I will be on KRXA 540 AM this morning at 8 to discuss this and other topics in California politics

Regardless of your stance on Proposition 11, the redistricting reform measure, hopefully everyone can agree that it shouldn’t be used to distort reality, right? Unfortunately that’s exactly what’s happening in the media’s coverage of both Prop 11 and the budget fight. Today’s column from George Skelton is a perfect example of how the media likes to let Republicans off the hook for their failures by blaming Democrats instead – in this case for the long budget delay.

Skelton buys hook, line, and sinker – without the skepticism a journalist should normally display – the bill of goods that Arnold Schwarzenegger sells him on Prop 11 and the budget. Although Skelton acknowledges the 2/3 rule is more important, he still buys into the long discredited notion that legislative redistricting is the cause of Sacramento gridlock:

But I wouldn’t argue with Schwarzenegger’s thesis: Gerrymandering tends to reward extremism in both parties and punish compromise, locking lawmakers into ideological corners….

Republicans pledge not to raise taxes. Democrats promise a laundry list of social programs the state can’t afford.

Then they come to Sacramento and can’t compromise.

“With the redistricting the way it is done, Republicans can only win [primaries] if they’re way to the right and Democrats can only win if they are way to the left,” Schwarzenegger lamented to a Los Angeles news conference Wednesday, pitching for his budget proposal that includes a sales tax increase, billions in spending cuts and budgeting reform.

Neither Arnold nor Skelton are telling the truth, and I leave it up to the reader to determine whether this is a deliberate lie. The Democrats HAVE produced compromise after compromise. They have consistently agreed to spending cuts over the last several years and the joint Assembly-Senate Democratic budget plan this year included several billion in spending cuts, alongside new revenues. That’s exactly the solution a new PPIC poll suggests Californians want. Dems even put it to a vote – and Republicans shot it down. Republicans have yet to offer ANY alternative.

It is undeniable that it is the Republicans alone who are responsible for this budget delay. Look at the email Republican Senator Dave Cogdill sent rejecting compromise:

“The Modesto Bee wants me to raise YOUR taxes!

“I just wanted to pass on this morning’s editorial from one of our local papers. They are calling on my friend Assembly Leader Mike Villines and me to consider raising your taxes. I don’t think that’s what you elected me to do. You elected me to represent you and to fight for a commonsense budget that is not balanced on the backs of taxpayers. California is already one of the most over-taxed states in the nation. With an additional tax increase, we’d vie for number one. That is not a distinction this state needs, especially with a slowing economy.

“This state has a spending problem, not a revenue problem. A tax increase would only encourage more irresponsible spending, cause the loss of over 56,000 jobs, smother the economy, and hurt hardworking Californians. Instead of a tax increase, this state desperately needs budget reform, measures to stimulate the economy and fiscal restraint now and into the future.

Both Skelton and Schwarzenegger allude to the reasons for Cogdill’s and other Republicans’ refusal to compromise – if they do they will be subject to a primary challenge by another wingnut who will say “the incumbent voted for a tax increase,” which makes Republican legislators skittish:

Sitting in his conference room, Schwarzenegger told me: “They are saying things in here — and I never want to repeat it because what we say in this office shouldn’t be repeated — but it’s clear that their hearts are sometimes in the right direction. But they’re afraid to go back to their districts because they’d get slaughtered.

“They could never win anything again. Their political career is over.”

Schwarzenegger was referring to the Republicans he has been trying to lobby for a tax increase. But he added: “Same thing with the Democrats. They have those kind of fears.”

With Republicans running so far to the right and Democrats to the left, the governor complained, “they can’t meet in the middle.”

The first part refers to Republicans and is entirely accurate. But Arnold can’t tell Californians the truth, that this budget crisis is entirely the Republicans’ fault, so he tacks on at the end “oh yeah the Dems have the same problem.”

But they don’t. Democrats have been willing to propose spending cuts. It’s not fear of the left that has prevented them from compromising but the fact that Republicans refuse tax increases. Arnold and Skelton are not being straight with the public here.

More fundamentally, their views on Prop 11 and the budget defy logic. As has been explained countless times – apparently falling on deaf ears – “gerrymandering” is NOT the cause of Republican extremism. Most of California is politically self-segregated. There’s no way to draw competitive districts in San Francisco, Fresno, and south Orange County.

The Republican Party nationwide is characterized by a far-right anti-government zealotry that pervades the voter base and the funding sources. Prop 11 won’t change that.

Finally, Skelton again repeats the discredited canard that California has a spending problem. Instead we have a structural revenue shortfall – we don’t raise enough money to pay for basic services. Republicans know this but don’t have the guts to implement revenue solutions because they’re scared of their fellow far-right freaks. Republicans and Republicans alone are responsible for the budget delay.

But instead of placing the blame squarely on their shoulders, look how Skelton ends his column:

Good people working in a bad system — some of it, the gerrymandering, self-perpetuated by Democrats.

He winds up blaming Democrats for Republican failures. And we wonder why the budget is so late. If I knew that I could screw around and not do my job and someone else would get the blame, I’d do it too.

One of the most important but so far overlooked narratives of this election cycle is the return of taxes as a major political issue. The recession is hitting government budgets just as that same downturn, combined with soaring gas prices and global warming is creating demand for new spending.

Against this backdrop conservatives are now convinced that their way out of an ugly election cycle is to rally the public behind their rabid anti-tax politics. Constant attacks on Obama as a tax-raiser are partly to blame for McCain’s recent rise in the polls.

And here in the states Republicans are again turning to the tax revolt, their bread and butter for 30 years. Republican intransigence on the California budget is best seen as part of this national strategy to break Democrats on the tax rack.

The Wall Street Journal has a great overview of tax politics in the states, including a lunatic proposal to eliminate Massachusetts’ income tax and a equally nutty plan to allow Oregon residents to deduct an unlimited amount of federal tax on their state returns.

Here in California conservatives are already circling the wagons on taxes. John and Ken, the reliable bellwethers of SoCal conservatism, raked Arnold over the coals yesterday over taxes:

Schwarzenegger tried to defend new taxes as necessary because the state was still paying off debts incurred by predecessor Gov. Gray Davis. But the hosts pressed further and suggested that Schwarzenegger abandoned his original mission of fixing the state’s fiscal situation in order to pursue environmental goals.

That seemed to upset the governor, who maintained that his environmental policies had nothing to do with the state budget.

“This is absolutely absurd what you’re saying right now,” Schwarzenegger said. “….You’re living in the Stone Age if you think that the environmental issue has anything to do with the budget or the declining economy worldwide.”

“Don’t lie to the people,” Schwarzenegger added. “That’s all I can tell you, don’t lie to the people. Don’t pull wool over their eyes. It’s nonsense Republican right-wing talk.”

To which John and Ken then asked whether Arnold was under anesthesia. Stay classy, Los Angeles.

What this shows is that the conservatives are in no mood whatsoever to give ground on taxes. The drubbing John and Ken gave Arnold is a taste of what many Sacramento Republicans might face from within their own party. Their fear is that by voting for a tax increase, they’re going to face primary challengers who will simply tell the wingnut base “my opponent voted for a tax increase” and their ambitious political careers will be over.

So it seems very unlikely that Republicans will give in this time. That leaves it up to Democrats to force the issue. The only thing that should scare Republicans more than a primary fight is losing the general election. That means Dems have to go after Republicans hard – and that in turn means Dems have to finally stop avoiding the issue and for the first time in 30 years make a case for taxes.

The problem is that, with reporters like Lisa Vorderbrueggen repeating conservative tax framing, Dems have an uphill battle. Way too many Californians assume taxes are taken out of their own pocket and never returned to them, even though Californians derive great and real economic value from government spending.

One angle would be to, as Anthony Wright suggests over on the left-hand column, make the budget about the economy. Explain the value of the services Californians receive from government and show how, in a recession, the loss of those services will hurt their bottom line.

Dems would also do well to explain to voters how Republican tax cuts are behind this crisis – from the 1998 McClintock tax cuts to Arnold’s $6 billion VLF cut to the repeated borrowing that Republicans have demanded, this budget crisis would be quite manageable were it not for reckless tax cuts.

Further, explain how tax cuts are also responsible for our economic downturn. With more government spending on higher education, health care, and mass transit, many of the costs that currently cripple households would be eased.

It’s not about the “budget” and never has been. This about taxes. With their backs up against the wall conservatives have returned to the strategies that brought them to power in the first place, and in California that means stoking a tax revolt. Unless Dems are able to defang that argument this budget crisis, and perhaps even the 2008 election, are not going have a happy ending.

Those who believe in investing in health care, education, and other vital services appropriately focus in the budget debate on the devastating impact of the specific budget cuts.

Those who oppose the revenues and taxes that are needed to find those programs generally make a broad anti-tax argument, often with an economic case. Witness many of the Republican Assemblymembers who spoke during the five hour+ debate on Sunday.

But the fact is, it’s the investment that helps the economy, and we should make that case more often. Noted academics Steve Levy and Manuel Pastor had an excellent Sacramento Bee op-ed that makes this very point.

In a recent study “Significant Side Effects: The Economic Impacts of Health Care Cuts in California Communities,” Health Access California (my organization) looked at just the health care cuts: and the comparison is stark. It finds that, due to federal tax deductions and matching Medicaid dollars, preserving California’s health care budget would have three times the positive economic impact as preventing an equivalent amount of increased taxes for upper income Californians.

In fact, the worst thing you could do for an economy is make health care cuts, which means twice the impact just from the lost federal matching funds denied to our economy. There are also economic ripple effects, from lost jobs and wages, increased private health premiums, and more.

Money spent on health care immediately goes into circulation, through wages and vendors, which then gets recycled and multiplied in the economy. In contrast, an upper-income bracket tax impacts money that may be in the economy, or may simply be in the bank. Also, state income taxes are deductible on federal returns, which means that translates to be 35% less to the upper-income family, and in effect, more money in the California economy, courtesy of DC.

We need to forcefully rebut arguments that make economic claims about taxes without considering the economic repercussions of the cuts. Preventing the cuts is not just good for our health, but the health of the economy as well.

Cross-posted at the Health Access WeBlog.

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 Incarcerex^TM 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.

A few months late and several billion dollars short, Arnold has finally gotten around to making a serious revenue proposal – a 1 cent increase in the sales tax for a duration of three years. The SacBee reports this is expected to raise around $4 to $5 billion.

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.

[UPDATE] by Robert The LA Times has more details:

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.

Yesterday’s news that Democrats were considering borrowing to balance the budget, specifically the plan to raid transportation and local government funds, brought a  vigorous response from Democratic leaders in the legislature. Don Perata, Karen Bass, and John Laird all issued statements claiming to not support budget borrowing, although the parsing of the words matters.

Perata’s statement:

Today’s Los Angeles Times story about state budget negotiations is inaccurate and misleading. Democrats have never entertained massive borrowing as a solution to this year’s budget problem. In particular, Democrats have never advocated nor believed in taking money from Propositions 1A, 42 and 10.”…

“Doing another get-out-of-town-alive budget would do nothing to help this state but rather would endanger Californians’ standard of living and economic future.”

Denise Ducheny chimed in with her own statement along these lines, and later in the day Bass and Laird added their stance. Karen Bass:

“Major borrowing is not part of the Democratic budget plan, and we don’t believe it should be part of the final solution. Our proposal balances the budget with a mix of billions of dollars in difficult spending cuts and new revenues, similar to those proposed by a previous Republican governor. It’s gimmick-free and honest. It closes our budget gap in a straight-forward manner, and eliminates out-year deficits.”

John Laird:

Any proposal to borrow from voter-approved propositions is not coming from those of us who want to balance the budget without borrowing or gimmicks.

Strong words – but nowhere in them did anyone explicitly rule out borrowing from the transportation and local government funds. It’s comforting to know that Democrats did not propose these plans and that they do not wish to use budget gimmicks – but a firm rejection of the plans is what we really needed to hear.

Sure, some might say we should not be negotiating in public. But if Republicans get to say “no new taxes” then surely Democrats are able to say “no new raids.” As I argued yesterday raiding these funds would not only cause the state serious economic harm, but it would severely weaken the Democrats’ political fortunes in the process.

Californians’ opinion of the Legislature is low, and many don’t trust their politicians. That gives the right wing a major opening to push through damaging things in the guise of populism. Democrats need to stand up to Republicans and protect working Californians. Refusing to even consider raiding the Prop 1A, 10, and 42 funds is a small but necessary place to start.

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.

Going off the SacBee summary:

New income tax brackets

Revenue generated: $5.6 billion

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.

Cross posted from the Health Access Weblog.

Earlier this week, Governor Schwarzenegger called the number of uninsured in California a “moral crisis”–and he was right, both about that and the need for concerted action on health reform.

Unfortunately, the Governor’s cuts-only budget goes in completely the opposite direction, making our health care system even more broken, and leaving more people uninsured. Today, Health Access California is releasing a report that reveals the full magnitude of the cuts the Governor proposes–with over one million more Californians uninsured. While the Legislature has adopted some of these cuts and rejeced others, all of these proposals are on the table until a budget solution is agreed to.

This has gotten attention in the Sacramento Bee, the Los Angeles Times, and the Contra Costa Times.

Details under the fold…

New Analysis Reveals Full Impact of Governor’s Health Cuts:

One Million More Californians Would Lose Health Coverage

* Permanent Policy Changes, Not One-Time Cuts, Would Hinder Reform

* Magnitude of Cuts Would Have Ripple Effects Through System

* Health Consumers and Providers Urge Alternative to Cuts-Only Budget

Over one million more Californians would lose health coverage, with significant impacts throughout the state’s health system, if the Governor’s budget and health cuts were passed, according to a new analysis today.

The study, by the health care consumer advocacy group Health Access Foundation, uses information from the Schwarzenegger Administration, but shows a much greater magnitude than earlier estimates, which only looked at the impact of the cuts for less than a year, and not at full implementation.

The report is available on the front page of the Health Access California website, and directly at:

http://www.health-access.org/preserving/Docs/HACoverageImpactReporto6-25Final.pdf

The study shows that these health care budget cuts are of a magnitude that will impact every Californian, as they place huge burdens on the health system we all rely on. These are permanent, not just one-time cuts, to leave more than one million more Californians uninsured, and over three and a half million having to pay more and get less.

Previous summaries of the Governor’s budget proposals, including the May Revision, show the impact of the cuts in only the first year – with tens of thousands losing coverage or being barred from enrollment. But the impact is much greater, in three ways:

* The Governor’s budget is not proposing one-time budget savings, but lasting policy changes and coverage reductions for the health care system.

* A snapshot of the savings in the budget year does not reveal the full impact in the following years, once the reductions have been enacted and all the administrative changes have occurred to continue the reductions.

* Finally, the cumulative impact of all the proposed cuts, when added up together, suggests that the magnitude of the cuts-with more than a million more uninsured-will have impacts not just on specific programs but on the entire health care system on which we all rely.

The permanent policy changes reflected in the budget will be in place long after the 2008-09 budget year comes and goes. Of note, these policy changes are contrary to health reform proposals the governor previously put forward.

The cuts include:

* A roll-back of eligibility for basic Medi-Cal coverage for low-income working parents to well below the poverty level. (429,000);

* Additional paperwork burdens for children and adults, requiring reports every three months in order to avoid disenrollment (471,500);

* Suspension of already-passed legislation to streamline child enrollment (97,000)

* Increased premiums for children’s health coverage, leading to decreased enrollment (60,000).

The cuts represent a reversal for the Administration, reducing programs that just a few months ago were being considered for massive expansions to provide coverage to millions more people. Rather than shrinking the number of uninsured, the Schwarzenegger budget would increase the number of uninsured substantially.

The report includes appendices that include:

* a county-by-county breakdown indicated the increase in the uninsured by county by 2010, the last year of the Schwarzenegger Administration;

* a chart comparing the policy changes in the Governor’s budget that would restrict coverage, to the health reform proposal supported by the Governor earlier this year to expand coverage; and

* a further detailing of the populations that under the proposed cuts would be forced to pay more or get less benefits, totaling 3.5 million Californians.

Allowing one million more California children and parents to go uninsured creates ripple effects throughout the entire health care system. It includes:

* an increased burden on “safety net” providers, from emergency rooms to hospitals to community clinics-many of which are dealing with direct cuts of their own;

* a cost-shift, from both the uninsured and reduced Medi-Cal provider payments, to private purchasers of health care-which likely means increased premiums; and

* worse health and economic impacts for California communities, from the destabilizing impact of more children uncovered and getting sicker, to more families facing medical debt and bankruptcy for being uninsured.

As a result, all Californians-not just the million more uninsured-will be impacted these cuts. The report makes clear the stark choice the budget debate this summer presents for California policymakers, between allowing these devastating cuts to move forward and to make these structural policy changes to our health care system, or to find the revenues needed to prevent these cuts.