There's no doubt that the state of California is in serious trouble. The beginning of the fiscal year is July 1st, and we have a deficit of some $24 million dollars. On Sunday Democrats and Republican members of congress locked themselves up in legislative sessions in an attempt to reach some agreement about how to deal with the budget gap. Democrats want to raise the additional revenue by raising taxes on tobacco and companies that drill for oil in addition to increasing the vehicle license fee by $15. Republicans are dead set against any new taxes and want to deepen the cuts of several previously wounded state programs. As expected, lawmakers have failed to reach a compromise. Democrats will pass their budget plan, and Governor Schwarzenegger will surely veto it. When this happens the state will not be able to pay its bills and the state controller will begin issuing IOUs in place of checks to college students, contractors, low-income seniors, and a wide range of others that depend on money from the state of California. State workers will be given a third furlough day without pay on top of the two days that have been forced on them since February.
No, this isn't de ja vu. We've been through this before. Back in February lawmakers finally passed a 2- year budget plan after months of fighting about these same issues. Schwarzenegger agreed to a temporary increase in the state sales tax after Republicans managed to remove a 12 cent gas tax from an earlier version of the budget. So why are we back to rehashing the same tired, old debate once again? Well, unfortunately the state has basically run out of money. We still don't have a balanced budget because massive job losses have led to a 34 percent loss in income tax revenue.
Figuring out how to fix this budget gap is maddening. There is no solution to this problem that amounts to anything approaching satisfactory. Further cuts will do even more damage to everything from construction projects to health care programs that are already suffering from severe underfunding. We certainly don't want to be saddled with new taxes. I do not personally know anyone who is happy about having to pay more for consumer goods. So how do we solve this budget problem? Well, I am not an economist. I know next to nothing about formulas and projections. However, common sense does tell me one thing. We are now at the precipice and forced to choose between the lesser of two evils.
Governor Schwarzenegger proposes that instead of raising taxes again we close hundreds of state parks, remove health care benefits from 930,000 low income children, and make further reductions in the salaries of state workers. Now place these evils on an imaginary scale opposite the idea of raising the tax on tobacco, those companies that drill for oil, and charging $15 dollars a year more for vehicle license fees. We can probably live, sadly, without our beautiful state parks, so let's just forget about that one for a minute. Let's see. Now it's between risking the health and lives of nearly a million children while further threatening the livelihoods of yet more families versus some of us having to pay a little more to engage in a deadly habit, to suck out of the earth a substance we all know we should have stopped using long ago, and add what amounts to the price of one family meal at McDonalds to our yearly car registration. Hmmm. Which one of these makes more sense?
It seems to me that California Republicans are determined to avoid any more tax increases whether they make sense or not, and they are not alone. Governor Paterson of New York, for instance, was practically crucified for proposing taxes on items such as sugary soft drinks, alchohol, cigars, and luxury cars. I think the reasoning behind it goes something like this. Raising taxes will discourage consumerism thereby contributing further to the economic problems of the entire economy. While it is true that we do not want to discourage spending, especially in this economy, we still have to consider which option is more likely to worsen the situation with which we are faced. Commodities like cigarettes and alcohol are things that some people want but don't need. Those that can still afford to buy these things will pay a few cents more for them if they want them badly enough. Of course, since I'm no expert, I could be wrong about this, but wouldn't trying this course be preferable to taking money and desperately needed services away from people who have already had their salaries cut and, in some cases, lost jobs. If we are trying to encourage consumerism, this seems like an odd course to take because people cannot spend money that they do not have.
Increasing the car tax is a little bit more complicated since this is a fee that applies to almost everyone. However, this would not really be a new tax but only going a little further to reinstate a tax that should have never been removed in the first place. The car tax was raised by Gray Davis to help in balancing the budget in 2003. We all grumbled about it, but after a while we started to get used to it. One of the biggest mistakes Governor Schwarzenegger made was repealing this tax shortly after taking office. If he had left it alone, we would still be facing economic problems due to the recession, but I doubt we would be buried so deeply.
Here is, perhaps, the most confusing thing of all. Schwarzenegger was previously a big advocate for health care reform. He has expressed his interest in working with the Obama administration on this very issue. Now he is saying that removing health care benefits from nearly one million children is a a better course of action than raising the price of a pack of cigarettes?
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