What (We and) CFT Members Can Do About the State Budget Crisis:
(sorry it's hard to find good info let alone tactics from CTA)
(sorry it's hard to find good info let alone tactics from CTA)
Background of the budget gap The news is bad for the state budget...again. In 2008, in response to a projected deficit of 17 billion dollars, the governor and Legislature produced a disastrous state budget. The Republicans abdicated all real world responsibility as legislators, refusing to consider any taxes at all. The Senate and Assembly Democrats, anxious about the suffering of the most vulnerable Californians as the state budget was shut off, caved in to the governor's proposal and the Republicans' obstinance. Only the Assembly Democrats offered, along the way, a reasonable revenue proposal, which included returning income tax rates on the very wealthiest Californians ($300,000 per year income and up) to the rates they paid in the 1990s, which would have raised six billion dollars per year. But this proposal was dropped. The CFT worked with the Education Coalition to raise public awareness of the devastating impact a budget without any new revenues would have on the quality of education in California, but to no
avail this year.
Now the same factors that produced the budget crisis last year are being enormously compounded by the national economic crisis. To his credit, the governor has added the small progressive tax on oil into the mix with his regressive sales tax proposal. But the problem is deeper than just this year. We have a structural gap in the California state budget, varying year by year, but running in the billions of dollars.
Solving the budget gap in California requires a reasonable solution—one that the governor is pointedly ignoring, along with his role in creating the problem. This is a large state, with the largest population in the United States, and an economy that, if it were a country's, would be the sixth largest in the world. The budget problem can't be solved by cuts anymore, because state program reductions of such a magnitude hurt the people most who can least afford them. Indeed, such cuts threaten the future well-being of California.
We need instead to increase state revenues with carefully considered tax increases, especially closing tax loopholes for those who can most afford to pay: the wealthy and large corporations. Taking these actions will allow us to fund the social programs we need.
What created the problem?Mostly undiscussed, but crucial to understanding California's problem, is that the state legislature, to get a recalcitrant minority of anti-tax legislators to pass state budgets, gave up taxes on the top brackets and the much-maligned vehicle license fee (VLF) during the height of the dot-com bubble. Each year since 1991, the state budget's ability to generate revenue has been compromised by rescinding one or more taxes. This meant the accumulated loss of many billions of dollars in revenue, contributing greatly to the current deficit.
Indeed, the VLF alone was worth $4 billion per year when Schwarzenegger, to great applause by the legislative Republicans, eliminated it. The VLF today is estimated to be worth close to $6 billion. Add up the loss of that amount each year since Schwarzenegger's election, and you have the budget deficit. Until last summer, Schwarzenegger clung to the position that he would not raise taxes. (Technically, the VLF is a fee; but since he called it "the Gray Davis car tax" throughout his recall campaign, that's what it remains in the public mind.)
We need instead to increase state revenues with carefully considered tax increases, especially closing tax loopholes for those who can most afford to pay: the wealthy and large corporations. Taking these actions will allow us to fund the social programs we need.
What created the problem?Mostly undiscussed, but crucial to understanding California's problem, is that the state legislature, to get a recalcitrant minority of anti-tax legislators to pass state budgets, gave up taxes on the top brackets and the much-maligned vehicle license fee (VLF) during the height of the dot-com bubble. Each year since 1991, the state budget's ability to generate revenue has been compromised by rescinding one or more taxes. This meant the accumulated loss of many billions of dollars in revenue, contributing greatly to the current deficit.
Indeed, the VLF alone was worth $4 billion per year when Schwarzenegger, to great applause by the legislative Republicans, eliminated it. The VLF today is estimated to be worth close to $6 billion. Add up the loss of that amount each year since Schwarzenegger's election, and you have the budget deficit. Until last summer, Schwarzenegger clung to the position that he would not raise taxes. (Technically, the VLF is a fee; but since he called it "the Gray Davis car tax" throughout his recall campaign, that's what it remains in the public mind.)
Public services in general, and public education in particular, have been underfunded in California since 1978 and the enactment of Proposition 13. This law substantially shifted the burden of funding many locally delivered services to the state, without providing appropriate mechanisms to pay for them. Increased spending on education in the late 1990s and into 2001 was finally beginning to address years of neglect. Now the gains of these years have been reversed. Per pupilfunding in California now ranks 46th in the nation.
What to do about it: 1) Progressive Taxation the revenue options below would raise an estimated $16 billion per year, essentially solving the state's structural budget problem:
Bring the top income tax bracket (people who make more than $300,000) back from 9.3% to 11% ($5 billion)
2)Reinstate the vehicle license fee ($6 billion per year)
3)Re-assess non-residential real property ($3 billion per year)
4)Limit mortgage interest deductions to $50,000 in interest ($47 million per year)
5)Require that large corporations file as corporations, not “S” type partnerships ($500 to 600 million per year)
6)Enact severance tax on oil produced in California ($.5 billion per year)
7)Extend sales tax to Internet purchases ($20 million)
These are each worthy proposals. But the real problem that needs to be addressed to solve California's budget problems is Proposition 13. It builds in inequities between residential and commercial taxation, and, depending on when a homeowner buys a house, inequities among homeowners as well. Reform of Proposition 13, which locks in a broken budget system, is an urgent priority.
Bring the top income tax bracket (people who make more than $300,000) back from 9.3% to 11% ($5 billion)
2)Reinstate the vehicle license fee ($6 billion per year)
3)Re-assess non-residential real property ($3 billion per year)
4)Limit mortgage interest deductions to $50,000 in interest ($47 million per year)
5)Require that large corporations file as corporations, not “S” type partnerships ($500 to 600 million per year)
6)Enact severance tax on oil produced in California ($.5 billion per year)
7)Extend sales tax to Internet purchases ($20 million)
These are each worthy proposals. But the real problem that needs to be addressed to solve California's budget problems is Proposition 13. It builds in inequities between residential and commercial taxation, and, depending on when a homeowner buys a house, inequities among homeowners as well. Reform of Proposition 13, which locks in a broken budget system, is an urgent priority.
The "two thirds" problem: blocking democracy. The problem with these ideas is that in California, any tax increase must be approved by a supermajority of 2/3 in the state legislature. California is one of just three states that require more than a simple majority to raise taxes. Each year a small minority of legislators, opposed to tax increases on ideological grounds, can block the will of the majority and prevent a balanced approach to solving the budget crisis. That's what happens every year, including last year, once again. Legislators should be able to enact a necessary tax increase with a simple majority instead of wrangling endlessly with hard core anti-tax ideologues.
Over time we must convince our legislators and the governor that only progressive tax reform can solve the long-term crisis. The problem isn't "overspending." This is a simplistic analysis of a complex problem. California is a big and growing state, and needs big revenues to function.
We are currently witnessing the return of the Gilded Age, in which the wealthiest among us continue to increase their riches at the expense of the rest of us. The top one percent of wealth holders in the United States owns one third of the assets of the country. The top ten percent owns 70% of the wealth. That leaves the bottom ninety percent of wealth holders–the overwhelming majority–with less than a third of the country's wealth. When Barack Obama spoke of "spreading the wealth around," this is the reality to which he was referring.
Don't let people tell you that "we don't have the money" for a decent public education system. The money's there. It's just in the wrong pockets. Tell your legislators.
Other Resources on the State Budget Crisis
The prospects for healthcare reform may be chillier than DC weather, but Democrats in the House and Senate are turning their attention to another warmer but still significant national issue: the increasing number of runaway and throwaway youth who are being forced into prostitution. In response to the growing concerns that desperate, runaway teens will be forced into prostitution in a sluggish economy, Congress is pushing several bills to improve how runaway kids are tracked by the police, fund crucial social services, and prevent teens from being caught in sex trafficking. Here's the gist of what the new legislation is trying to accomplish:
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