HollisterFreelance.com | Marty: Solutions for the state spending mess

Marty: Solutions for the state spending mess

Jun 16, 2009
By Marty Richman

The State of California is getting all revved up on the tax debate and one of the issues always at the top of the list is the state's constitutional requirement to have a supermajority, two-thirds, legislative approval to raise taxes. Those who support raising taxes always blame that requirement for our budget crises. Meanwhile, those opposing new or increased taxes count on that provision to save them.

Let's look at some of the facts that bear on the tax issue. One is the amount of spending the state does. According to the San Jose Mercury News, a paper that supported tax increases, if spending had merely kept pace with inflation and population growth since 1980 the budget would be $88.1 billion, but the spending proposal is actually $100.9 billion; therefore, the spending has increased 14.5 percent more than the population and inflation combined.

The result is a $12.8 billion gap attributed only to spending rate increases, but it's not the end of the story. If the budget were $88.1 billion, we still couldn't cover it because the state's income is down to only $82.6 billion, which would have left us $5.5 billion short if we had held the line on spending. We did not hold the spending line, so we are a whopping $18.3 billion short and the chickens are coming home to roost.

One problem with the state's income is that it relies, more than ever, on income taxes, much of it paid by the wealthy. Income taxes equal 53-percent of the state's intake, that's up from 35 percent 30 years ago. Although less than 2 percent of state personal income tax returns have incomes over $500,000, these provide "nearly 40 percent of the state's personal income tax revenue." However, when the rich stop making money, as they did this year, the state's tax take goes way down.

A background article in the Los Angeles Times called California's requirement for a supermajority to raise taxes an oddity, but is it? Fourteen other states; Arizona, Arkansas, Delaware, Florida, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Nevada, Oklahoma, Oregon, South Dakota and Washington, have tax laws that require some sort of supermajority to raise taxes. Most cover all taxes and some for major portions - in Michigan it applies to state property tax. Including California, the 15 states equal 30-percent of the states in that nation. Thirty percent is certainly not my idea of an oddity.

Would tax decisions be fairer without a supermajority? Not if the proposed rate increases at the Sunnyslope County Water District is any example. These are called fees, not taxes and the increases will automatically take effect unless more than half of the district files a written protest by July 9, 2009. If you do nothing you count as supporting the increase. I'm positive if the district gave every property owner a simple ballot where they could check yes or no and drop it in the mail, the increase would be rejected, but most people will not bother to file a protest because the system makes it just a little bit harder to do. You have to write the letter and include some critical information - the truth is that it's easier to vote for president than to protest an increase in water rates.

The right answer is before us. The state should reduce the spending to where it would be to cover population growth and inflation, $88.1 billion, then ruthlessly go after every dime of waste, fraud and abuse in the system. In return the taxpayers should approve increases that will make up the small gap that is still left. It should be less than $6 billion. We can do that.

Marty Richman
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