Senate Democrats Embrace New Revenues for a Budget Solution

This is welcome news from Capitol Alert:

Senate Democrats today plan to roll out a $4.9 billion package of tax hikes on cars, alcohol, income and corporate profits.

According to a budget committee analysis, the Democratic 2010-11 plan includes:

— Suspending corporate tax breaks scheduled to begin Jan. 1 (worth $2.05 billion)

— Extending a 0.25 percent income tax surcharge that is scheduled to end Dec. 31. (worth $1 billion)

— Extending a $217 per dependent reduction in the state’s dependent income tax credit, also scheduled to end Dec. 31 (worth $430 million)

— Raising the vehicle-license fee on cars 0.35 percent starting July 1 of this year (worth $1.2 billion)

— Increasing the state’s alcohol tax by an inflation-adjusted amount; this rate currently remains at 1991 levels (worth $210 million)

Democrats see the tax hikes as a way to avoid safety net cuts proposed by Gov. Arnold Schwarzenegger to bridge a $19.1 billion deficit in 2010-11. The Republican governor and GOP legislators already have said they refuse to consider new taxes.

So it’s clear that Senate President Pro Tem Darrell Steinberg has been paying attention to what went on in Oregon and Arizona, and is not afraid to buck the completely inaccurate conventional wisdom that the public doesn’t support new taxes – they DO support those taxes, including to prevent health and human services cuts, as proved by last week’s PPIC poll.

We can discuss whether these are indeed the best kind of tax increases to embrace. But we as progressives should keep that debate in context. The most important question is whether we have new revenues or not. Once you answer “yes” it’s much easier to decide what the revenues are.

The Senate proposal includes eliminating a new corporate tax break, restoring the taxes to 2008 levels, and extending a current income tax surcharge. It also includes a VLF increase and new alcohol taxes.

Some may claim that those latter taxes are “regressive” and would hurt the poor. That is not true, and we progressives must strongly reject such thinking. Spending cuts are the regressive solution. Every form of taxation is more progressive than a spending cut. Income taxes and corporate taxes are more progressive than a VLF increase, but a VLF increase is FAR more progressive than cutting CalWORKS spending or Medi-Cal spending.

Here’s why. Whereas a VLF increase will bite, it’s easier for a struggling family to manage that cost than it is to deal with losing their health coverage entirely. Or, as the New York Times showed today, cuts to child care such as those Arnold proposed would make it nearly impossible for many working families to get a job – whereas if they had child care and could get a job, a higher VLF is affordable.

Overall, the Senate Democrats deserve a standing ovation for realizing that California needs prosperity, not austerity, and that new revenues must be part of the picture. We can expect Republicans to fight this tooth and nail, but that’s only because they realize that if this proposal – or something like it – became part of the final budget deal, it would prove that Californians will support other progressive revenue solutions to save our public services and provide prosperity to all.

7 thoughts on “Senate Democrats Embrace New Revenues for a Budget Solution”

  1. Lets see My VLF last I looked on My car was $134.00 a Year and as to Poor(It’s a 1999 FORD Escort zx2 Hot Coupe), Oh I’m there and then some, I get $845.00 a month in SSI/SSP income as I’m a Disabled person(SSI[Supplemental Security Income] comes from the main Federal Budget same as the Militaries money does, SSP[State Supplemental Payment] comes from CA and is administered by the SSA[Social Security Administration]), So I think I’m very poor indeed, Arnold is very Rich(Filthy stinking, Like a SKUNK), Maybe He could pay My Fee? I doubt He would, As I guess the Republican Party bigwigs and demagogues like bootstraps as their just a bunch Liber Cheapskates who don’t want to pay their fair share.

  2. Robert, Robert, Robert…

    I love you “analysis” about how the VLF is a much better way to balance the budget than cutting spending, because, according to you, people without child care can’t get a job, whereas someone with childcare (paid for by the taxpayers) can get a job and then they can afford to pay more money to license their cars!

    Maybe you hadn’t noticed, but folks are having a heck-of-a time finding a job regardless of their childcare dilemma. So raising thr VLF on the people who ARE working just penalizes them again.

    “The problem with socialism is eventually you run out of other peoples money”.

    California has a SPENDING problem, not a revenue problem.

  3. Other states have successfully added taxes specifically targeted at the well-off.  Why are California Democrats afraid of this?

    For example, why the 0.25% surcharge that affects all brackets equally?  Arguably this is a flat tax, neither regressive nor progressive (or very, very slightly progressive because of the standard deduction).  This could be tilted more to land on upper-income taxpayers.

    Reducing the dependent tax credit disproportionately hits poorer working families.  It’s regressive, taking the same dollar amount away from every child, whether claimed by a minimum-wage worker or a billionaire.

    The VLF is progressive, I’ll grant you that.

    But by depending so much on the sales tax, and by keeping the state income tax

  4. I think there is a BIG difference of what they did in Oregon and Arizona . In Arizona they increased a low state sales tax by a bit over 1% with an expiration date. The Senate Dems in Sacramento now want to EXTEND a tax that they originally sold as a “temporary” increase. They want to increase the VLF to close to what it was under DAvis. Remember Arnold was elected in ’03 partly on the lowering of that tax.

    One can release all the polls one wants that shows Californians would rather have higher taxes than cut services…but I bet most of them think somebody else’s taxes are the ones going to be raised. If the DEMS in SAcramento go through with this I think it will hand the election to whoever the GOP nominates despite what any polling on taxes says.

    It makes much more sense to stay away from the nickle and diming the middle class, (raising the VLF, income tax surcharge, and alcohol taxes), and instead going after the yacht/luxury  tax and those making over a million a year. It’ll much much harder for the GOP to convince the voters those are things worth closing libraries and schools over.          

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