It’s time, Californians, to hold on to our collective wallets.
“It does NOT raise taxes,” proponents of Proposition 68 insist in the official state voters’ guide. Then where do they think the money will come from to repay the $4 billion in bonds that are supposed to go for parks and “climate adaptation,” whatever that is?
Bonds are debt. Debt needs to be repaid, with interest. The debt payments will increase the state budget or something in the budget will have to be cut to provide the required funds. But most likely, taxes will have to be raised.
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In an economic downturn, bonds must still be paid. And recessions happen.
We are not talking about small change. The Prop. 68 repayment is $7.8 billion – $4 billion in principal, plus $3.8 billion in interest. That means $200 million a year for 40 years from the state’s general fund.
Assuming they don’t leave the state to get relief from ever-high taxes, that means not just our children, but our grandchildren will be paying it off.
Californians have been here before. In 2009, during the Great Recession, when revenues dropped sharply,
Gov. Arnold Schwarzenegger pushed a $13 billion tax increase through the Legislature, on top of $15 billion in budget cuts, including $8.1 billion to education.
Despite the current good times, California’s finances are actually in bad shape. The unrestricted net deficit is a whopping $169 billion, the worst of any state. Our state already owes $74.2 billion on previous bonds, including for the high-speed rail boondoggle, costing the state’s general fund $3.9 billion in debt payments in 2018-19.
Silicon Valley profits are currently filling state coffers. Forecasted personal and corporate income taxes are up $8 billion from Gov. Jerry Brown’s January budget proposal. Which begs the question: If the Prop. 68 projects are so great, why not just fund them with that surplus?
The next time Silicon Valley’s profits tank, expect $40 billion annual deficits, and tax increases. Which is why this accountant and financial planner believes a pay-as- you-go system is best. And you should, too.
John Moorlach, R-Costa Mesa, represents the 37th state Senate District. He can be contacted at firstname.lastname@example.org.