Dan Walters: Tax volatility plagues California budget wrangle

The volatility of California's tax revenue – booming one year, plummeting the next – plagues the state budget.

The volatility, born of the state's reliance on personal income taxes from a relative handful of high-income Californians, is the underlying factor in revising the current state budget to close a whopping deficit.

Gov. Arnold Schwarzenegger and Democratic legislators are wrangling over how to apply the state's ultra-complex school finance law in an era of declining revenue. Democrats want guarantees that shortfalls in school financing will be fully restored in the years ahead, but Schwarzenegger is unwilling to provide restoration money beyond one year without a constitutional amendment.

The state expects revenue this year to be $10-plus billion lower than two years ago, even though increases in sales and income tax rates, approved in February, were supposed to raise revenue by that much – a stark effect of the recession's impact on wealthy Californians' tax bills.

The flip side has been that when the state's economy is booming, revenue from those few high-earners skyrocket, encouraging politicians to spend like there's no tomorrow.

Smoothing out the revenue stream, or smoothing out how taxes are spent, has been kicking around the Capitol for years. Schwarzenegger has tried, and failed, to persuade voters to adopt a "rainy-day fund" in which to park extra money during up-years. The latest rejection occurred just two months ago.

Bottom line is that their “tax the rich” system has not worked and will work even worse with higher taxes. The rich got rich by being smart, hardworkind and frugal(for the most part) they are unlikely to give up those traits because of govt. They will move(which many have done), they will build more tax shelters, yes,they will cheat, and otherwise avoid paying more. Plus the prosperity which created the higher revenues will disappear.
Spending is the problem,,not revenues.

I am John Galt.

Garde la Foi, mes amis! Nous nous sommes les sauveurs de la République! Maintenant et Toujours!
(Keep the Faith, my friends! We are the saviors of the Republic! Now and Forever!)
LonePalm, le Républicain du verre cassé (The Broken Glass Republican)

Prop.13 stabilized property taxes so that the yearly rise in property values didn't kick the elderly and moderate income families from their homes. Obviously, this has failed the necessary funding of the State legislature and its necessary, socialist programs.

Therefore, it is incumbent upon the legislature and Governor to override this abominable chain on profligate spending; they must reinstate increasing property taxes. Billions of dollars of revenue will immediately flow from the coffers of the greedy rich. Oldsters who have horded the people's money will either cough up their fair share, or they will hit the streets and, by soon dying, free up crowded medical facilities for the deserving undocumented workers and young single mothers. In time, all those monster, 2000sq.ft. family dwellings, favored by the rich conservatives in this State, will be repossessed by the State and split into multifamily dwellings for needy Democrat voters.

Come on, California. You can do it if you simply have the courage to do the right thing.

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