Mail Bag: California’s Budget

Since it came from a family friend, it took me a minute to realize that this question came via Ask Andrew. Maybe it’s time to set up a separate “Great ” Thoughts email account. In any case, we have our first “Ask Andrew” question. (Cue the trumpets!) :

Reader Liz writes:

I read this story today and thought I wonder what Andrew thinks about this.  Here’s the article:

http://www.latimes.com/news/local/la-me-state-budget-20110629,0,1794731.story

It’s about cuts to California’s budget, including closing state parks, cutting college funding 23% and others.

To be honest, some of it I don’t care that much about but I do wonder about cutting parks.  California hosts a national treasure in its’ parks and is one of the most, if not the most visited/toured park systems in the country.  I suppose that if we are realistic about the dire financial condition our country is in, it makes sense, but letting the parks go feels tragic to me, like letting go of our national pride.

But anyways, I was just wondering what you think about the state of California and the budget cuts they are making.

 

There’s a lot I could say about this.  First, California has a special problem in that you need a 2/3 majority of the legislature to raise revenue.  I’m not quite sure how they enacted the increases that they did, as I’m not fully versed on the current procedural constraints of the California legislature.  I have a problem with supermajorities because they allow minority rule.  Think about all the good legislation that the 110th Congress could have passed had the Senate Republicans not made a policy of filibustering just about everything. So the supermajority requirement take a lot off of the table.  Sure, it prevents (sometimes necessary) tax increases, but more importantly, it prevents comprehensive legislation that includes tax increases as part of a package or plan.  California is a place that has a lot of creativity, a lot of ideas.  Some are good.  Some are bad.  When it comes to state budgets, some may raise taxes.  Some may lower them.  But when you have an ideological minority that is dead set against tax increases and with the power to make that stick, you leave a lot of ideas, a lot of innovation out of the equation. 

Sadly, California’s problems are not unique.  Budgets are strained all across the country, at every level of government, and it seems that very few people are willing to take a stand and close tax loopholes or even raise taxes on people and businesses that can afford it.  There’s a national narative that says that teachers, firefighters, nurses, bus drivers, social workers, and all manner of public employee are responsible for our economic woes.  There’s been some pushback against those ideas, and it has slowed the Republican crazy train that was elected  last November, but not nearly enough. 

There needs to be a counternarrative, the one about tax cuts for the wealthiest Americans that wiped out a surplus, the one about two wars conducted without budgetary considerations, the one about a giveaway to prescription drug companies, the one about a giveaway to an underregulated banking industry that blew up our housing markets, the one about companies moving overseas because they can exploit workers and increase profit margins with no regard for the communities that gave them life.

On one side, we have schools, libraries, parks, and hospitals.  On the other we have tax breaks for people and corporations who have more money than most of us will ever see.  What do you want to preserve, enrich and protect?  It should be an easy answer.

 

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About Andrew

I'm a Christian, American, liberal, geeky, thoughtful, Northwest-transplanted Angeleno husband, father, and pundit who writes about anything he can think of.
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9 Responses to Mail Bag: California’s Budget

  1. Liz V. says:

    I’m glad you brought up the following because I’ve been mulling this idea over and have some concerns with it: “On the other we have tax breaks for people and corporations who have more money than most of us will ever see.” I recently read the book The Millionaire Next Door by Thomas J. Stanley and William D. Danko. These researchers studied millionaires and found something that makes a lot of sense but that blows out of the water what your average over-commercialized American thinks about millionaires:
    They live beneath their means.
    They live in modest homes and drive modest cars that they don’t buy new.
    They don’t throw money away on vacations, expensive clothes, and a lavish luxury lifestyles. (Most of the people who do that don’t really have that much money.)
    They prefer to drink beer to wine, because wine is too expensive.
    They are entrepreneurs and invest the money that they save by being frugal into their business, thus growing their business.

    Keeping this in mind here are my two concerns.
    One: These smaller, but successful businesses are holding our communities together. They are creating new jobs, and because of their smart business practices, have been able to weather the blows to the economy. If we take away their ability to do this by overtaxing them, what will we have left? The few ultra rich corporations who can afford the extra taxes. We will be back to feudalism. I’m truly afraid of this.
    Two: Why in the hell should we take money away from the people who have demonstrated that they are faithful stewards of it, who work harder than most of us every day to make their businesses successful? Why not instead focus on those people at the top who have lied, cheated and stolen money from all of us to create their own fortunes. Let’s charge the people at the Federal Reserve and banks for creating trillions of dollars out of the air and making our investments and homes values tank. Let’s charge the people responsible for blowing up the twin towers on 9-11 and calling it terrorism for the resulting loss of economy and insurance payments made to corporations. Let’s charge the leaders who have okay’d starting unnecessary and unsupported wars for the cost of those wars. Let’s charge Monsanto for stealing our biologically diverse seeds and inserting into them genetically modified ones without our permission and then charging us for them. While we’re at it, why not bring your average school superintendant’s salary down from $150-250K? Is their work really that hard compared to a teachers? Oh, and let’s not forget the whole insurance/drug company scam that charges $200 for a bottle of allergy eye drops. Where is that money going? And all of the new immunizations that are now “required” that don’t have proper testing or documentation to prove that they aren’t harmful or causing more problems.

    All that to say, don’t penalize those people who are helping and ignore the gigantic “elephant” in the room that

  2. Liz V. says:

    Oops, I had edited this lengthy thing and reframed it but when I posted it, it went back to the former version. I edited it when I went back and realized that you were talking about some of the same things I was, for example, a giveaway to prescription drug companies. And my main point is: Taxing the public will never solve a problem created and maintained by criminals. Your average millionaire, small business and even ethically run corporation is not the problem. I don’t want to harm or overtax the people who are keeping things running. I want to solve the real problem, which goes beyond party lines and policies to the greed and long unchecked power held by a select group of people at the top.

  3. Liz V. says:

    Another interesting article I saw today that relates to your original post:
    http://arstechnica.com/tech-policy/news/2011/06/amazon-to-shut-down-calif-affiliates-over-new-sales-tax-law.ars
    Will Amazon and other on-line companies leaving California hurt the state economy more than the new tax would help? I am thankful that Oregon has chosen not to overtax the corporations here because Intel has poured so much back into our community. Because of them we have farmers markets, our farmers are thriving and we have easier access to locally grown food. They serve locally (and organically!) grown produce and meat in their cafeterias. They have also led the way in our community in converting to renewable resources and they are now the single largest purchaser of renewable resource certificates in the US. They recently chose to build a new factory here instead of overseas at great added cost to the corporation, which will provide even more jobs to our economy. When we do run out of oil or when/if the dollar fails, our community is better prepared to survive and be independent.

    • Andrew says:

      That’s a tough one. I don’t know how that will pan out. (Like I know how anything will pan out.:)) Business is not the problem. The problem is when business suppresses social concerns and responsibilities as a part of the community in favor of maximizing profits.
      As for Amazon, It’s a gamble. Will the tax generate the revenue from Amazon? Will it send people back to brick and mortar stores and generate revenue there? Will it be a flop and be quickly repealed? I’ll tell you this though. Taxing internet sales is a big gamble, but someone had to try it. If the tax is effective, look for it to spread. If not, it will be gone very soon.

  4. Andrew says:

    Both your comments came through, and you framed the first one quite well. To start with, progressive taxation is not about punishing anyone. We’ve allowed a few misconceptions about tax policy to take hold. Taxation is not punishment, and it’s not theft. We elect officials to decide what goverment should and should not do and how to pay for it. This includes levying taxes as is specifically enumerated in the Constutition. Essentially, our elected officials are the stewards of the commons. What the commons are is subject to debate, but I don’t think you and I are too far apart on those things. Remember, when it comes to the tax increases, we’re talking about pretty modest stuff that still gives us some bang for our buck. So let’s talk about returning to the Clinton era tax rates. That’s an increase of 4% to the top marginal rate. So a couple making under $250,000/year.wouldn’t see a change. So lets say that couple makes $300K. That’s an increase of $2000, or $166/month on a monthly income of $25,000. That’s above what they’re paying now. There are middle class tax payers who are seeing heath care costs accellerate at a higher rate. And you know what? Since we’re talking about the millionaire next door, this couple probably gives to charity. The tax benefit of their charitable giving is also increased by 4%. Now, for someone making a million dollars per year in taxable income, that increase amounts to $39,900.
    Here’s the neat thing about high marginal tax rates (and 39% isn’t that high). They create an incentive to reinivest in the economy. If an individural really wants to get down to that next tax lowest tax bracket, they can give to charity. If a small business owner wants to do so, they can buy new equipment or hire additional staff to reduce their profits. Obviously, this does not work in every case, but it’s a consideration.
    Let’s also deal with the myth that tax rates impact hiring. If I’m running a business that is doing well with 5 employees, I’m not going to fire one because my income taxes are too high. I’ll work those taxes into the rates I charge for my goods or services. Likewise, if business his humming along, I’m not going to go out and hire someone because my taxes went down.

    What will make me hire is demand for my product that exceeds the capacity of my current staffing level. Typically, that’s going to happen by putting money into the pockets of consumers, the largest number of which are in the lower tax brackets.

    I have a few posts back in April that elaborate a lot more on tax policy. I’ll see if I can post the links later. (Bug me about it if I don’t in the next 24 hours.)

    The problem isn’t with people who have worked hard and prospered as a result. The problem, as you so aptly described is with the bad actors. The real remedy there is not tax policy at all. There are things we need to change to defend democracy. We need to eliminate corporate personhood, and we need to pass legislation that states that money is not speech. This allows us to reign in corporations and it allows us to get the money out of the political process.

  5. Liz V. says:

    Great explanation, thanks! I’ll think it over with that in mind. I love your synopsis: “The real remedy there is not tax policy at all. There are things we need to change to defend democracy.”

    This is not always true: “Typically, that’s going to happen by putting money into the pockets of consumers, the largest number of which are in the lower tax brackets.” More people are going to choose your product or service when you work hard and do an excellent job, or are creative and come up with a better way to meet peoples’ needs. Even in an economic downturn,or perhaps because of it, certain businesses thrive because they meet a niche or market. In this case, the market rewards those who provide better services or have a creative idea OR who have a monopoly on an essential product.

    What you are saying is that if we tax the people who make more at a higher rate, we can afford to charge the people who make less a lower rate, thus giving them (the larger number) more money to spend which fuels the economy? I need to read your tax posts.

    But if we were smarter financially and/or using common sense those of us in the lower brackets would save our money and pay off our debts, thus not fueling the economy. It seems that for this tiered system to succeed you require massive marketing to convince the people in the lower brackets to spend their money. If there was no pressure in this way would the system work? If everyone in the lower brackets suddenly started choosing not to spend their money, wouldn’t we be forced to raise taxes, and probably onto those brackets? Don’t get me wrong, I would rather have the extra money with the choice to save or spend it. It just feels wrong that in order for the economy to succeed the majority of people have to make financial decisions not in their best interest.

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