With the failure of Propositions 1A thru 1E in the May 2009 Special Election, the Democratic leadership of the California government will be back at the drawing board attempting to close the $21 billion deficit. There are several strategies they might pursue — some wiser than others.  Expect the Democrats to propose another tax even though the voters spoke loud and clear on election day telling the Legislature not to increase taxes.

The Majority Vote Budget

This proposal is a personal favorite of Senate President Pro Tem Darrell Steinberg.  By proposing bills that simultaneously decrease taxes and increase fees — making the bills “revenue neutral” — Steinberg believes he does not violate the intent or the letter of Proposition 13.

In December of last year when this budget proposal was originally made, the idea was to decrease the gasoline tax and simultaneously increase personal income tax.  The result was revenue neutral.  The Democrats also proposed a “gasoline fee” at the same rate as the previous gas tax.  The net result was a proposal to increase income taxes.

The problem is that the proposal isn’t revenue neutral.  The end result, whether we call it a fee, or tax, or “budget solution” is an increase in the financial burden on Californians.  If it looks like a duck and sounds like a duck — it’s a duck!

Changing The 2/3 Rule

Proposals to change the rule were already forthcoming before election day.  Assembly Speaker Karen Bass already drafted a constitutional amendment that would lower the threshold to pass a budget to a simple majority (see ACA 4).  Additionally Tom Torlakson has proposed AB 267 and ACA 10 which would allow school districts to increase local parcel (property) taxes by a simple majority.

The Democrats justify this idea by saying that if a majority of the people — or the Legislature by extension — supports a tax increase than the law should allow them to impose it on the the people.  There is a major loophole to that logic — since only 10% of Californians pay 90% of the income taxes, the non tax-paying majority could force the highest earners to pay additional taxes without their ability to have a say in the process.

The graph above from the Governor’s 2008-2009 budget proposal shows the amount of income taxes paid by people at various earning levels.  Notice that those making $100,000+ consist of about 10% of the population but pay close to 90% of the income taxes.  Those that make $50,000 or less pay almost 5% of the state’s income taxes.

It’s easy for Democrats to vote for tax increases because they will never have to pay for them.  They don’t care about the state’s tax rate because it comes from other people’s money.  The 2/3 rule allows those who are forced to pay California’s taxes based on the state’s top-heavy tax brackets to have a vote and a voice in how their hard earned money is spent.

The 2/3 rule protects taxpayers and should be maintained.

The Solution:  Cut Costs Rather Than Services

California doesn’t need to raise taxes or cut services — but it does need to cut spending.  Democrats want the people of California to believe that cutting spending means that services will disappear.  For example, Democrats believe that the only way to cut costs for prisons is to let criminals out of jail.  This is not the case.

California spends $43,000 a year to house it’s inmates.  It’s high costs are largely associated with it’s overpaid prison guards — members of the California Correctional Peace Officers Association.  Last year the corrections system employed 5,000 employees who made more than $100,000 a year before benefits.  The State of Florida can house their inmates at a cost of $19,000 a year.  Rather than risk putting dangerous criminals back on the streets, the Legislature needs to cut it’s spending in corrections and pay it’s prison guards fair, market-driven wages.

The number of state workers in California has increased 40% since Arnold Schwarzenegger took office in 2003.  He is only proposing laying off 5,000 of the 140,000 employees employed by the state.  California’s ability to provide essential services would not be impacted if many more were let go.  Some have used numbers as high as 30,000.

If California cuts their costs they can provide the same services without spending ridiculous amounts of money.  Rather than trying to find loopholes in the law, the Democrats should be working to break free of the grip of their Union handlers and make the necessary spending reductions to balance the California Budget.