There are still a few fine folks left in California, we suppose, so we find no pleasure in reading that the state is $16 billion in debt. The state as a whole is sufficiently smug that we’ll admit to a slightly satisfying sense of vindication for our stingy prairie ways, but by no means do we stoop to schadenfreude.
California’s $16 billion shortfall is about $7 billion more than Gov. Jerry Brown anticipated when he proposed what was called an austerity budget at the beginning of the fiscal year, and he’s warning Californians that further cuts will now be necessary. The man known to both his admirers and detractors as “Gov. Moonbeam” deserves some credit for taking such a politically risky stand, but only so much. Democrats, especially ones of such impeccably Democratic lineage as Brown or New York’s Andrew Cuomo, can cut a budget and expect to be hailed for their hard-nosed realism and fiscal probity, whereas Republicans who cut budgets, especially ones of such low birth and Republican instincts as Kansas’ Sam Brownback or especially Wisconsin’s Scott Walker, can expect all manner of calumnies against their compassion and character.
Proving that he is still a Democrat through and through, his budget-cutting ways notwithstanding, Brown is also proposing tax increases. In a message to the state released on YouTube, where he has to compete for viewers with videos of street brawls and cute kittens, Brown said that next November’s ballot would include initiatives to raise the state sales tax by 0.25 percent and raise income taxes on people making more than that magical yet arbitrary amount of $250,000 a year. Given that everyone in California pays the sales tax, which is already the highest in the nation, and that most people there make less than $250,000 a year, we expect that the latter proposal will prove far more popular than the former.
Brown will likely find it difficult to persuade an overwhelmingly Democratic Senate and Assembly to start spending less money, but even if he does succeed it is unlikely to help in balancing California’s budget. Much of the bigger-than-expected budget shortfall is a result of state courts and federal regulators blocking the cuts that had already been made, and further attempts to limit spending will likely face the same stubborn resistance. With grievance-mongering still one of the state’s most vital industries, and a robust tradition of union thuggery and rioting in the state, one can also expect a nasty public reaction to any effective degree of budget-cutting.
The liberal explanation for California’s woes is to blame the 34-year-old Proposition 13, which infuriatingly restrains the state from taxing every last penny out of the citizenry, but we don’t believe that Brown’s tax increases will significantly reduce the deficit. Most of the blame for the budget crisis is being ascribed to the state’s lousy economy, which Brown describes as the worst since the 1930s, and adding to what is already the nation’s highest sales tax will further hinder growth, perhaps to the point that the tax increase becomes counter-productive. Even at a harmless-sounding quarter-of-a-penny the tax would also be a further burden to an increasingly impoverished population, given the extraordinary number of pennies it takes to live in the Golden State.
Raising the income tax rate, which is also the nation’s highest, will most certainly drive even more wealthy California taxpayers out of the state and result in a net loss of revenues. There is much to recommend California, such as its climate, natural beauty, and abundant resources, but there is nothing there that a wealthy person can’t find in some more hospitable tax jurisdiction. People have been fleeing California by the hundreds of thousands since 1990, and taking their tax payments with them, so a further increase will only hasten the exodus.
Most of the people leaving California are doing so because of the state’s high taxes, a regulatory system that thwarts entrepreneurship at every opportunity, and a popular culture that is not conducive to raising a family. The fewer number of people moving in do so for reasons that are harder to explain, given the high unemployment rate and myriad social problems, so we’ll assume most of them intend to become movie stars or are drawn to the state by its reputation for generous social programs and potent marijuana. In other words, the state is rapidly losing Republicans and gaining Democrats, so we don’t expect that California will soon ditch its high-tax, high-service model for the more austere sort of state government favored the rubes out here on the plains.
— Bud Norman
The Central Standard Times 