California: Davis considers change to state's tax structure

The San Diego Union Tribune ^ | December 12, 2002 | Ed Mendel

[Ernest_at_the_Beach]

SACRAMENTO – As Gov. Gray Davis works on a plan to close a state budget gap approaching $30 billion, he wants to use the crisis as an opportunity to improve the tax structure and realign state and local programs.

The governor said yesterday he would like to smooth out the "wild gyrations" of a tax structure, now heavily dependent on taxing the wealthy, to provide more stable long-term revenue for education, health, and social services programs.

Davis also said he may propose shifting some state programs to local government, along with a funding source, as was done with a successful "realignment" of mental health and other programs during a previous crisis.

"There is no point in going through all of this grief and agony and pain without leaving the state a better system and a better future," he said.

The governor, who spoke briefly with reporters, made an initial proposal of $10.2 billion worth of cuts and savings last week and will present a complete plan on Jan. 10 that is expected to include tax increases.

Davis said he may use graphs next week to demonstrate how "the fate of California services rests disproportionately in the well-being of the top 10 percent of California taxpayers."

He said state income tax revenue from capital gains and stock options was $17 billion in 2000, dropped to $6 billion last year, and will probably be less than $5 billion this year.

The governor said that relying on the income tax on Californians earning more than $100,000 is a "double whammy" because they can offset their taxes with losses from the plunging stock market for several years.

Although Davis mentioned no specifics, one of the often-discussed options for broadening the tax base is extending the sales tax beyond goods to a wide range of services, such as legal and accounting work.

The Legislative Analyst estimates that in the new fiscal year beginning July 1 the state will get $34.5 billion from the income tax, $22.4 billion from the sales tax, and $6.8 billion from the corporation tax.

Davis said that during a budget crisis in 1991 former Gov. Pete Wilson shifted mental health and other programs to local government along with a source of funding from the sales tax and the vehicle license fee.

"We are looking at realignment issues to see whether some functions could be more efficiently performed at local levels," he said.

The Legislative Analyst reported early last year that the shift of mental health, social services, and health programs from the state to the county has been "a largely successful experiment."

Pat Leary, a lobbyist for the California State Association of Counties, said realignment has been a success. However, Leary said the programs are hurting now because the stagnant economy is reducing sales tax revenue as caseloads increase.

She said legislation several years ago resulted in unionization and higher pay for many in-home support services workers, who provide everything from grocery shopping to technical support for the severely disabled.

Still, Leary said, "I'm hopeful that he would think about building on it (realignment), rather than dismantling it."

[Ernest_at_the_Beach]

Wonder what the Governor has in mind?

[Ernest_at_the_Beach]

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[My2Cents]

Whatever it is, hold on to your wallet.

[kellynla]

Too late! The Dimwit must have heard of the mass exodus out of CA to NV.

[SteveH]

Maybe it is something like a local income tax. I get the impression that NYC has such a tax though I do not know for certain.

Rather than increase state taxes to handle the state deficit, Davis can then offload some of the tax increase heat to local governments along with offloading some of the welfare entitlement burden. By keeping the state tax level the same, he can then claim that he did not increase state taxes (or at least, not increase them too much), while total tax burden at the citizen level, of course, necessarily grows larger.

So it is a shell game to avoid taking the political hit for the irresponsible fiscal practices at the state level and the corresponding need to raise taxes somewhere, sometime soon.

Just a guess...

[Ernest_at_the_Beach]

That would make sense that he would try to do that!

[NormsRevenge]

"There is no point in going through all of this grief and agony and pain without leaving the state a better system and a better future," he said.

He reminds me of ol'd senator KKK byrd.... Better Better Better Better ... I expect we will see a lot of trial balloons like this.

I don;t know how willingly we should just decide to lock stock and barrel change the whole system now, tho...

Hey, GraYout!! Go fill some sand bags and make yourself useful for a change ... Go shore up the manure pits in Sacrademento. We got us some gullywashers on the way.

[anniegetyourgun]

He's going to not only tax the rich, but the middle class, the poor, and church mice....or anything else that moves.

[ServesURight]

The only people that will be left to pay the tax increases are guilty Hollywood liberals and a few left-wing corporations who'll stick around "for the community." The real producers, small business owners, and middle-class families will boogie - when they're gone, there'll be nobody left but wealthy gated liberal communities and a huge population of illegal aliens and unemployed minorities fighting over the remaining state poverty programs.

[Orangedog]

The Gray Davis Campaign Song, compliments of The Beatles!:

Let me tell you how it will be ThereÕs one for you, nin'teen for me

Cause I'm the tax man

Yea I'm the tax man

Should five percent appear too small

Be thankful I don't take it all

Cause I'm the tax man

Yea I'm the tax man

If you drive a car-car I'll tax the street

If you try to sit-sit I'll tax your seat

If you get too cold I'll tax the heat

If you take a walk I'll tax your feet

Tax man

Well I'm the tax man

Yea I'm the tax man

Don't ask me what I want it for

If you don't want to pay some more

Cause I'm the tax man

Yea I'm the tax man

Now my advice for those who die (tax man)

Declare the pennies on your eyes (tax man)

Cause I'm the tax man

Yea I'm the tax man

And you're working for no one but me

[Centurion2000]

SACRAMENTO – As Gov. Gray Davis works on a plan to close a state budget gap approaching $30 billion, he wants to use the crisis as an opportunity to improve the tax structure and realign state and local programs.

Translation : He wants to TAX the hell out of anyone making above subsistence wages/salaries in California.

[SteveH]

Remember what happened during the energy crisis-- Davis blamed the local governments for gouging the consumer through contract speculation.

He's using the same principle here-- diffuse and spread the blame around so less of it lands on him.

The other principle at work is ratcheting taxes and spending up (for Democrats, it's always ratcheting in the up direction, of course) via a new path.

No doubt the local governments are all aware of the move. The liberal playbook is to be selective at the next level, labeling the hits in Democrat-controlled localities "absolutely essential and unavoidable", while labelling the hits in Republican-controlled communities as "soaking the poor on behalf of the rich", "wasteful", etc., until a Democrat is elected on a fiscal conservative platform and then turns around and does the exact same thing that the Republican that he/she replaced would have done. Of course, it helps to have a liberally-biased and compliant media when performing this strategy...

[NEWwoman]

Whatever it is, hold on to your wallet.
Good advice.

My first thoughts on:
The governor said that relying on the income tax on Californians earning more than $100,000 is a "double whammy" because they can offset their taxes with losses from the plunging stock market for several years.

1. This governor will want to take away tax deductions for the "rich" so he can still get the tax money out of them.

2. On the other hand, he might be waking up and smelling the coffee and realize he would be killing the geese that lay the golden eggs. And like another CA governor, Reagan, realize that if you lower taxes on the "rich" that stimulates the economy and increases revenues. (This may be wishful thinking. It certainly is not Democrat thinking.)

[richardtavor]

The governor said that relying on the income tax on Californians earning more than $100,000 is a "double whammy" because they can offset their taxes with losses from the plunging stock market for several years.

Huh? 1) Why not just tax the losses too (in other words a reverse sales tax--some % of however much stock you sold. That's a progressive tax (never mind shouldn't give the Rats any ideas)! 2) Open up their coastline to drilling--would solve 2 problems: $ for Cal and less dependence on Middle East oil. 3) Fire all the state workers and replace them with illegal aliens (could save a bundle by paying minimum wage 4) Let Davis work for $1 (he doesn't need the money anyway...

[Thud]

Ain't that the truth. "Whatever it is, hold on to your wallet."

Davis is right that California's tax structure is screwy, but anything he says about money starts with "What's in it for me?"

[skeeter]

Wonder what the Governor has in mind?

Making California's middle class a thing of the past.

[scooby321]

LOL Glad Davis Won , wonder if all those who gave him money have any left to pay the NEW TAXES

[Mr. Jeeves]

Davis isn't exactly a fiscal conservative, but he's not completely clueless, either. He knows that he can't realistically raise state income taxes on the higher brackets and have any hope of increasing revenue - that the bulk of the balancing is going to have to come from budget cuts and new "user fee" type taxes. His problem is State Senate Pro Tem John Burton, a doctrinaire leftist ideologue (and a crude, foul-mouthed, cocaine-addled thug), who was the man behind spending every cent of the increased revenues during the dot-com boom.

Burton is the kind of politician who dreams of setting income tax rates set at 100%, so the government can give everyone a certain amount of money back in "benefits". He has many supporters in Sacramento, who see every liberal spending initiative as sacred.

Even if Davis wants to do the right thing (which, to a surprising extent, he probably does - his legacy is in jeopardy) he has got a lot of problems to overcome. This is where Simon's loss starts to look like a net gain for the Republican Party.

[Dog Gone]

In the span of a couple weeks, the papers have gone from saying $20 billion to $30 billion. That's more realistic.

I'm not sure, though, whether the budget forecasts take into consideration what the effect on the California economy will be in both cutting expenditures and raising taxes the equivalent of $1000 per person. It will further hurt it, obviously, which will result in lower sales tax revenue if nothing else.

The California budget trainwreck is going to be one of the more interesting domestic stories to follow in the next few months. If the Democrats are smart, they'll wait to vote to pick everyone's pocket until the day the Iraq conflict begins.

[Redcloak]

"...the fate of California services rests disproportionately in the well-being of the top 10 percent of California taxpayers."

Do my eyes deceive me? Does he actually "get it"?!?