Taxable Talk

…and still has a $5 Billion deficit projected for next year. Oh, the Governator signed the budget.

Moody’s Investment Services followed up by raising California’s Debt Rating from A3 (bad) to A2 (not as bad). Perhaps I’m being a bit cynical about this; after all, Moody’s says that both A3 and A2 ratings indicate “bonds with many positive investment qualities.” California, though, has one of the worst ratings of any state.

On the good news side of the ledger, the Governator used the line-item veto to eliminate some egregious programs, such as the UC Berkeley Center for Labor Research and Education. He also vetoed hiring 14 new state tax investigators. While the veto “saved” $1.2 million, the investigators were budgeted to bring in $4 million in back tax payments and penalties annually. So tax cheatersprocrastinators, you can rejoice!

Again, the key for California will be the results of the November 8th special election, which will have numerous initiatives that could change our state government in many ways.

As reported yesterday, California will soon have its’ new 2005-06 budget. Dan Weintraub, a columnist with the Sacramento Bee, reports on more of the specifics (missing from yesterday’s report).

Some highlights:

—Education funding increases, despite what you may hear from the teacher’s unions;

—The state is repaying the $1.2 Billion it owes the cities one year earlier than scheduled. This will make local governments quite happy.

—The budget is balanced on paper. However, it’s balanced by using one-time funds. Thus, next year’s budget starts off $5 Billion in the hole.

So, let’s take the good with the bad. Given the makeup of the legislature, this is probably as good as one could hope for. Just remember that we’re still looking at a special election in November with a whole host of initiatives that have the potential to change the picture in Sacramento.

California’s legislature and the Governator agreed on a budget last night that, supposedly, increases spending (a little) without increasing taxes (or implementing new taxes). That doesn’t mean there won’t be new fees, including new court filing costs, and who knows what else buried in the fine print.

Until we see the actual budget, and the analysts’ reports on the budget, we’re better off not speculating as to whether it’s a good or bad deal. For now, look at it as a $117 Billion unknown.

Coverage: San Jose Mercury News (one-time registration required)

They’re at it again.

The California Public Employees Unions are, according to this story in the San Jose Business Journal, gathering signatures on an initiative that would cause all non-residential property to be reassessed annually. While this would be a boom (temporarily) to local government—property taxes would increase—this would be devastating in the long-term to California.

If a business’s property tax bill increases, what will they do? Basic economics gives us the answer: the price charged will increase. If prices increase, demand decreases. Fewer sales in California. Fewer businesses in California. Instead of calling the initiative the “Tax Fairness Act” (the current title), the initiative should be called the “Nevada Full-Employment Act.”

This same proposal came to a vote a few years ago and was defeated by the voters. If it comes up again, it deserves the same fate.