Wednesday, July 1, 2009

We're each only about $650 short.

A lot of the reports about California's budget crisis make it seem as though the state is flat on its back and we are simply broke. A lot of public opinion reflects this view, for example a letter to the editor I read this morning, stating that "the taxpayers of California have simply run out of money and can't afford the likes of unsustainable government pensions and wasteful social programs." The fact is, however, that we have not "run out of money." When you do the math and divide the approximately $24 billion that the state is short by approximately 36 million Californians, you find out that we are actually only short about $650 each. Yes, that might be more than $2000 per family, a considerable sum for a lot of people, even an impossible sum for millions of people, but a manageable amount for a lot of others, and a trivial amount for quite a few people. Certainly, not all of us are broke.

Furthermore, when you actually do the math, you find that to close a $24 billion budget gap without raising taxes, drastic cuts in services would be required. But relatively modest tax increases make it a much easier job. Here for example is a tool the LA Times put out to allow you to fiddle with the budget deficit yourself. This forces anyone trying it to decide whether to shorten the school year, or close the state parks, or parole a lot of prisoners, and a whole lot of other things that might need to be cut to close the budget gap. Performing this exercise should help people discover that any fair attempt to solve the problem by relying solely on spending cuts would cost many people much more than their $650 share of the budget deficit. For example, a state employee who must be fired to help meet budget might bear 50 times their fair share of the state's fiscal shortfall. A community college student may be asked to pay more than their $650 share of the budget shortfall just to stay in school. So anyone who says the state should not raise their taxes by even another dollar is really saying that state employees and those who benefit from state services (which actually is all of us) should accept all of the sacrifice, but taxpayers should accept none.

A reasonable combination of tax increases and budget cuts could solve the state's budget problem in a still painful but more fair way, but the State Legislature is unable to agree on any kind of reasonable combination because the minority has the power to prevent that. The majority is being asked to bend to the minority's will, and is understandably frustrated at being asked to do that, particularly since the pain of relying solely on budget cuts will be so severe, while the pain of relying in part on tax increases should be more manageable. In short, although there is no free way to solve this budget problem, no one should be under the illusion that it is an unsolveable problem, or that we Californians, taken as a group of 36 million people, are simply too broke to solve it. We're not.


(Chart from the Ojai Post)

6 comments:

  1. Why don't we raise taxes to 100% of income then Kalifornia will have plenty of money and THEY can decide where I live, what I eat, and what I spend my money (well, their money) on. I could live in a better area, eat healthier food, and see better TV shows because the Democrats in Sacramento could choose it all for me and since they obviously know how to run a state so well I'm sure my life, and those of my fellow Kalifornians, would be much better.

    You may be on to something but just are scared to take it to its logical conclusion!

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  2. Harrison, I really enjoy your comments because they help me make my argument. I could just as easily try to scare you with the idea that we should lower taxes to zero percent, and then abolish schools, roads, police, prisons, courts, hospitals, parks, and everything else that we the people pay for through our elected representatives. I don't think either of us would enjoy living in that world either. But we are not talking about either setting confiscatory tax rates, or about abolishing taxes altogether. We are talking about things like whether sales tax rates should be 8 or 9 or 10 percent, whether state income tax should be 5 or 10 or 15 percent, whether gasoline or car registration taxes should be slightly higher, etc. In those discussions, I don't think the scenarios you are talking about come into play.

    My point, which you don't seem to disagree with, is that this budget crisis is going to cost the average person in California about $650, one way or another. And that anyone who says that he cannot afford to pay another penny in taxes, is really saying that somebody else should pay more than their fair share, whether that someone is a state employee, or a student at a state college, or someone receiving state services. And that those people who are already being asked to make major sacrifices, can't afford to suffer any more than taxpayers can.

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  3. My issue is that you put the onus on the taxpayer. Hey, it's only $650. Have you thought that maybe we are "$650 short" is because Sacramento has spent with reckless abandon? You think that if everybody coughs up the money the problem just won't happen again? That's how the sales tax keeps creeping up... oh just give us a little more money and that'll take care of it.

    When I moved to SF the Bay Bridge was $1 to cross and the Golden Gate was $3. Now the Bay Bridge is $4 I think and the Golden Gate is $6. BTW the Golden Gate Bridge was "sold" with the idea that once it was paid off the tolls would be eliminated. I sold a few cars to people who work for the GG Bridge and they are all union and the benefits/salaries they get are amazing. Creeping government spending is why we're in this mess.

    The public trough is not bottomless and taking from it has to stop.

    Do you have kids? If you bought your kid an iPod and he broke or lost it and wanted another would you give him the money to buy another one or tell him to get a job and buy it himself?

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  4. I'm not sure I agree with the "reckless abandon" comment. What I would agree with is that when the state is flush, our legislators tend to find a way to spend the revenues that the state has. (although to be fair, you should recognize that the state has also been known to cut taxes when it has had the ability to do so) I'm sure there is some waste there, but there are also a lot of useful projects that a lot of people want and benefit from. The reason we are in a budget hole now is not that the government became more wasteful, but instead that revenues are lower than they were last year because of the decline in economic activity. So we have to make up those revenues either by raising taxes or by cutting spending or both. If we try to make it all up by cutting, we are not just going to be cutting waste. We are going to have to lay off teachers, close down useful services, abandon worthwhile projects, release actual prisoners onto the streets, and a lot of other painful cuts. You should acknowledge that that is what you are advocating. It's not as simple as saying that all the government has to do is stop wasteful spending. If it were that simple, the legislature would easily have been able to find enough waste to stop.

    And the ipod analogy doesn't work at all either. The government did not break its ipod. The government just failed to anticipate a huge shortfall in revenues.

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  5. The Democrats broke the budget check out this graphic:

    http://www.ibdeditorials.com/images/editimg/issues01121807.gif

    Democrats increased spending by 33% assuming the fat tax revenues would pour in forever... well they haven't so time to go back to being fiscally responsible.

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  6. Taxes were already raised once, and revenues came in as less than projected.

    Hmmm... Wonder why that happened?

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