The Issue: California Governor Arnold Schwarzenegger has stated that he and the legislative Democrats are one or two meetings away from a compromise on the California Budget.  Many applauded the Governor when he announced that he would be vetoing the budget proposal passed last week by the Democratic majority, but now it seems that he will sign another version of that same bill next week.  The Governor has lost sight of how the middle class will be affected by this policy.  Economic stimulus is needed, but not at the expense of the state’s middle class.

At a press conference in Los Angeles Monday, the Governor stated that he was close to making a deal on a budget bill to get the state into next year.  He appears to be ironing out details for a stimulus package and avoiding the discussion of the merits of circumventing Prop 13.  Arnold seems to be willing to challenge the basic principle of California budgeting for the last 30 years– the 2/3 requirement.

The can of worms that the Governor is opening (assuming that the courts wouldn’t strike down this measure) is one that will destroy the California middle class.  California has the highest rate of income tax in the nation (9.3%  for earners over $43,468).  Additionally, citizens are required to pay Federal Income taxes (25% of gross taxable earnings at the same income level).  The proposal under discussion will increase state income taxes by 2.5%  That is $1087 more per person.  For some this will amount to an entire month’s expenses.  Additionally, the proposal plans to increase the gasoline tax by 13.5 cents.  If you drive an average of 10,000 miles annually (an insurance cutoff from normal to high propensity drivers) and you get 25 miles to the gallon, that additional expense will be $54.  At the current gas prices, that’s 2 tanks of gas you will have to find money for.

A recession is not the time to be imposing more taxes on Californians.  Even if Californians stay employed due to the economic stimulus plans that are being negotiated, they will require additional support from the safety net services because their tax burden is so great they cannot afford to live independently.  What California needs is economic stimulus to grow the private sector without an additional tax burden.  The people cannot afford it.