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Cutting through the state budget rhetoric

By Josh Richman
Wednesday, January 9th, 2008 at 11:25 am in Arnold Schwarzenegger, Assembly, California State Senate, Sacramento.

The governor’s State of the State Address yesterday, and the unveiling of his initial budget proposal tomorrow, means it’s time again — and really, is it ever not the right time? — to consider how California raises money.

schwarzeneggers-address.bmpThe governor yesterday flatly rejected any possibility of a tax increase — “I said it back during the recall and I’ll say it again; we do not have a revenue problem, we have a spending problem.” But he also noted the across-the-board budget cuts he’s contemplating are morally hard to swallow: “I mean, talking about fiscal responsibility sounds so cold when you have a representative for AIDS patients or poor children or the elderly sitting across from you.”

Keep in mind that tomorrow’s budget is the first round of betting in this high-stakes game of poker — it’s when the governor sets his ideological stance, from which negotiations will start. Some believe that as the May revision approaches — the real start of budget talks — he’ll soften his line and might even support some way of increasing revenue, though he’ll be hard-pressed to push a true tax increase through the Legislature (especially the Assembly) where Republicans are sure to stymie the requisite two-thirds vote.

But whatever the endgame, the rhetoric is flying hot and heavy already — the governor’s speech yesterday was met by a flurry of statements not only from Legislative Democrats but from social-service agencies as well, decrying the projected cuts and calling for other alternatives.

The Center for the Continuing Study of the California Economy has an interesting piece on “Is California a High Tax State?” which should be required reading as the debate goes forward.

Ditto for the California Budget Project’s “Who Pays Taxes in California?,” which has an important observation to balance Schwarzenegger’s statement yesterday that “the top 10 percent of our population, those making more than 119,000 dollars a year, pay nearly 80 percent of the taxes.” From the CBP:

Measured as a share of family income, California’s poorest families pay the most in taxes. The poorest fifth of the state’s households, with an average income of $11,100, spend 11.7 percent of their income on state and local taxes. In comparison, the wealthiest 1 percent,
with an average income of $1.6 million, spend 7.1 percent of their income on state and local taxes.

So the rich might contribute more dollars to the state’s coffers, but it’s less of a hit for them than for people on the financial edge — the kind of people who are first to suffer when social services and public education take budget hits.

And, if anyone finds this helpful, the U.S. Census Bureau tells us that California collects the most taxes of any state — $98.4 billion in 2005, $111.3 billion in 2006 — which is unsurprising considering we’re by far the nation’s biggest state. But that same data (for 2005, as I couldn’t find it for 2006) says California ranks 9th among states for per capita tax burden, $2,724.31.

So where are our problems, really?

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  • janinsanfran

    Thanks for this enormously helpful run down of the situation. Until we restore the ability of government to tax by majority vote, the state government will continue to be a long running, dysfunctional, comic opera.