Posted on 12/12/2002 12:27:53 PM PST by 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."
They probably would be unreceptive to replacing the income and corporate taxes completely by a large sales tax. Based on these numbers, assuming prices stayed the same, and ignoring property taxes, the new rate would be somewhere around 21%. If the CA state government would curtail its wild spending habits, perhaps the rate could be lowered.
The sales tax is progressive, since the more one earns, the more he can buy, and the more taxes he shall pay; and, food is already exempt, so poor people would still pay little or no taxes. Illegal aliens would be unable to evade these taxes by accepting wages "under the table," since they have to buy goods, too. Only a small fraction of people live close enough to state lines to buy goods from outside CA, and tax revenue losses to online merchants would still be limited. (besides, aren't several state governments trying to tax the internet?)
Obviously this idea could not easily get the 2/3 supermajority needed in the CA legislature to change taxes. Maybe Gray Davis should try a flat income tax rate, which is still a progressive tax. He can say he lowered the tax rate if the rate is lower than that of the highest bracket.
Sorry to play the cynic here... just considering Davis' penchant for political slicksterism, etc...
One of the problems when State Senator Tom McClintock was reducing the vehicle license fee was that many counties opposed the reduction out of fear that their funding would be cut. Eventually, they still got their funding from the state, but this type of opposition hurts efforts to repeal excess taxes/fees.
If Davis shifts mandatory programs to the county without adequate funding, how are the counties supposed to pay for the new burdens? If he uses similar tactics that funnel specific tax revenues to the counties, then the reduction of those fees becomes even more difficult.
Holy cow, is he really going to cut the tax rate of the EVIL WEALTHY, which now stands at around 9 PERCENT????
I won't believe it until I see it.
the california trial lawyers, who re-named themselves "consumer lawyers" because the former has such a stench, run california along with the teachers and prison unions.
the trial lawyers count among the top 10% and probably want to thrust the taxes down the food chain.
I actually think that he understands the dilemma of feeding off the rich. The real interesting thing is what will Davis propose as a solution?
Higher taxes on the lower and middle income earners?
Reduction in spending?
Higher capital gains taxes?
Wonder what the Governor has in mind?
LOL!!!
Bend over. Here he comes now.
TRANSLATION: Now we are going to soak everyone, not just the rich. All your income belongs to us. Then we'll give you good service.
A democrat promising to cut taxes? Shades of Bill Clinton. Expect a retro-active middle-class tax increase.
Davis is a liberal Democrat; a socialist scumbag.
Whatever smoke and mirrors he pulls out of his rear end will involve higher taxes on everybody. Much higher taxes.
It's the only thing a scumbag Democrat like him knows.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.