Michael Hiltzik who for some reason has become the new voice of opinion in the business section of “my” L.A. Times launched on The Governator last week (sorry for the delay in blogging, I’ve been busy):
Gov. Shuns Most Obvious Fiscal Remedy
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For someone who accumulates praise for his do-it-now demeanor the way a scow collects barnacles, the governor certainly does a lot of whining. In truth, his budget can have anything in it he wants. If any California governor in the last 20 years has had the chops to prevail over this “broken system,” it’s him.
Yet he insists, “This is all the money we have…. We must live within our means.”
The only thing limiting the amount of money the governor can spend is his doctrinaire refusal to acquire it from the most efficient and least costly source: the tax rolls. It’s obvious from his budget that he endorses in principle most of the spending programs the state undertakes — on schooling, road building, environmental protection anod so on — or he would have taken a sharper ax to them.
But he keeps running from his responsibility to inform the voters that the right way to pay for them is cash on the barrelhead. Instead, he argues that putting the bill on the charge card — more than $2 billion in new debt this year alone — is the more responsible path.
Nor is it accurate to say that a tax increase is a “liberal” solution. Govs. Pete Wilson and Ronald Reagan, facing deficits like today’s, temporarily raised the top tax rates on the state’s richest residents to 11%.
Perhaps Wilson, who advises the governor, wants to spare him the pain of being pilloried by the right wing, but that’s a meager rationale for fetishizing the current top tax rate of 9.3%. (My rough math says that raising the top rate to 10% on all incomes higher than $500,000 and 11% on those beyond $1 million would yield as much as $2.5 billion a year.)
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You can reach Michael Hiltzik at golden.state@latimes.com and read his previous columns at latimes.com/hiltzik.
Why can’t Jill Stewart be writing this column? Oh – sorry, the Times would never hire her back. That’s their loss (and ours). Here’s Jill, on the very topic of Mr. Hiltzik’s ‘obvious’ solution:
Elizabeth Hill, the state legislative analyst, who strives not to side with Democrats or Republicans, pointedly explained that corporations comprise only a small part of the roughly $70 billion tax revenue–roughly $6 billion.
That was a shock to some Assembly members. Hill noted, again rather pointedly, that “the top 5 percent of Californians pay 42 percent of the income taxes” and that just 10 percent pay 80 percent of income taxes. Furthermore, large numbers of millionaires and those making $100,000 or more have vanished. Some went broke, but others left for states that don’t make them carry as big of a load, like tax-free (and booming) Nevada.
The packed audience at the special hearing appeared stunned. The message was clear: There aren’t enough corporations and rich around to pour huge new tax dollars into state coffers and save us.
Here’s Dan Weintraub (who also would be a damn site better as a columnist):
Nobody knows how those wealthy taxpayers would react to such an increase. If they stayed in California, and didn’t change their behavior, the state treasury and those who rely on it for services would be better off. And certainly a tax increase of a few thousand dollars on someone making a half-million a year would seem unlikely to drive them from the state.
But if the increase prompted just a few thousand of the wealthiest taxpayers to flee California, then the revenue decline it would cause could make the past year’s drop seem mild. The truth is you could put thousands of laborers to work at good wages and probably not compensate for the lost income tax from one departed millionaire.
Even if it worked as intended, raising taxes on the wealthy would push California out on a fiscal limb that everyone already knows is weak. Had the higher rates been law during the late 1990s, the revenue growth the state experienced would have been even greater. And the decline, when it came, would have been even steeper.
Going further in that direction would make the state’s masses even more reliant on the good fortune of a few than they are today. And as the last few years have shown, in the long term that can be a very risky proposition.
One major reason, many analysts agree, for the fiscal collapse of california is that tax collections collapsed faster than the economy did becase they were so dependent on high-wage earners – whose wages either collapsed in the dot-bomb era, or who took their liquidity and managed their ‘taxable’ exposure through deferred compensation or other strategems, or who simply moved to a lower-tax state.
I believe strongly in progressive taxation.
But I believe more in a tax policy that works, provides stable revenues to state and local governments, and is accompanied by some measure of fiscal prudence on the part of that goernment.
I outlined some notions of such a policy quite a while ago.
My party handed out millions of dollars as party favors in the 90’s, and the credit card bills are now coming due. My party ought to take the lead in finding a solution – one other than asking Dad for his Mastercard, so it can be charged up too.