July 9, 2008

Points and counterpoints on Dems' tax plans

The reactions to the budget stalemate -- and the Democrats' plan to raise revenues through a series of tax hikes -- have been pouring in via press releases, events and blogs. Here's a sampling:

Karen Bass, the speaker of the Assembly, said, "Californians are telling us don't decimate education, don't shred the safety net, don't close parks and provide health care for kids -- don't close clinics."

"The straight truth is that takes revenue," she said.

But California Taxpayers' Association President Teresa Casazza said, "This is not budget management. This is a recipe for recession. During an economic downturn, the last thing Californians need are more taxes."

Not that the taxes will pass, blogs Jon Fleischman, a vice chairman of the state Republican Party, on the FlashReport.

"Fortunately for California taxpayers, the California Constitution requires a two-thirds vote to pass both tax increases and a budget," he writes. "I spoke with several Republican legislators from both chambers last night, and there is no interest whatsoever in supporting this proposal. It is dead in the water."

Tim Herdt, the Ventura County Star columnist, sees the two-thirds requirement differently. "The budget is chronically late for a single reason: 81 of the state's 120 lawmakers have to agree to it," he reports.

Back to the taxes at hand, Democrats are generally sounding supportive.

"A cuts only budget devastates the most important infrastructure in California, the intellectual infrastructure. The economy cannot succeed unless we have the best education system in the world. We are far from it," Lt. Gov. John Garamendi, a Democrat, said in a statement.

Assemblywoman Fiona Ma, D-San Francisco, sees the taxes-not-just-cuts approach helping the poor. "When families are choosing between rent, food, and gasoline costs, this is not the time to severely cut social programs Californians need the most," she said in a statement. "Closing tax loopholes, making reductions where we can, and asking those who can pay the most to help their neighbors have delivered a balanced budget."

Senate leader Don Perata, D-Oakland, says too deep of cuts will damage California's future. "We will not turn California into a second-class state," he said.

Assemblyman John Laird, a Santa Cruz Democrat and the Assembly's chief budget writer, called the plan "compassionate budget that fixes California's budget problem and restores draconian cuts the governor proposed."

"This is a compromise budget that includes a responsible mix of cuts and revenue increases," Laird said.

Republicans, well, just plain disagree.

"Raising the rates in two tiers, up to 10 and 11% should strengthen the Mayflower portion of the economy as more investors and companies and their employment load onto those moving trucks," Assemblyman Doug LaMalfa, R-Oroville, wryly blogs on the FlashReport. "Many are staying home this summer because of skyrocketing fuel prices as well as higher costs of food and everything else ... couple that with this tax plan ... yeah, lots of happy families in California this year."

Sen. Bob Dutton, the Senate GOP budget vice chair, agreed with LaMalfa: "With California families paying more than $4.50 a gallon for gasoline, significantly more at the grocery store and have seen the value of their homes plummet, the last thing we should do is further burden taxpayers but that's exactly what Democrats have proposed to do by raising taxes."

Joel Fox, president of the Small Business Action Committee, writes on Fox and Hounds Daily that "there is a clear disconnect in understanding the effects of tax increases on the budget. "

"The Democrats trumpet their proposal of creating two new tax brackets for upper income taxpayers by pointing out that (Gov. Pete) Wilson raised taxes to those levels during a budget crisis in the early 1990s," Fox wrote. "Nowhere is it mentioned that the upper income tax increase did not bring in the revenue expected. It stymied growth and killed incentive and income tax revenue was flat after the tax increase was implemented. Wilson later called the tax increase a mistake."

The take of Assemblyman Roger Niello, the Republican vice chairman of the Assembly Budget Committee: "The Democrat majority believes that we need to pile on with tax increases so that the government doesn't have to make the tough adjustments that California families must."

But Laird, the Democratic chairman, says now that Dems have announced their tax plan, it is time for Republicans to specify all the cuts they want.

"If a cuts-only budget is the alternative, then we need to see a detailed proposal put on the table for everyone to see," Laird said.

Loren Kaye, president of the California Foundation for Commerce and Education, a business-backed think tank, criticized the specific policies in the Democrats' plan.

"First, about one-fifth of the revenue increases are really just accelerations or gimmicks, which would create a $2 billion hole in next year's budget," Kaye wrote on Fox and Hounds.

"Second, about two-thirds of the tax increase is aimed at high-income Californians, who are far more able to become high-income residents of other states than are other California taxpayers. Have no lessons been learned about the volatility of California's income tax and the mobility and flexibility of the upper reaches of the economy?"

Kaye concludes: "The best that can be said of this action is that the Democrats have finally played the tax card, which means that legitimate negotiations and vote counting can finally be engaged. Next move is ... Governor?"

But Gov. Arnold Schwarzenegger seems none too eager to take the lead. In an appearance this morning, he hedged about what comes next:

"I want to have Republicans who are working very hard to fix the budget, I want to have the Democrats working hard to fix the budget. Take all their proposals, put it on the table, there's a lot of creative minds over there at the Capitol. You know, we have had some answers, we think great answers, to find a solution."

OK, then. Problem solved.

As for the all-important question of whether he'll back new taxes, Schwarzenegger said no. Kinda.

"You know I have always been against tax increases, but I always want to keep everything on the table, because you cannot go into negotiations and say don't talk to me about this, don't talk to me about that. You have to be open minded, and that's the only way we can get a compromise done. So, I'm open minded, but I'm against tax increases."

We'll let Brian Joseph, a reporter for the Orange County Register, have the last word.

"I have good news and bad news this morning. The good news: there's finally some action on the state budget. The bad news: it probably won't amount to a hill of beans."

Posted by Shane Goldmacher on July 9, 2008 12:57 PM