May 24, 2002

Commentary

Sacramento’s Feast or Famine Cycle Must Be Stopped

By Jon Coupal

To close the state budget deficit — now estimated at $23.6 billion — the governor has embraced a number of program cuts, tax increases and financial manipulation of which the Enron accountants would be proud.

For most Californians, this deficit figure is so large it begins to lose meaning. Breaking it down in human terms, it would require every California man, woman and child to pay another $700 in taxes to make up the state’s burgeoning financial shortfall.

Davis’ willingness to raise taxes as part of the solution to the budget dilemma has been called “courageous” by some in the Legislature, but it is the taxpayers, not the governor or lawmakers, who will suffer the consequences. On top of the sales tax increase Californians started paying on January 1st of this year, the governor is seeking to triple the car tax, which will cost many vehicle owners hundreds of dollars.

However, the current crisis is not due to a lack of revenue. To the contrary, the problem has been the unwillingness to control spending. Davis and his allies in the Legislature ignored warnings as early as December of 2000, that the state was heading into recession, and continued a lavish spending program that has seen the state budget increase a phenomenal 37% over three years.

A recent survey of members of the Howard Jarvis Taxpayers Association shows near unanimity that the budget deficit is the fault of state government’s overspending during the dot.com boom and general mismanagement of the budget. Those polled strongly objected to any efforts to raise taxes, to make it easier to raise taxes by lowering the vote requirement for local bonds, and any and all attacks of Proposition 13.

Since the poll respondents were members of California’s largest taxpayer organization, perhaps the results should not come as a great surprise. However, these responses from grass roots taxpayers should be taken seriously because they closely track the perceptions of most voters who are feeling the burden of state spending that is at an all time high as a percentage of personal income.

Taxpayers are tired of paying for lawmakers’ refusal to use realistic budgeting and accounting procedures, which results in cycles of boom and bust. The politicians have enjoyed the feast of multibillion-dollar surpluses in good times, but now that times have changed, taxpayers are being served the $23.6 billion famine.

Given politicians’ propensity to spend every bit of revenue they can get their hands on, it may be time to consider revisiting constitutional restraints on the rate of growth in government. In 1979, voters approved the Gann Spending Limit which did just that. But this important taxpayer protection was watered down by subsequent special interest initiatives.

In self-defense, California taxpayers may want to reimpose limits to prevent lawmakers from indulging their addiction to spending and force them to set aside a prudent reserve based on a percentage of tax receipts. Under this system, the greater the take, the greater the savings. This way, when the inevitable economic downturn occurs, the money will be available to fund vital services and there will be no excuse to add to the burden of taxpayers already beleaguered by a failing economy.

Jon Coupal is a recognized expert on California tax policy. He is an attorney and President of the Howard Jarvis Taxpayers Association. Coupal can be reached at www.hjta.org.

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