all you really need to know about California’s government. It’s time for spending to be drastically cut. Perhaps the legislature will get the idea when Propositions 1A – 1E go down to defeat.

Proposition 1A is the last of the six initiatives that Californians will vote on next Tuesday. The title of this initiative states, “STATE BUDGET. CHANGES CALIFORNIA BUDGET PROCESS. LIMITS STATE SPENDING. INCREASES “RAINY DAY” BUDGET STABILIZATION FUND.” If only it were really true.

Let’s note that there’s some slight truths in the title. The budget process will change…cosmetically. The “Rainy Day” fund will increase…but given that it’s been raided time after time by the legislature and nothing in the new legislation will stop that, I consider the change worthless to California’s taxpayers.

Now, what you may not be able to easily figure out from the title. The tax increases approved by the legislature in February will be extended for two additional years if this measure is approved.

The Legislative Analyst calls the impact of the measure “…particularly difficult to assess.” Well, I’ll give it a go. I believe that if the measure is passed California will see additional tax increases. The measure does nothing to stop further revenue increases…those are called tax increases by us.

What California really needs is to cut spending to a level commensurate with revenues. Indeed, I read a recent commentary on what the state should do:
– Determine the amount of revenue California will take in;
– Match the budget to the prior California budget that was used; and
– Change the laws so that it’s legal.

In the commentary I linked to, Ray Haynes thinks that California will take in $74 billion, and that’s about the 2002-03 budget amount. So just re-adopt that budget for 2009-2010. The unions will go nuts; the liberal media will go nuts; the special interests will hate it.

But it would work. And, as Mr. Haynes notes, it would be understood by Californians.

Do I think that will happen? No. But next Tuesday Californians are poised to throw cold water on the tax and spend ideology of the legislature.

Bill Leonard, who I just linked to, is one of the five elected members of the Board of Equalization. The BOE directly administers California sales taxes, and hears appeals of various tax rulings.

A few years ago a gentleman declared bankruptcy. He thought he owed (through his corporation) the BOE, so he listed the BOE as a creditor. He wasn’t sure of the amount, so he listed about $100,000 owed. The BOE never responded.

Fast forward a few years to today. It turns out the corporate debt to the BOE was about $7,000. Add in interest and penalties and the sum is now over $44,000. The man is out of luck (the law is on the BOE’s side) but Mr. Leonard is upset over a dispute that should have been resolved years ago…but wasn’t.

In the YouTube video below, Mr. Leonard pointedly asks BOE staff members why they didn’t respond years ago to the request. The audio quality is poor, but the content is worth watching (and listening to). It shows, unfortunately, the California bureaucracy at work.