July 20, 2007

Budget musings

According to Don Perata, the budget package approved by the Assembly overnight includes about a half billion in tax cuts, for research and development, Hollywood film makers and jet fuel. The budget also has an operating deficit, meaning it proposes to spend more in the next 12 months than the state will take in from taxes. Yet it cuts taxes further. Republicans will argue that these tax cuts will actually increase revenue to the state. But narrowly targeted breaks for special interests are a terrible way to set tax policy. The best way to increase revenue is to have a tax system that is fair and simple and encourages all kinds of economic devleopment, and to have a kindergarten through university education system that helps Californians get ready to work, invent, create and invest in the future of the state.

It's not clear yet whether the Senate Republicans have made the tax cuts a condition of their agreement to the budget package. It's possible that the Assembly Democrats voted for the cuts only because they assumed they would die in the Senate.

It also appears, by the way, that Democrats are voting for the transit cuts the governor proposed on the assumption that they will be declared illegal by the courts. That's a nice way to get out of town with a budget Republicans would support, while assuming that the judicial branch will blow a hole several hundred million dollars wide in it before long.

Posted by dweintraub on July 20, 2007 6:17 AM