Excerpt
State Controller John Chiang is predicting July 28 (2009) as the state's 'meltdown' day
Animal analogies come to mind when somebody asks, "What is going on in Sacramento with the budget deficit?"
In one sense, the scene's like a horse race with some of the beasts balking at the starting gate. They'll get there eventually, but it'll take prodding and pushing.
In another sense, some Democrats -- mainly newer legislators in the Assembly -- are scrambling around like chickens with their heads chopped off.
And it's understandable. The electorate last month chopped off nearly $6 billion in anticipated state revenue, plus $16 billion in future tax hikes.
That raised the projected budget deficit for the fiscal year starting July 1 to roughly $21 billion, up from $15 billion. Since then, it has jumped another $3 billion to $24 billion.
And last week, practically unnoticed, the red ink grew by almost an additional billion when state Controller John Chiang routinely released his wonky cash balance report for May. During that month, revenue dropped $827 million below projections.
"Without immediate solutions from the governor and Legislature," Chiang warned, "we are less than 50 days from a meltdown of state government."
Realty check from a Californian:
The state of our California budget is not FULLY attributable to any party (Democrat nor Republican), it mainly stems from our California Referendum laws. It is referendums passed by voters, especially California Constitutional Amendments, that mandate what tax money is spent where AND how much.
The problem is, the voter not realizing that these mandates leave no flexibility for our legislators on taxes AND spending. The voters want lower taxes but mandate spending on "their" priorities.
You cannot have both, if you want to spend on a specific program you have to tax enough to pay for the program. Also, you must raise enough additional taxes to pay for the general state government. The shortfall is in that additional taxes needed to run our state government.
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"The question: To tax or not to tax?" by Steven Harmon, Mercury News Silicon Valley
Excerpts
Are Californians overtaxed?
On the face of it, the question should not even have to be posed. Californians pay the highest sales tax in the nation. Their top-bracket earners have the second-highest income tax rate in the country. The middle class to upper class — those making $48,000 to $1 million — are right up there among the most highly taxed, too. California's gas tax, at 35.3 cents per gallon, is third-highest in the nation. Corporations face the highest tax rates in the West.
So, case closed, right? If you mix in the contention that California has the nation's third-worst business climate, any argument for new taxes would appear to stand on wobbly legs. Why would you raise taxes, even if it is just on the wealthy and corporations, when the state is facing the deepest recession since the Great Depression, when jobs are scarce and companies are being driven out of the state by its burdensome tax and regulatory system?
That's what Republicans and conservative taxpayer rights groups are stressing as the debate heats up over how to overcome the $24.3 billion budget deficit facing the state. They argue that any added taxes would be ruinous to the already-teetering economy. Californians already are facing $12 billion in new taxes over the next two years.
"Do we overtax the wealthy? Absolutely," said Jon Coupal, president of the Howard Jarvis Taxpayers Association. "Do we overtax the working class? Absolutely.
The car tax is the highest in the country. I can't imagine any additional transference from the private sector to the government sector that would do the state any good."
Some Democrats and liberal tax fairness groups, however, insist that any number of targeted tax increases — including loophole closures — are needed to keep the state from collapsing into fiscal chaos. They also make the case that the tax burden is not as bad as Republicans say it is — particularly for the wealthy.
"California has relatively high tax rates, but it's because we have a loophole-ridden tax system," said Jean Ross, director of the California Budget Project. "If we had fewer loopholes for the rich, we could have lower tax rates. (Resisting tax increases) is really a smoke screen for saying we believe government ought to do less for education, children and health care."
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There are other ways, however, to determine the tax burden on businesses and the wealthy.
A study by giant auditing firm Ernst & Young showed that, as of 2007, businesses in 34 states paid a higher share of overall tax collections than in California.
California ranked 17th in tax collections as a percent of income in 2006, the most recent year data is available from the U.S. Census Bureau. That is hardly the worst and is a more accurate reflection of effective tax burden, said Justin Garosi, an economist with the Legislative Analyst's Office.
In addition, a 2007 study by the Public Policy Institute of California showed that only a small number of businesses leave the state — and for many reasons other than taxes.
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