Taxable Talk

That’s the opinion of the Reason Foundation, a nonprofit 501(c)(3) organization dedicated to “advanc[ing] a free society by developing, applying, and promoting libertarian principles, including individual liberty, free markets, and the rule of law.” In an article titled “California Won’t Fix Budget Until It Cuts Spending” Reason notes:

“Despite what some lawmakers would like us to believe, this is a budget crisis borne of an addiction to spending, not a revenue problem. In the past four years, the state’s general fund revenues have increased approximately 32 percent. In fact, total revenue has grown steadily since the early 1990s, shortly after major tax increases were imposed under Gov. Pete Wilson’s administration…

“It is time for Californians and their elected representatives to undertake a serious re-evaluation of the proper role of government. Government has simply gotten too big and too intrusive. The casualty is individual liberty. Only when we rediscover the truth of the maxim – ‘That government is best which governs least’ – will we be able to restore any fiscal sanity to our state government.”

Any bets on our legislators listening? I for one am not hopeful.

The tax rebates (aka the stimulus payments) that will be issued beginning in May won’t be taxed by California. The Franchise Tax Board announced this last week. The FTB notes (as has the IRS) that in order to claim the rebate you must file a federal tax return. You do not have to file a California tax return in order to claim the rebate.

A few states will be taxing the federal tax rebate. Generally, those states give a deduction for federal tax paid. Alabama and Louisiana are two states that I believe will be taxing the federal tax rebates.

An interesting question is whether California government employees are overpaid. We can now find out. Thanks to the Sacramento Bee we can now find out. The Bee has a searchable database of California government employees so we can now find out exactly what our government employees actually make.

If you’re a California resident (and taxpayer), you may want to buy a padlock. A big padlock. That’s because Democratic legislative leaders have resolved that the only solution to the budget crisis is to increase taxes.

Senate President Pro Tem, Don Perata (D-Oakland) told a news conference in Sacramento when asked how the budget deficit will be made up, “Raise taxes. That clear enough? Raise taxes.” I applaud his honesty though I disagree with the message.

Meanwhile, Jim Batten (R-Palm Desert) told the Flash Report, “If last year’s Democrat rage at the Senate Republicans refusing to vote for a budget until spending was reduced by just $750 million is any indicator of what we’re in store for this year, I’m going to start wearing body armor to work.”

We may need to start a pool on when the state budget will be finalized. I think the only certainty this year is that it won’t be done by July 1st (the constitutional deadline).

What’s the difference between a tax hike and the elimination of a deduction? In politics, everything. For the taxpaying public, the impact is the same. We’re talking words or nomenclature.

It appears that some legislators in Sacramento are considering eliminating the mortgage interest deduction for state tax returns. While I don’t expect that to pass, I do believe we’ll see a few tax hikes when a budget finally passes in Sacramento this year. Please don’t ask me what they’ll be—it’s way too early for that—but do realize that Democrats don’t want to cut any programs. This editorial in the Los Angeles Daily News sums up the problems with eliminating tax deductions.

Thanks to Kerry Kerstetter for pointing out the editorial.