The Assembly Republicans have been practically begging for a vote. They really, really want to show the Club for Growth that they love them and put their anti-tax pledge over what’s best for the people of California. We get the point, you oppose services to the elderly, you oppose school funding, you oppose state parks, you oppose services to the mentally impaired, you oppose law enforcement funding, etc.
Of course, they won’t admit the last one, but to what other conclusion does the Party of IncarcerexTM want us to come? They don’t support funding counties and municipalities, thus they don’t support local law enforcement. Ipso facto and all.
So, Speaker Bass and the Assembly Democrats have decided to give the Republicans their greatest wish: a vote. They’ll get to vote it down, and they can once again bow at the feet of the Club for Growth:
Assembly Speaker Karen Bass, D-Los Angeles, said lawmakers plan to vote Sunday on a modified version of the Democratic conference committee plan, which relied on tax increases on the wealthy.
“It will be on a compromise version from the conference committee to where we are now, and reflect a variety of areas where we’ve compromised,” Bass said. “And it is critical that we take action before Monday because the Democrats have taken budget reform very seriously.”
For his part, Senate President Pro Tem Perata has said that the Senate is on-call for a vote on Sunday, but nothing definite has been scheduled. As every day passes, it becomes more clear that the Republicans lack the faintest notion of how to address the budget crisis. Any vote just emphasizes that all they have to say is one simple word.
No.
UPDATE by Robert: There’s going to be a rally at the Capitol in Sacramento at 12:30 today to protest the concept of a spending cap. It’s being put on be the SEIU California Council, AARP, CA Alliance for Retired Americans, and many others who understand the catastrophic damage a spending cap would mean for our state, especially for health care. It’s a good way to start pushing back against the Republicans, but it’s overdue, and needs to be the beginning of a much bigger effort to educate the public about what the Republicans want to do to this state.
Not one to offer a solution without strings, Arnold insists that this would only happen in exchange for “long-term budget fixes” such as a rainy-day fund. A rainy day fund is a good idea but that needs to come AFTER we fix the structural revenue shortfall.
The problem with Arnold’s proposal is that as most people recognize, sales taxes are a very regressive form of taxation. The Democrats’ tax plan would have relied on income and corporate taxes and would have generated nearly $10 billion in revenue, greatly easing the current crisis.
Instead Arnold, in typical fashion, thinks the poor and working Californians should suffer for the budget to be fixed. A smaller sales tax increase might not be a bad idea, but income and corporate taxes are the better solution, as those kind of tax increases promote more economic growth and provide more stability for state revenues. Another solution would be sales tax modernization, where goods and services currently exempt would be included to reflect a 21st century economy. That would provide more stable revenues while also spreading the burden out more fairly.
Democrats are in a stronger position than they realize on this. The public wants smart, effective solutions on the budget, and they want their services to be protected. Let’s hope they stick to those values.
PS: John Chiang tears yet another hole in Arnold’s ridiculous wage and jobs cut: the state does NOT actually face a cash crisis, Chiang told a Senate committee. Chiang is emerging as a hero on this, and Arnold’s attack on the workers is being revealed for the shock doctrine-style assault on wages and jobs that many of us always suspected it to be.
The increase of one cent per dollar would take effect soon after a budget is signed and last three to four years; after that, the tax rate would gradually drop. It would ultimately settle at a level lower than the current statewide rate of 7.25%.
That last part is troubling. I’d love to see a more progressive tax structure in California, and more reliance on income, corporate, and property taxes as opposed to the sales tax. But to turn this into yet another tax cut, outside of an overall and comprehensive revenue solution, is only going to make matters worse.
The Times also has more on the budget reforms Arnold is demanding:
The proposal, floated in meetings with the Legislature’s leaders and their staff, hinges on lawmakers agreeing to automatic spending restraints and new powers for governors to cut programs whenever the state falls into the red.
I wonder if those new powers would even be constitutional. In any case they’re very unwise. Separation of powers seems unfashionable these days, but it matters. The Legislature, as the most direct representatives of the people, must never cede this power to the executive branch. A line-item veto is bad enough. No governor should have unilateral power to make cuts.
Ultimately all of this shows that Arnold isn’t really interested in budget solutions, but instead wants to use the crisis to ram through far-right solutions that would otherwise never be accepted. Arnold is a textbook example of the shock doctrine that Naomi Klein so ably described in her recent book. Perhaps every Democrat in the Capitol needs a copy?
Yesterday’s SacBee has a Q&A with Darrell Steinberg on the budget. His answers are brief but brilliant – along with Speaker Karen Bass it is clear we now have leadership in Sacramento that finally understands not just what is wrong with the budget but how to properly frame it:
Q: Why would the Democrats roll out a tax plan that they knew ahead of time the Republicans wouldn’t vote for?
A: There’s actually some consensus that has developed over the past several years. It’s clear from even the way the Republicans are acting in the budget negotiations, there is a common recognition that we cannot cut our way out of this problem. The Republicans aren’t putting $15 billion of cuts on the table, for good reason. … That would implicate the department of corrections and law enforcement, public education, transportation, a whole host of other policy areas that are not necessarily partisan in nature, so now the debate is framed very clearly.
This is very good framing. He’s pointing out that Republicans tacitly accept that spending cuts are not a realistic option – that even Republican programs like prisons would be crippled. California voters need to hear more of this – that spending cuts are just not possible.
Q: Are the Democrats concerned that the increase in taxes would have a negative effect on business retention in California?
A: I think the Democrats are approaching the tax question in an intelligent way. Look at the upper-income tax. This was a tax that (Pete) Wilson, a Republican governor, pushed through. I know the claim is made that wealthy earners would leave California, but that belies the facts. I did Proposition 63, the mental health initiative, which was just a surtax on earnings over $1 million, and there hasn’t been some great flight out of the state. … People choose to live in California for a lot of good reasons, and ensuring that we have the resources to properly invest in education and health care and an infrastructure, I think, is more important to the business community.
These are excellent evidence-based arguments and build off of what Speaker Bass and John Laird have been saying – that California has previously turned to taxing the wealthy without cost to our economy. The lie that taxing the wealthy hurts the overall economy has been the cornerstone of conservative anti-tax sentiment for decades, and it is long past time for Democrats to be rejecting it.
Further, Steinberg touches on a point that should be made more explicit. It’s not just the business community that finds more value in good government services over low taxes – it’s working Californians. Most of us understand that Californians get far more in value from affordable, quality schools; affordable, quality education; affordable, quality mass transit, etc – but that message hasn’t been truly embraced by Democrats ever since Jerry Brown’s notorious “born again tax cutter” emerged the day after Prop 13 passed in 1978.
California owes its current economic prosperity – such as it is – to the legacy of Pat Brown. We’ve been living off of earlier government spending. Even Ronald Reagan increased taxes when faced with a similar crisis (in 1967). If Democrats can make that argument loudly and as often as possible they will undermine the Republicans.
Q: Does the state of California have a revenue problem or a spending problem?
A: That’s a question that is always asked in the political context, and I believe we have a revenue problem. … The governor went through the stage of blowing up the boxes … he didn’t find a lot of the waste, fraud and abuse. We have a very complex state, with a growing population and with significant unmet need, and so I think we have both a revenue problem, and we have a major structural problem. … We’re misaligned, for example. Local government has significant responsibility to provide services and little authority over the revenue side of the equation.
This is pure gold. Steinberg points out that Arnold’s own performance review failed to find the “waste, fraud and abuse” that we were told we’d find in the budget. It no longer exists, if it ever did. You cannot cut something that isn’t in the budget. Plus it’s nice to see him using the structural revenue shortfall framing I’ve been using for months.
Q: Why is it that the state always seems each year to spend more money than it takes in?
A: The system of public finance that we have in California is not keeping up with the public demand for public education, for more and better quality transportation, for improved access to health care, and for first-rate local government public safety and other services.
Steinberg refuses to be baited by the Bee’s leading question here, and insists that the problem is a government that cannot play the central role it needs to play in guaranteeing economic stability to all Californians.
Overall Steinberg is pushing out some great frames that attack the heart of the Republican nonsense that we can cut wasteful spending that does not actually exist. The Republicans are left to propose massive cuts to core services which they are of course unwilling to make. All they have left is a dogmatic stance that everyone now sees right through. If Niello is an emperor then he’s clearly got no clothes.
Wouldn’t that make an excellent headline? Instead the SacBee offers Schwarzenegger criticizes lawmakers for not reaching budget deal – Arnold kicks it in his smoking tent, or idly speculating about a post in the Obama administration on national TV while the Legislature remains divided on the budget. Here are the damning grafs from the article:
Schwarzenegger ramped up criticism of lawmakers this week, but he so far has refrained from using harsh tactics such as visiting lawmakers’ districts and cajoling them, as he did during a late budget in 2004.
The Republican governor has been meeting with leaders individually, though he said he “didn’t really want to interfere with their process.” The parties remain divided over whether the state should use tax increases to bridge the gap, as majority Democrats have proposed.
In other words, Arnold is reluctant to himself exercise the leadership that he claims is lacking in the Legislature.
His statements on specific proposals have been vague to the point of uselessness:
The governor attacked tax proposals in previous years, but he did not do so Wednesday. “I think this is their way of looking at it, and I’m sure they have their reasons,” he said of Democratic tax proposals. “And I think this is what makes the world go around. People have different ideas for how to solve a problem.”
The contrast with previous governors is stark. In 1991-92 Pete Wilson proposed tax increases and budget cuts himself and took a very active role in getting legislators on board with a plan to close the deficit without destroying state government. Whatever we think of Wilson’s governorship overall, he did not hesitate from exercising leadership to solve a much worse budget crisis.
Instead Arnold continues the trend that has defined his failed terms as our governor: playing to the media while ignoring the basic work of government.
But to leave it there would be letting him off lightly. We must not forget that much of this budget deficit is Arnold’s own fault. He came to power in the 2003 recall by promising a long-term budget solution. Instead he made matters worse by cutting $6 billion in revenue from the vehicle license fee, which is actually a $12 billion swing since the state spends $6 billion a year to pay local governments what they would have received with a restored VLF. He then insisted on borrowing to close the last big budget gap, causing ongoing budget costs of $3-$4 billion a year.
It seems more and more likely that when we historians assess the seven years Arnold was our governor, the ultimate conclusion will be that he made the rest of the state cover up for his failures so he could play a governor on TV.
(I added the Speaker’s Web report on the budget. There’s some good information in there. – promoted by Brian Leubitz)
I will be on KRXA 540 at 8 tomorrow morning to discuss this and other California political topics
I’ve been looking over the Democrats’ budget proposal and the more I see it, the more I really like it. It’s a testament to the leadership of Speaker Karen Bass and of Assembly budget wizard John Laird (not his official title but it might as well be) that they put together such a good plan. Of course it will be a starting point for future negotiations, but Californians should rally behind this plan, which provides for the public services this state needs to survive a tough economy without hurting working Californians with a tax increase.
The plan is smart, fair, and above all progressive. It would reverse the trend toward regressive taxation in California by finally making the wealthy pay their fair share. Just as Bush’s tax cuts have blown a hole in the federal budget, so too have the McClintock Republican tax cuts done the same to ours.
The first thing to understand is that, as Speaker Bass explained on a conference call earlier today, that we already have cut the budget. Over the last 3 years some $15 billion in cuts have been made, particularly back in February. We will hear the usual “more cuts!!!” from Republicans – but there really is nothing left to cut. We’ve cut fat, we’ve cut muscle, we’ve cut bone. We’re reduced to sucking out the marrow and leaving a bare rickety skeleton.
Second, the tax increases – some of which are temporary, some of which are permanent – are not designed to be the final solution to the structural revenue shortfall. Speaker Bass made a good point that while the income tax increase is permanent, it can and perhaps should be changed when the tax reform commission unveils its proposals next year.
Third, the increases will hardly hurt the economy. Many of these tools were used in 1991-92 with the severe budget crisis at that time and they did not prevent the state economy from going into recovery by 1993-94. Of course we need to get away from the notion that tax increases by themselves hurt economic growth – firing teachers, cutting public transportation, and closing hospitals are really what produce severe and lasting damage.
That all in mind I discuss the specific plans over the flip.
Reinstates 10 percent and 11 percent tax brackets for wealthiest Californians. Income tax rates range in California from 1 percent to 9.3 percent. The new proposal would raise the rate to 10 percent for “taxpayers filing joint returns with taxable income above $321,000 and 11 percent for those with incomes above $642,000.”
This title from the Bee is misleading – the brackets are NOT new. They were created in 1991 and then recklessly cut in 1998 when Tom McClintock insisted on new tax cuts at the height of the dot-com bubble. This tax would be permanent but, as Speaker Bass noted, these wealthy individuals can deduct that amount on their federal income tax return. It’s a wash for them an a boon to the state.
In any event this revenue solution is smart, fair, and desperately needed. Even if the other proposals are abandoned, this one should stay.
Suspend “net operating losses” for corporations
Revenue generated: $1.1 billion
For three years, big business would lose its “net operating loss” deduction. That allows companies to carry forward losses from one year to the next and use them as a deduction in taxes.
This would only apply to businesses making over $5 million in profit, protecting small and medium businesses. Again it is a progressive solution that pushes the tax burden onto the rich to benefit the masses.
Suspend inflation indexing of state income tax brackets
Revenue generated: $815 million
This plan would suspend the adjustment of income tax brackets for inflation. As a result, Democrats say, a single filer with a taxable income of $50,000 a year would pay $34 more, while a taxpayer with income exceeding $97,000 would pay about $180 more.
$34 per person is a very small price to pay. Especially considering that wages are not rising much due to this current inflation – indexing of tax brackets was done in the 1970s in response to the “bracket creep” that stagflation produced.
Eliminate dependent credit for those with incomes above $150,000
Revenue generated: $215 million
The dependent tax credit was $294 last year. The LAO proposed lowering the credit to $94 — the amount of the individual exemption. The legislative Democrats have proposed lowering the tax credit for those taxpayers with adjusted gross income above $150,000.
This is a necessary tax loophole closure, but it is right to protect those middle-income families who have children.
Raising the franchise tax
Revenue generated: $470 million
The top tax rate for corporations is currently 8.84 percent. The proposal returns the tax rate to 9.3 percent, where it was in 1997.
This will finally undo one of McClintock’s reckless 1998 tax cuts that blew a hole in the state budget during the temporary dot-com boom. Republicans cut taxes during the flush times, not leaving Californians with enough during the hard times.
Steps up tax enforcement
Revenue generated: $1.5 billion
This is a plan to collect taxes already owed to the state, to be “modeled after successful tax amnesty efforts in the past,” according to legislative Democrats. They said some of the $1.5 billion in revenue “will be an acceleration of revenues that would be paid in the future.”
A no-brainer.
All in all these are smart and fair solutions that will protect vital state programs and services from radical Republican slashing. We cannot afford more cuts, but we CAN afford new revenues.
One thing you can usually count on in a hostage crisis is that the hostage takers will eventually start to freak out. And so it is with Assembly Republican Leader Mike Villines, who let loose on Democrats in an interview with Valleyfornia. (h/t to Josiah Greene at the CMR) Some highlights, beginning with his whining on dams and environmental rules:
That’s a liberal minority of people these environmentalists, who I call whackos, who are totally out of touch with reality (that) are controlling the legislative process.
Right there Villines explains why his party is viewed by even other Republicans as tainted dog meat – in a state that is so strongly environmentalist, California Republicans have deluded themselves into thinking that voters actually think the way Villines and his Rush Limbaugh-fed colleagues do.
Villines then predicted that Republicans would win seats if the redistricting measure passed – showing the “government reform” groups supporting that plan to be useful idiots – because, in his words,
They are totally out of touch with reality. Their main issues are gay marriage, no reservoirs, no taxes. This is not mainstream California. They are out of touch.
Psychologists might call that “projection” but we can just call it the last gasp of a dying party. Unfortunately that dying party has a lot of power with the 2/3 rule and they are using it for all it’s worth. Villines says some progress is being made in negotiations with Speaker Bass and the Senate leadership but these comments ought to suggest they’re locked inside the building for the long haul, until all their demands are met. If innocent Californians are hurt, well, tough – such is the mentality of the hostage taker.
The Field Poll has been surveying Californians’ attitudes on Prop 13, and the broader issues of taxes and spending. What they’ve found is that Californians don’t want spending cuts, prefer spending cuts to new taxes – but also are willing to support new taxes if they’re the only way to prevent health care cuts.
Reading these poll numbers against the Field Poll’s Prop 13 numbers, which indicated ongoing support for Prop 13 and a belief that the state’s problems stem from spending and not tax problems it seems clear that there is a massive disconnect among California voters. They cling desperately to the belief that government waste and overspending is the problem of deficits, otherwise they might have to honestly and openly explain that their support for tax cuts is a desire to get government-sponsored tax shelters at the expense of everyone else in society and our state’s economic competitiveness.
Frank Russo argued the Field Poll numbers might provide a “road map” forward for the legislature. I agree, although that map suggests confrontation will be the first stop on the trip. Something has to give – Californians cannot maintain their low-tax environment without crippling spending cuts they say they don’t want. Republicans will take that to mean a stubborn refusal to increase taxes is popular with voters; they’ll not be inclined at all to seek new revenues.
What is really needed is a strong and persistent argument from Democrats – in Sacramento and in the grassroots – that our state has a structural revenue shortfall – that our problems really do stem from a lack of revenue, that a state ranking 46th in per pupil school spending doesn’t have any revenue to cut. We need to not shrink away when Californians insist that our problems are on the spending side – those Californians are wrong.
It’s especially important to begin with fellow Democrats. The Field numbers suggest that many Democrats are ardent defenders of Prop 13 and believe spending cuts are preferable to tax increases. These Democrats should be the target of a broad-based and long-term campaign to show them the error of this thinking – that their Democratic values are not compatible with these thoughts on budgeting.
It won’t be easy, but it is necessary if we are to fix this state.
The 30th anniversary of Prop 13 has brought out a raft of commentary in the state media. This commentary tends to split on whether Prop 13 benefited or hurt the state – as if there is still any doubt that it was a disaster – but it rarely examines some of the underlying assumptions of Prop 13, and even more rarely does it explore the deep inequality it has enshrined into our state.
Much of this stems from a fundamental misunderstanding about what Prop 13 was and what it did. Voters convinced themselves it was a populist revolt against rising property taxes. They believe this so fervently that they act as if they willed it into existence.
In fact Prop 13 was an extremist attack on the very practice of state government by a group of far-right activists, with property taxes used as a convenient cover. Those who voted for – and who say they would vote for it again – still seem to believe its primary purpose was to protect homeowners, when its true goal was to destroy public services by starving government of revenue – otherwise why include the 2/3 rule? Why give commercial property the same protection as homeowners?
Further, there seems to be widespread misunderstanding about the level of taxation – especially property taxation – in California. California ranks 38th in property taxes. Somehow homeowners in the 37 states ahead of us haven’t been losing their homes to taxes. One consequence of Prop 13 was a shifting of taxation to sales and income taxes – sales taxes are regressive and income taxes can be volatile. Prop 13 is therefore directly responsible for California’s regressive and unstable budgeting. No Prop 13, no structural revenue shortfall.
California’s per pupil school spending, which was among the top 10 states in the 1960s, is now among the bottom 10. Proposition 13 alone is not responsible, but along with two major court decisions that preceded it, it helped decouple school funding from the local tax base and thus undercut voter incentives to fund education generously, as it had been in the generation after World War II. Our roads, once a national model, are an embarrassment. …
California once had a communitarian ethic. That’s been turned into a market ethic. It once did serious planning for the future. For now, that’s a nearly forgotten hope.
Prop 13 helped create a “homeowner aristocracy” – where those who bought their homes before 1976 are given preferential treatment and tax shelters while everyone else has to pay market rates. Some argue that those on fixed incomes deserve protection from rising tax bills, but it is difficult to have sympathy for this when the method of protecting them – Prop 13 – has produced a generation of inequality that leaves most folks under 35 unable to ever own a home in California.
Why should some homeowners get government subsidies and others do not? Why is it that under Prop 13 we protect some homeowners at the expense of future generations? If we are to right the state’s finances, provide economic security for all Californians, deal with the energy price and global warming crisis, and have a competitive 21st century economy, we need to reexamine our priorities, and be willing to move past obsolete 1970s faux populism.
Last fall I took the LA Times to task for framing the state budget crisis as a problem of “automatic” spending, and not being sufficiently attentive to the structural revenue shortfall that is the true cause of the budget problem.
Take, for example, Sunday’s SacBee column from Daniel Weintraub, California Budget 101: What went wrong, when. Weintraub’s column purports to be a “a fuller explanation of the dimensions of the problem” – but winds up repeating the same discredited arguments, namely that this is primarily a spending problem:
But the economic issues only worsened a basic, structural problem in the state budget: Spending is programmed by law to grow each year at a rate that is generally faster than tax revenues can match. Current state law would push general fund spending to $113 billion next year if nothing is done to slow it, according to the Schwarzenegger administration. Revenues, meanwhile, are projected to decline further, to about $95 billion. The budget Schwarzenegger celebrated last summer would have bridged the gap for one year at best.
Weintraub then goes on to detail the education, health care, prisons and transportation spending that makes up that growth. But nowhere in his column would you see the following:
Tom McClintock and Arnold Schwarzenegger’s $6 billion VLF cut
And of course, the start of the state’s budget problem: Prop 13.
In other words, Weintraub makes it sound like the state is in a budget crisis because it is overspending, instead of because it is undertaxing. This is especially important when we consider what the state has been spending on – education, health care, and transportation – the very things California needs to remain competitive in a globalized 21st century economy.
The aforementioned George Skelton column provides an excellent contrast, showing what a more accurate explanation of our budget problem would look like:
People, one place it [additional spending under Arnold’s administration] went was for Schwarzenegger’s car tax cut. Yes, that tax cut counts as spending — about $6 billion annually. It’s because revenue from the car tax — the vehicle license fee — had gone to local governments, not the state. The governor generously agreed to replace the locals’ lost revenue with money from the state general fund. But he never replaced the tax he grandiosely whacked. Big hole. Big mistake.
The 2000 decision to spend most of a one-time, $12 billion tax windfall on permanent spending and tax cuts that could not be sustained, leading to the state’s chronic budget deficits, is another [wrongheaded move].
And to his credit, Walters has argued for higher taxes, although as part of a holistic budget reform package that contains some problematic ideas.
The fact is that if we are to finally end 30 years of budget crisis, we have to find new revenues. The notion that any new taxes cripple economic growth is absurd – both California and the federal government hiked taxes between 1990 and 1993 and it didn’t prevent the 1990s economic boom. The investment in education and mass transit helps create more investment while saving commuters, students, and workers money; and universal health care (or even a modest expansion of government-provided care) creates significant savings for businesses and employees.
A focus on spending, however, blinds us to the structural revenue shortfall and leads Californians and their politicians to assume the only way out is to slash spending – which would make the cost of doing business in California, and the cost of living here, significantly higher.
Without solving the revenue problem, we will never cure this chronic budget crisis.
It’s been a few weeks since I wrote about this, but surely you all still remember my insistence that what California faces is a structural revenue shortfall – that our budget problems are the cause of a long-term inability to raise enough money to pay for our basic services, and not with how we spend that money.
Obviously such a shortfall can only be closed through new revenues – and yes, that means new taxes. Californians need to finally understand that tax cuts are not a freebie – they come with enormous costs, and that the high price of higher education, their lack of mass transit options, their lack of affordable health care, and the looming K-12 disaster with 20,000 fired teachers are just some of those costs. 30 years of tax cuts have produced social inequality and a lack of opportunity, and only new taxes can reverse those trends.
Facing the worst fiscal crisis of his political career, the Republican governor in recent months has signaled in increasingly frank language that he would consider new taxes as part of a compromise to close an $8 billion deficit.
To be sure, he’s never declared: “Let’s raise taxes.” But more and more, he’s saying he is at least open to discussing it.
“I made it very clear my proposal” does not call for raising taxes, Schwarzenegger said at one of several appearances around the state last month addressing the budget. “But I’m not the only one that is running the Capitol. I’m not the only one that is running the state of California.”
Legislators, he added, are also involved in budgeting. And in the process of finding a compromise with the governor, higher taxes might enter the picture.
“I said and I made it very clear that everything is on the table,” Schwarzenegger said…
…Since then, the governor has struck a more compromising tone, suggesting that ideas such as closing tax loopholes, or applying the sales tax to services currently not subjected to it – such as, say, haircuts and legal advice – should be on the table….
Some experts say it reflects a battle between two identities – one, the anti-tax conservative and self-proclaimed disciple of free-market economist Milton Friedman; the other the political realist trying to fix the state’s daunting fiscal problem and dealing with a Democrat-controlled Legislature that resists his vision.
It’s not surprising that the Merc points to Arnold’s affinity for Milton Friedman – I’ve written before about how Arnold’s budget plans are a kind of California shock doctrine. But it is also interesting that Arnold is gingerly exploring the path of new revenues as a possible solution.
Sales tax modernization in particular has been identified by groups like the California Tax Reform Association as a valuable method of raising billions in new revenues, as the current sales tax is more appropriate to the 1960s than the 2000s in what it covers.
It might be too much to ask Arnold to revisit the Vehicle License Fee cut, which the California Budget Project estimated cost the state a whopping $6.1 billion for the current fiscal year – more than enough to wipe out the proposed education, parks, and health care cuts, all at the cost of about $150/year per person.
Of course, Arnold’s new willingness to support taxes – such as it is – runs into the stubborn opposition of the Yacht Party – Republican legislators who prefer to protect tax loopholes for the wealthy instead of doing their jobs and helping the state meet its public services obligations. These legislators are hell-bent on preventing any new taxes from being passed, and Arnold’s support for new taxes would likely just cause them to dig in even more deeply.
All this suggests that the battle over the budget will not be won in the halls of the Capitol, but in the court of public opinion. Californians are going to have to step in and play the decisive role here, most likely by telling the Yacht Party where to stick it. In that sense Arnold’s willingness to back new taxes is a big plus, as one of the few things Arnold is good for is mobilizing popular support for policies. Polls already show that Californians support Democrats on the budget, and with Arnold on their side, Dems might just be able to isolate the Yacht Party.
How exactly that isolation occurs will be key. Republicans will either have to fold under threat of losing their seats in the November election (a successful Denham recall would be very useful here) or we may have to go to the November ballot itself with a tax package, bypassing the Republicans. Either way, mobilizing the public to oppose the Republicans and support revenue solutions is the only way we will resolve this crisis.
