The headline says it all. Democrats in the state legislature are telling California voters that it doesn’t matter that you turned down the budget initiatives last May, we know better and the solution must include tax increases. That’s the only possible meaning of the Democrats’ proposal for eliminating the $24 billion deficit.
While the full Democratic proposal hasn’t been released, key elements have been. Here are some of the features:
– A 9.9% oil extraction tax;
– An increase in tobacco taxes. Cigarette taxes would increase from $0.87 to $2.37 a pack;
– Reversal of two corporate tax relief measures passed last September to allow passage of the 2008-09 budget; and
– A new $15 additional vehicle license fee tax to fund state parks.
Additionally, Democrats rejected Governor Schwarzenegger’s proposed 5% cut in the pay of state workers.
Two quotes from the story in the San Francisco Chronicle tell the full picture. First, Republican Assemblyman Jim Nielsen noted that the proposal was “…the most massive and quickest tax increase ever imposed in the history of California.” Given that tax increases require a 2/3 vote for approval, this measure may be d.o.a. However, I suspect Democrats will call the tax increases “user fees” in order to sidestep the measure. No matter, Governor Schwarzenegger has said that he will veto any measure with tax increases.
Meanwhile, Democratic State Senator Alan Lowenthal noted, “I’m really concerned when we put up any taxes as Californians are struggling to pay their mortgage, their rent and to put food on the table. The perception of the Legislature is we can’t live within our means. We have to realize we will pay a price for doing this.”
Apparently, Democrats believe that the price they’ll pay from the voters is less than the price they’ll pay from the unions if they pass pay cuts.
Here’s the reality: This proposal will not become law. Sooner or later California will have to learn to live within its means. I suspect we will see yet another budget stalemate, with California running out of money in July. Democrats in the legislature believe that they can print money. Only the federal government can do that. The day of reckoning for California has been postponed many, many times. It’s here.
The only solution is massive budget cuts. Governor Schwarzenegger’s budget (in general) spends what California will bring in. I suspect it might be late August or September before we see a budget where spending matches revenues.