How tax cuts killed California

[BR_Parkway]

http://blogs.alternet.org/speakeasy/2010/02/16/how-tax-cuts-killed-california/

Once upon a time, there was a Golden State which had the arguably the best public schools and the best public higher education system of state colleges and universities. People longed to move there for its natural beauty, its climate, its good schools, its many jobs in the entertainment, defense and high tech industries, etc. Was it a perfect state? Far from it, but it did seem to be the place everyone wanted to be — once upon a time.

Now? Not so much. You might even call it an unmitigated disaster, a failed state, one that is, for all practical purposes, ungoverned and ungovernable.

Gov. Arnold Schwarzenegger unveiled an $82.9 billion state spending plan today that calls for no tax hikes but envisions pay cuts for state workers, reductions in services to California’s neediest residents – and relies on the benevolence of the federal government.

Well, the economy is bad. Times are tough. Yet I live in a state (New York) which, despite its fiscal problems, still manages to fund social services, good public schools, a good public higher education system, and provide all the other essential government assistance without massive layoffs or cuts. New York State has an $8 Billion deficit this year, but that’s less than half of the budget deficit faced by California. New Yorkers suffer from high unemployment, but the values of our homes (at least those among us who don’t live in super rich enclaves like the Hamptons or own condos in Manhattan) haven’t gotten flushed down the toilet.

How did this all come to pass? How did New York manage to avoid a California budgetary collapse? Well, for starters, New York wasn’t subjected to the grand conservative social experiment known as Proposition 13, a provision that, once approved, altered California’s Constitution making it impossible to raise tax revenues and thus do what Government needs to do — provide for the general welfare of its citizens.

[Captain Hilts]

1. It's the INability to raise taxes to meet increasing demands and voter mandates that is the problem.

[taught_me_patience]

18. We can't raise taxes because they are so high already

9% Income
9.75% Sales (Los Angeles)
1.25% Property (On very expensive property).

Maybe it's time to cut spending a bit?:shrug:

[Flaneur]

19. Cut spending where?

[taught_me_patience]

21. Start by reducing state payroll

http://articles.latimes.com/2009/jan/31/local/me-workers31

Cutting the state workforce "is just very difficult to do," said Jason Dickerson, a public employment expert at the nonpartisan Legislative Analyst's Office. "It can be a very long and cumbersome process."

Personnel records show that there have been no mass layoffs in state government since 1975, when 2,500 California Department of Transportation employees lost their jobs during a budget crunch.



Meanwhile the private sector jobs have been decimated. Time for the state to cut back their payrolls.

[Name removed]

23. Deleted message

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[taught_me_patience]

30. The private sector has already been screwed.

Meanwhile, there haven't been meaningful layoffs in state goverment since 1975. I don't see how they've "destroyed" government jobs...

[Name removed]

28. Deleted message

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[David Zephyr]

34. This private business owner knows that we need public workers.

What the other argument does not understand is this, the more public workers you lay off, the more housing prices will drop, the more foreclosures will happen, the less shopping will happen. Is there room to trim fat in the public sector as is being done in the private sector? Of course, but taking a chain saw to simply reduce the public payrolls is stupid.

We have troops all over the world in hundreds of military bases. I always tell people we should bring them home and, yet continue to employ the troops, even if they do nothing. The difference: they'd be spending their money here and our local economies would benefit, too.

[WillyT]

35. Exactly !!! - Thanks David...

I swear some of this is just plain "misery loves company".

"If I lost my job, how come you haven't lost yours?"

"Since I'm losing my benefits, pay, and possibly my job, how can you sit there so secure."

I process California unemployment forms all... day... long...

In the past year and a half, my (our) work load has quadrupled, while our pay has been cut by 15% (furloughs). And we don't get to take our furlough Fridays because we're too mission critical. Truth be told, if we took those Friday's off, we'd get killed on Mondays.

A big day used to be 50,000 to 70,000 claims in a day. NOW...we do well over 300,000 claims every Monday and Wednesday. The rest of the week is pretty big too. We are furloughed, yet are so swamped, we're getting overtime to be able to get all the work done.

And on top of it all, we're mostly Federally funded. So the state isn't saving anything by furloughing us. Yet we've hire hundreds of new people to handle the workload, and it doesn't look like it's gonna slow down anytime soon.

Whew... thanks for letting me blow off that bit of steam.

:hi:

[David Zephyr]

37. Businesses need the infrastruture that government gives them.

It's why the public option or single payer makes sense for busineses like mine. If we can take the burden of healthcare off of businesses like it is in Europe and Japan and let private business get back to what they do best, then it would be a great boost for our nation.

We need a vital public sector to support the private sector.

What we don't need are two fucking wars ($2 Trillion) that are not even part of the budget and are "paid for" through "supplementary funding" which robs from our national parks, social security, medicare, education, our infrastructure, the space program, and yes, our public sector. The debt from the wars is financed by borrowing and the interest on our debt is greater than the defense budget.

End the fucking wars. Learn to mind our own fucking business and only use force when it is truly needed as with Kosovo and with World War II. Take care of the American People.

[Mr Rabble]

51. Mostly agree with you David-

But the space program?

Ive never quite understood how this did anything to help people in need.

I agree that we could probably dramatically slash the 700+ military bases, but think the space program should go with it.

Tell me why Im wrong.

[David Zephyr]

58. Well, I'm an engineer to begin with and a futurist nut...

We will not survive on this planet alone if the human race is to continue. We learn a lot about our own planet through space exploration. We've had tremendous technological developments directly from space exploration and funding. And it not only employs our brightest minds, it inspires young people and people of all walks of life to some common goals, it unites us: just look at the international space station.

The funding of space exploration is very small when compared to our warmongering and the defense budget and the interest we are now paying on the debt from the "off the books" wars.

I work with a lot of people in the space industry and they are a great crowd, mixed racially, women and men, highest of ethics and simply brilliant and optimistic as they come.

With the Space Shuttle program ending and nothing on the horizon for a long time, I'm afraid that younger generations will lose the awe and wonder and desire to be scientists and to see the great beyond. There will be a long period now without any real space "news" with a few exceptions here and there. That's a loss, in my opinion.

[Bigmack]

38. You apparently don't understand...

At least the state workers are working. Lay off some of them, and you have relatively high-paid workers laid off, and the tax base shrinks. It's a tough problem, tho.

How about those land taxes? Didn't prop 13 screw with that?

California's tax burden is about 10.5%... national average is about 9.7

More people want to live in California... feature it as a premium for quality living.
No warm beaches in Nebraska.

[David Zephyr]

26. We are already overtaxed. The problem is with the structure of Prop 13.

Prop 13 needs to be revisited and explained to the voters. Commercial and industrial properties, as well as multi-tennant properties, should not have their taxes frozen at 1978 rates as residential, single owner homes were when Prop 13 became law.

We had an alternative ballot measure, which froze only residential property rates, back then and this was the option supported by then Governor Jerry Brown.

But big money confused the public and Prop 13 won the day. Everything that Jerry Brown warned about, and not just Jerry, has came to pass.

It is simply criminal that a corporation that lives in perpetuity can have its skyscrapers taxed at 1978 property values and a new homeowner is paying taxes on 2010 values.

This is not hard to explain to the public, but Prop 13, as it is structured, was the worst thing that ever happened to my Golden State.

[taught_me_patience]

29. Commerical property taxes are an extremely small part of the pie

The worst thing to happen to California is the draining of federal tax dollars beginning in the 80's. Sorry, they've been taking over $30B more than they give back for many years. No economy can withstand that for very long before enduring severe problems. It is the true cause of our budget problems. Bloated government that is impossible to cut back is problem #2.

[David Zephyr]

32. I didn't just say "commercial property".

First, I do agree with you that we, as Californians, are being ripped off by the Feds. Even Arnold knows this and, to his credit, he has tried to do something about it. And, it is also wrong for California and all border states to carry the burden of the federal government's broken immigration policies.

That said, the amount of dollars that the State loses in property taxes (commercial, industrial and in multi-tennant housing, which is what I wrote) is so substantial that it is also unsustainable. It is not fair that a corporation with a skyscraper pay taxes at lower levels than a brand new homeowner. It also presents an unfair advantage to businesses over other start-ups. It simply screwy.

Single family homes should have frozen tax assessments. It was the outrage of seniors being taxed out of their homes in the 1970's that gave the truth to the big lie behind Prop 13. I worked against Prop 13 at the time. I wasn't just there, I was involved.

I was part of Tom Hayden and Jane Fonda's People for Economic Democracy at the time and we had a very small gathering of six or so of us in Hollywood when a young fellow (like me then) snapped at Tom saying "Prop 13 is grass roots movement" to which Tom responded without blinking an eye, "Yeah, well Hitler was a grass roots movement. Grass roots manipulated by big money." Jarvis/Gann was a very clever trick on the good people of California.

Let's get Jerry elected. He knows how to move the legislature. He knows how to govern. He "inherited" the State from Ronald Reagan dripping in red ink and turned it over eight years later fat and in the black.

Our problems are not unsolvable and, contrary to what someone else said in this thread, California is not ungovernable. This is a great State. We've just had lousy, no, make that shitty government for years. Eight years of George Deukmajian followed by eight years of Pete Wilson and Gray Davis, a good man, but not one to stand up to bullies as Jerry did and will.

[Zomby Woof]

56. You sound like you're shilling for Meg Whitman

[taught_me_patience]

59. Nope Jerry all the way

I've never voted for a Repuke.

[Heywood J]

53. Every time I go home, sales tax is 13%

You've still got a long way to go.

[Bertha Venation]

2. May Howard Jarvis and everyone who voted for Prop 13 rot.

Short-sighted greedy pricks, every one of them.

[DJ13]

8. People would have lost their homes if Prop 13 hadnt been enacted

Prop 13 isnt as bad as some people think, when the home is sold the valuation resets back to normal, and during the housing boom a lot of people sold their homes.

Prior to Prop 13 property taxes were increasing faster than inflation, which was an unsustainable situation for home owners.

[KansDem]

11. I beg to differ...

I lived in California from 1954-1979, and was the beneficiary of a damn-good public school system. And I remember the Prop. 13 vote. I knew a couple who swore up and down that if Prop. 13 didn't pass, they'd have to move out of state. Well, Prop. 13 passed and the next thing this couple did was buy a second home in Big Bear.

Apparently, they confused "entitlement" with "need."

A couple of years ago they sold their house, and moved out of state. They were relieved they "got out" before the bubble burst. I don't know what they sold their house for but believe it was 12 to 15 times what they paid for it. They lived the good life: artificially-low taxes and inflated home resale value...

[DJ13]

12. Im a home owner here in Ca since 1975

Property taxes were the major means of increasing taxation before Prop 13 passed, and it was getting out of control.

Repeal it and watch the exodus of older people because they would certainly be unable to pay a higher rate in a state that already has high taxation.

[David Zephyr]

27. There's an intelligent alternative (and there always was one)

See my other posts.

No one wants to unleash the re-assessment of property values for taxation on single family homeowners. We had another option on the ballot instead of Prop 13.

It's the inability of the State to re-assess commercial, industrial and multi-family rental properties that is starving the state.

[HowHasItComeToThis]

13. BINGO

[taught_me_patience]

17. So true. n/t.

[David Zephyr]

25. Not so. Prop 13 was one of two options on the ballot that year.

Prop 13 froze all property taxes at 1978 rates which included industrial and commercial as well as residential property.

Governor Jery Brown supported the alternative measure which would have only frozen residential properties.

The state's failure to tax skyscrapers that are "owned" by perpetual corporations is absurd.

Jerry Brown had it right, but Howard Jarvis had the backing of the real estate tycoons in our Golden State and, yes, they tricked the voters into supporting Prop 13.

[Greyhound]

43. And apparently many still haven't figured it out.

Watching the disintegration of what was once the best state in the nation (arguably the best place on earth) has been spectacle of historic proportion.

[slackmaster]

3. Amazingly, we working middle-class California homeowners are still some of the most heavily taxed

...people in the USA.

Income tax rates are high and progressive - You only have to earn about $44 K to start paying the top rate.

Statewide sales tax is 8%, and it's higher than that in many locales.

Fuel taxes and corporate taxes are among the highest in the USA.

And our legislature can't figure out how to balance the budget.

[BR_Parkway]

5. Looks like the cut taxes on the businesses - leaving you with the bill

further down the page

"Since 1978, state and local government in California has been funded chiefly by personal income taxes. Bank and corporation taxes have been steadily reduced. In the current recession, with state unemployment at 11 percent, tax revenue has fallen off a cliff."

[slackmaster]

9. Let's see how California corporate and bank tax rates compare to other states

Data for 2008:

http://www.taxadmin.org/fta/rate/corp_inc.html

8.84% for corporations, 10.84% for banks. Only about eight states have higher rates.

[taught_me_patience]

20. Thank You Slackmaster for cutting through the B.S.

DUers spew about California being some type of low-tax "haven" for business. Completely false.

[Greyhound]

42. That is income and no major CA based corporations pay anything close to that rate.

This is the same old lie that's been keeping parasites employed for generations, only "little people" pay huge tax bills.

[slackmaster]

46. Corporations don't show much income, so raising the rate wouldn't do much to raise revenue

Raising property taxes would have the immediate effect of decreasing property values.

The ONLY solution for California is to cut spending.

[SoCalDem]

7. I think ours is higher than 9% these days

but then we DO use services:)

[NoNothing]

4. "A tax not raised" is not a "tax cut"

Otherwise anything less that 100% taxation is a "tax cut."

[Dr. Strange]

6. Clearly you don't think like a politician.

Not that there's anything wrong with that. :)

[dsc]

14. in this case it is

the tax wasn't a certain dollar amount but rather a certain percentage of the vaule of the house. Thus in order to keep the dollar amount constant, the percentage had to be cut as the house value increased.

[Ozymanithrax]

10. California is disfunctional, not dead.

[wildeyed]

15. My parents campaigning against Prop 13 is my earliest political memory.

Maybe one of my earliest memories ever. I remember that my grandmother, a public educator and one of the brightest people I ever met, was absolutely devastated by the law and its longterm ramifications for public education in the Golden State.

[David Zephyr]

33. Your parents sound like good people.

I worked against Prop 13 here, too. We had another option, but the television blitz and the scare tactics to older homeowners carried the day.

[ddeclue]

16. Yep and Florida is doing it's best California impersonation and getting the same results.

:cry:

[WhiteTara]

22. I don't know so much about prop 13; but,

the reduction on the car tax was the big downfall moment. Hummers were all the rage that year and had HUGE annual tax fees.

[ProgressiveProfessor]

24. The vast majority of the car tax was an assesment on the value of the vehicle

Not sure that was always a good thing, and it certainly was regressive.

[Ardent15]

31. FUCK PROP 13!!! nt

[slackmaster]

47. I voted for it, and if it was put on the ballot I'd vote for it again

I pay plenty in property taxes, and it's quite clear that if the 2/3 vote requirement to raise taxes was removed, taxes would be raised across the board.

The only solution for California is to cut spending.

[Commie Pinko Dirtbag]

54. They could start by nixing that three-strikes BS. -nt

[KingFlorez]

36. Commercial property taxes should have never been frozen under Prop. 13

That is the part that needs to be repealed, it's absolutely disastrous.

[Imajika]

39. So New York state is a few years behind California?

"Yet I live in a state (New York) which, despite its fiscal problems, still manages to fund social services, good public schools, a good public higher education system, and provide all the other essential government assistance without massive layoffs or cuts."

Err, for how much longer? All this means is that New York is a couple years behind the disaster that is California. Last I heard New York's deficit problems were getting worse rather than better. I could be wrong about that, but from what I gather New York's budget problems are not all that far behind California's.

Know the saying "As California goes, so goes the nation"? I'd imagine the states that will get hit first and hardest are the ones with the highest public sector spending on things like education and health care. With the economy in the gutter, tax revenue will of course plummet and the states that have a costly social safety net will feel the pain first.

Bottom line is California can't afford all the things the state government is trying to do. Can't have a lot of social spending without the tax revenue to back it up. Going to have to raise taxes, cut spending or some of both. Right now it seems as if Californian's don't want tax increases, so state spending will have to be cut. There is just no way around it.

[Hawkowl]

40. Reagan again.

His destruction lives on long after the evil gipper.

[muriel_volestrangler]

41. Sounds like California needs to change the majority needed in votes back to 50%+1

Changes that are needed are being blocked by a rump of idiot Republicans (just like the US Senate now, but it's been going on for far longer).

So, get an initiative put to a referendum saying that a simple majority in the legislatures will be enough to make any changes to tax rates. It's more democratic (which should make it 'sellable' to voters); it's what California used to have when things were going OK (a look back to a better past that may even persuade some conservatives that it'd be a good move); and with a fine irony, it would only need a simple majority of voters to pass. If California is that screwed up, there must be a good chance you can get more votes for a proposition that will help democracy.

[slackmaster]

48. Why? So the legislature can jack up taxes even higher? You KNOW that's what they would do.

:crazy:

[muriel_volestrangler]

49. If they needed to

At the moment a minority of Republicans can block any increase in taxes, and just shout "cut services, it's the only way". So the only fix is to cut services, even if a majority of the legislators don't want to. It's quite similar to the Senate Republicans blocking health care reform, even though they're in the minority. In both cases, the poor suffer the most.

[slackmaster]

50. The poor always suffer the most no matter how much or how little the .gov spends

That's not a valid argument against cutting spending. They don't "need" to increase taxes now, and if we allow them to, they'll do it whenever they WANT to, which is always. That's why Proposition 13 was passed, and the underlying problem is still in Sacramento.

I'm sure that services can be delivered more efficiently. Have you ever looked at the computer systems used by the DMV and other state agencies?

[AsahinaKimi]

44. I don't think we are dead yet..

California may not be what it used to be, but its not dead. I don't see flocks of people abandoning the state. Running to the Nevada border! There are still many of us, who believe things can turn around. The prices might be very high here, but its because of things like gasoline thats been treated so as to not pollute the air so much as we used to.

There is the idea that the Green energy business could have a good start here with more use of wind power, solar power, and even using the Ocean (waves) to generate more power for the state. Innovation has always been apart of this state.


I have lived here all my life, though fires, earthquakes, mudslides and floods, and yet this state is still here, and people are not leaving. If anything, we are still getting more people moving here from back east. Its been that way since the first 49ers, and people in covered wagons came out here looking for better opportunity.

California has such a lovely diversity of people.. such a wonderful mix of ethnic and cultural events. San Francisco is the home to many immigrants from not only Mexico and China, but from people from all over the world.

You can stand on a busy street corner in San Francisco and hear not only Chinese, English, and Spanish, but also French, Arabic, Japanese, Korean, Tagalog, Vietnamese, Thai, Russian and a ton of other languages. San Francisco and Los Angeles are very international cities.


You might think Calfornia is dead, but its very much alive...and the economy will come back here, it has to. If life is change, then it begins here, in the Golden State.

[Zomby Woof]

57. It may not be dead

But it's sick, and it's going to get worse.

I was born here, and have lived here off and on during the 60's, 70's, and again for the past 5 years. It has been a long sad decline, and Prop 13 was the poison arrow in our heart.

It's all going to hell, and quite quickly.

[crazyjoe]

45. California has some of the highest tax rates in the country

The problem is a mass exodus of business and money to avoid these taxes.

[Bigmack]

52. Tax per capita is 10th...

business is not leaving... it's dying.

Prop 13 screwed the pooch.

[Commie Pinko Dirtbag]

55. What are the 9 states that tax more than CA? And how are they faring?