Posted 1:14 am Saturday, November 10, 2012
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It's not the taxes, it's the spending
Even Californians realize California can’t go on as it has — running up huge debts with little to show for them in either infrastructure or education. So on Tuesday, voters agreed to higher taxes.
But that’s not going to solve their problems.
“With the passage of the first voter- backed statewide tax increase in eight years, Californians sent a clear signal they are tired of failing schools, gridlocked roads and the deterioration over the past decade of the state’s reputation as a standard bearer,” the Bloomberg news service reported.
Proposition 30 passed by 54 percent to 46 percent. It raises sales taxes from 7.25 percent to 7.5 percent, and increases income tax rates on higher-income earners.
It was sold as a remedy to a problem “caused” by Proposition 13 — the 1978 measure that marked the start of nationwide revolts against high property taxes.
“That measure prompted cuts that reduced per-pupil school spending in California to 35th nationally from seventh and saddled the world’s ninth-largest economy with the country’s highest debt and lowest credit rating,” Bloomberg explains.
But there’s something wrong with that statement. Sure, Proposition 13 forced spending cuts. But not for long. The California legislature and the state’s municipalities soon created and increased other taxes to make up the revenue. In fact, spending on schools kept pace with the rest of the nation after the passage of Prop. 13; it wasn’t until 1985 that any gap appeared.
No, California didn’t have a revenue problem. But Proposition 13’s intention — to “starve the beast” of growing government by denying it the nourishment of tax money — failed. It didn’t fail because the principle was wrong; it failed because it was never truly attempted. California didn’t stop spending when it ran out of money; that’s why it finds itself in trouble now.
Gov. Jerry Brown’s intention, on the other hand, seems to be the opposite of starving the beast — he wants to carbo-load the monster. It will fuel little more than a new spending binge, though Brown himself has urged “the the prudence of Joseph” on future expenditures. The measure will raise an estimated $8 billion in the first year (retroactively, by the way, to Jan. 1, 2012). And nothing in the legislation says all of it, or even most of it, must be spent on schools.
Proposition 30 passed by 54 percent to 46 percent. It raises sales taxes from 7.25 percent to 7.5 percent, and increases income tax rates on higher-income earners.
It was sold as a remedy to a problem “caused” by Proposition 13 — the 1978 measure that marked the start of nationwide revolts against high property taxes.
“That measure prompted cuts that reduced per-pupil school spending in California to 35th nationally from seventh and saddled the world’s ninth-largest economy with the country’s highest debt and lowest credit rating,” Bloomberg explains.
But there’s something wrong with that statement. Sure, Proposition 13 forced spending cuts. But not for long. The California legislature and the state’s municipalities soon created and increased other taxes to make up the revenue. In fact, spending on schools kept pace with the rest of the nation after the passage of Prop. 13; it wasn’t until 1985 that any gap appeared.
No, California didn’t have a revenue problem. But Proposition 13’s intention — to “starve the beast” of growing government by denying it the nourishment of tax money — failed. It didn’t fail because the principle was wrong; it failed because it was never truly attempted. California didn’t stop spending when it ran out of money; that’s why it finds itself in trouble now.
Gov. Jerry Brown’s intention, on the other hand, seems to be the opposite of starving the beast — he wants to carbo-load the monster. It will fuel little more than a new spending binge, though Brown himself has urged “the the prudence of Joseph” on future expenditures. The measure will raise an estimated $8 billion in the first year (retroactively, by the way, to Jan. 1, 2012). And nothing in the legislation says all of it, or even most of it, must be spent on schools.
And on top of its normal $5 billion annual deficit, the state is facing a $500 billion pension shortfall. Proposition 30 won’t even make a dent in that.
Two Southern Methodist University economics professors say the outcome is predictable: an exodus out of the Golden State.
“Many beleaguered taxpayers are going to decide they’ve had enough and head for other states that don’t impose as heavy a tax burden,” say W. Michael Cox and Richard Alm. “The California weather and lifestyle just aren’t worth the higher price they now have to pay for it. So, welcome to Texas: The weather isn’t as good, but you’ll have more money to spend.”
California remains a model to other states: Here’s how not to do it.
Two Southern Methodist University economics professors say the outcome is predictable: an exodus out of the Golden State.
“Many beleaguered taxpayers are going to decide they’ve had enough and head for other states that don’t impose as heavy a tax burden,” say W. Michael Cox and Richard Alm. “The California weather and lifestyle just aren’t worth the higher price they now have to pay for it. So, welcome to Texas: The weather isn’t as good, but you’ll have more money to spend.”
California remains a model to other states: Here’s how not to do it.
