Schwarzenegger breaks no-tax promise, calls for big hike in sales tax
Posted by: Chuck DeVore | 08/05/2008 9:26 AM
We had a recall almost five years ago. California had a huge deficit. And soon-to-be-governor Arnold Schwarzenegger was promising to "Cut up the credit card."
In the March 2004 primary, Schwarzenegger, now Governor, was promoting the passage of Propositions 57 and 58. Prop. 57 was a $15 billion deficit bond designed to refinance the short term debt California incurred under Gov. Gray Davis (with a few billion left over for future needs, the last $3 billion of which was borrowed a few months ago). Prop. 58 was a supposed spending cap of which Schwarzenegger said, "By voting yes on Proposition 58, you are basically taking the credit cards, cutting them up and throwing them away so that the politicians over there (at the Capitol), those big spenders, will never ever get the state into this kind of trouble again." Yea, right.
Others at the time called Prop. 58 a ruse, saying, correctly, that it was weak and opened the way for more borrowing, spending and taxing by politicians. At great risk to my own campaign for Assembly at the time, I was one of those people, with my main opponent using my opposition to the then-popular governor's borrowing plan against me.
With due credit to Schwarzenegger and to history, Prop. 58 was initially supposed to be an iron-clad spending cap that would have would limited spending increases to population growth and inflation. Of course, Democrats in the legislature fought the plan, saying the cap was too restrictive because it did not account for programs such as education and public health, in which costs often grow faster than either population or inflation (that's the point, isn't it?).
So, the compromise Prop. 58 was worthless and here we are today, with government spending 40 percent higher than it was at the time of the recall in 2003 - $41 billion in additional state spending and a $16 billion deficit. Schwarzenegger is again calling for a spending cap, and more borrowing, and now, a $5 billion a year tax increase, even though he promised never to raise taxes.
The problem with a spending cap is one of believability. History has shown us that no spending cap devised by politicians sticks in California. The question is, will earnest Republican lawmakers once again play Charlie Brown to the Democrats' Lucy holding the football?
As for taxes, California already has the highest income tax in the nation, the highest sales tax rate, the highest gas tax, and the highest corporate tax in the West with our property taxes being at the national average, combining for the 47th worst business tax climate in America. Clearly, additional taxes in this time of economic weakness would make it highly likely that California would be the last state to recover in this present downturn.
Further, Californians are already stretched. As the Los Angeles Times quoted me today in a piece entitled "Schwarzenegger proposes temporary California sales-tax hike to close budget gap:
In the March 2004 primary, Schwarzenegger, now Governor, was promoting the passage of Propositions 57 and 58. Prop. 57 was a $15 billion deficit bond designed to refinance the short term debt California incurred under Gov. Gray Davis (with a few billion left over for future needs, the last $3 billion of which was borrowed a few months ago). Prop. 58 was a supposed spending cap of which Schwarzenegger said, "By voting yes on Proposition 58, you are basically taking the credit cards, cutting them up and throwing them away so that the politicians over there (at the Capitol), those big spenders, will never ever get the state into this kind of trouble again." Yea, right.
Others at the time called Prop. 58 a ruse, saying, correctly, that it was weak and opened the way for more borrowing, spending and taxing by politicians. At great risk to my own campaign for Assembly at the time, I was one of those people, with my main opponent using my opposition to the then-popular governor's borrowing plan against me.
With due credit to Schwarzenegger and to history, Prop. 58 was initially supposed to be an iron-clad spending cap that would have would limited spending increases to population growth and inflation. Of course, Democrats in the legislature fought the plan, saying the cap was too restrictive because it did not account for programs such as education and public health, in which costs often grow faster than either population or inflation (that's the point, isn't it?).
So, the compromise Prop. 58 was worthless and here we are today, with government spending 40 percent higher than it was at the time of the recall in 2003 - $41 billion in additional state spending and a $16 billion deficit. Schwarzenegger is again calling for a spending cap, and more borrowing, and now, a $5 billion a year tax increase, even though he promised never to raise taxes.
The problem with a spending cap is one of believability. History has shown us that no spending cap devised by politicians sticks in California. The question is, will earnest Republican lawmakers once again play Charlie Brown to the Democrats' Lucy holding the football?
As for taxes, California already has the highest income tax in the nation, the highest sales tax rate, the highest gas tax, and the highest corporate tax in the West with our property taxes being at the national average, combining for the 47th worst business tax climate in America. Clearly, additional taxes in this time of economic weakness would make it highly likely that California would be the last state to recover in this present downturn.
Further, Californians are already stretched. As the Los Angeles Times quoted me today in a piece entitled "Schwarzenegger proposes temporary California sales-tax hike to close budget gap:
Almost every Republican in the Legislature, meanwhile, has signed an oath never to support a tax increase. Assemblyman Chuck Devore (R-Irvine) predicted that Schwarzenegger's proposal would win no GOP votes. "You're talking about raising the cost of living on working Californians at precisely the time inflation is beginning to raise its ugly head," he said.To sum up, this budget battle goes to the core of the major parties' conception of the role of government. Democrats believe in an expansive administrative state that ministers to all our needs, whether we think we need them to our not. In this worldview, you can never have enough government and taxpayers can never pay enough. Republicans, Schwarzenegger now apparently excepted, believe in a more modest government that does for the people no more than what they cannot do for themselves through individual effort, family effort, and community effort. In the Democrats' view of government, even our 40 percent increase in spending since 2003 is not enough as their current budget plans are to spend billions more on welfare. Schwarzenegger seems to agree.
"The last thing that hardworking Californians need right now is, in effect, an increase to their cost of living by making everything they purchase, with the exception of food and medicine, more expensive."
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Mr. Ayer registered as a Republican to be electable in an interim election with no incumbents. He did...
A sales tax increase? Is Sacramento that devoid of new ideas?
Let see if I have this right.
(1) The proposed solution to a state budget that swings wildly out of balance when the economy slows is ... make tax receipts more dependent on marginal consumer spending.
(2) Since the stated purpose of this large state budget is "fairness," let's fund our grand ideas of "fairness" with a highly regressive tax.
"What are they smoking" is normally a rhetorical question in California, but since these same assembly-critters keep voting down your sensible Hemp Farming bill, I really want to know: What are these people smoking?
So Arnold is proposing new taxes, but I thought he said during the last campaign that he doesn't support new taxes? This was his line to get reluctant Republicans to vote for him. He even laughed at Phil Angelides, in fact he mocked him, for "You love to raise taxes. I can see the big smile on your face that you get from raising taxes". Now the whole state can see what a big joke Arnold is. He is big liar. My vote for Art Olivier looks better and better with each passing day.
RECALL!!!!!!!!!!
You left out the part where you asked for campaign contributions to go along with your outrage.
Are you ready to recall this Governor now?
Tom McClintock is heading to the US Congress so would we have a good Republican who could win?
The best thing to do in my humble opinion is to send a loud message that voters do have a choice and send a Libertarian to Sacramento.
Any endorsements would be very welcome. Jim Lacy, have you endorsed in the 73rd Assembly race?
Andy Favor
73rd Assembly District Candidate
www.AndyFavor.com
PS: I have signed that taxpayer pledge that I will not support tax increases.
Matt -
You neglected to mention the details. First of all the proposal mandates budget cuts and gives the governor the power to make even broader cuts. Secondly, the tax rate after the 4 year period would fall to a level below the current 7.25%.
Yes, it's a small tax hike, but it's also necessarily far more complicated than that because with the state's excessive debt load, desperate times call for creative measures that must appeal to those on both sides of the aisle.
Dan -
Isn't the proverbial 'Lucy holding the football' the Democratic Party? Aren't they in control of the legislature? Aren't they the reason that Schwarzenegger has to offer a plan that raises taxes against his own campaign promise? Didn't we all just recall Grey Davis over this issue? That's what I thought.
Maybe it's time to recall a few obstructionist Dems in the legislature as well.
SMS
Chuck -
Sorry, I was addressing that comment to you, not Matt. *embarrassed*
SMS
Sarah,
Thanks for your comments.
Here’s the challenge. No one believes the Governor anymore. He promised us a spending cap with Prop. 58 when he said, "By voting yes on Proposition 58, you are basically taking the credit cards, cutting them up and throwing them away so that the politicians over there (at the Capitol), those big spenders, will never ever get the state into this kind of trouble again." That was wrong. Prop. 58 did little to solve the problem.
Then the Governor broke his commitment to work on redistricting combined with term limit reform, instead going his own way with a half-baked initiative.
Lastly, no one believes the sales tax hike would be temporary. With California having the 4th highest tax burden in the U.S. with the highest income tax, the highest sales tax rate, the highest gas tax and the highest corporate taxes in the West, any increase in taxes will further harm our economy. We have to live within our means. We cannot tax our way into prosperity.
Things will be tough. The Democrat’s budget proposal is $4 billion more than the Governor proposed and $2 billion more than last year’s spending. How about at least getting back down to the Governor’s proposal?
All the best,
Chuck DeVore
California State Assemblyman, 70th District
Chuck -
Does the Assembly have a proposal in response to this plan? Do you think your Democratic counterparts would vote for one if it didn't include a tax increase?
I agree that any Democratic increases should be rolled back. At this point I don't care what they are; the budget at least needs that much to get closer to the target.
What's the plan Chuck? How will our Republicans in the legislature counter the governor's proposal other than simply blocking it? The problem remains.
SMS
The governors choice to raise taxes is both dissapointing and scary. The state does not need any more funds. Every public administration spends every penny they get in order not to have a reduced budget in any future rounds of funding. That means that unecessary overtime is being given out right now, uneeded supplies are being bought, and worst of all equipment is being upgraded only to be scrapped or sold at auction for pennies on the dollar. These fiscal policies need to be addressed. At a time when the government has allowed good jobs to go overseas, allowed a $70 billion dollar per month trade deficit with China alone, allowed a federal deficit of $9.4 trillion dollars, allowed the dollar to be weakened, illegally borrowed (read "spent") social security funds, allowed illegal immigration to usurp billions of dollars a year, and yet they expect to raise taxes. Politicians are elected to LEAD and if they cant perform that duty why do we need them? I believe that raising taxes at this point is immoral at best.
Tim -
And what of the state debt?
SMS
Hey SMS.... it was off the top of my head... misspellings and all :)
Hey SMS ... that was off the top of my head misspellings and all :) I'm sure a lot more topics of missmanagement could be added without too much work. You think after 60 years of solar panel technology we would have them on every roof!?!
Tim -
'You think after 60 years of solar panel technology we would have them on every roof!?!'
Can't argue with that!
SMS
I work at one of those flawless government institutions that "spend every penny they are given". I have managed a department in this institution for a number of years. Because I am a conservative republican working in a strange land of "liberals by the hundreds-if not thousands" it is really hard to watch some of what goes on. But let me assure you that MY department does NOT spend every penny it gets. We could most probably be labeled the most frugal department in the entire organization. We have a small group of other like-minded conservative republicans working in my department (wonder how that happened...lol) who all pitch in and cover vacant positions; we go to vendor fairs and collect pens and paper pads in the big plastic bags they give you and bring them back to the office for our use. We have computers that are nearly 8 years old. (But with foresight when we got them I got the ones with the greatest power then and with the highest memory capability and a server to back them all up). While they may appear to be dinosaurs, they are still working along at a good pace and doing what we need them to do.
Our department (because this is a joint effort) was punished this fiscal year because we had a surplus of funds that we had been frugally scratching together, saving for new computers at some point in the future, and some "saved" funds from not filling positions that needed filling (but we all pitched in and covered the basics of those positions). Because we had funds on hand, we were not given the standard algorithm based funding that each of the other departments received. This now puts my department "behind" in being able to fund new computers and replace vacant staff positions. We have a bare bones staff that works extremely hard - I would challenge any private company to compare the amount of work we put out with the small number of staff we have with their own. Highly productive people are punished in a liberal environment. So where is our incentive to save taxpayers dollars except our own conservative morals?
What we are left with now, is 8 year old computers and no funds to replace them with. What we are left with now is a growth in the work that needs to be done by nearly 20% and no funds to hire the people we need for those positions we have been able to cover but are no longer able to cover without massive overtime and let me say, damage to our own morale.
No good deed goes unpunished in a liberal environment.
Thank you for keeping the faith, Anonymous. I appreciate that you are trying to do the right thing with the citizen's resources while serving in government. Have you looked into the zero-based budgeting used in other states and decided whether that would prevent some of the bad budget tricks you have experienced?
All the best,
Chuck DeVore
California State Assemblyman, 70th District
www.ChuckDeVore.com
Anonymous - Please don't lump everyone together. This is just bad management on the part of the agencies, bottom line. The lack of fiscal responsibility is appalling and your department be set up as an example of how one spends money THAT IS NOT THEIRS.
I consider myself fairly liberal in many ways but those that you speak of are not "liberals" they are merely bad at managing money. Don't blame the institution, blame those that run it.
Moderate Dem ~ Having worked in state and county government for most of my professional life, I think that the blame is properly laid at the feet of the institutions themselves. Essentially, Anonymous at 06:32 had it right.
If a state or county agency does not spend the funds that were budgeted on its behalf, the budget-making authorities will often, when times get tough, use that opportunity to seize the surpluses you've accumulated AND reduce your budget to an amount below your current, frugal spending levels. Those funds are redirected to the latest “program du jour”, enabling the budget makers to either leave that program fully funded OR reduce the amount of cuts to that program. That reallocation enables the budget makers to cater to the needs of their “constituents”, who are usually the public employee unions. Absent zero-based budgeting, the “system” is not designed to reward those who make prudent financial decisions.
MN
Ok, so we are all pissed, dismayed, disillusioned, or write in your own adjective. How do we rebel against this? We can write our representatives in which case a staffer opens the mail and makes a tic on a clipboard under "opposed" or "in favor" and that is about the end of that. So short of grabbing our guns and driving to Sacramento and taking back the government, how do we not pay this tax? Do we need to create a Proposition 13 type law that limits sales tax? Isn't this the reason the Progressives gave us the initiative, recall, and referendum?
http://www.sos.ca.gov/elections/initiative_guide.htm
There is a guide on the Secretary of State's web page how to create an initiative. Unfortunately the papers need to be filed 131 days before a statewide election. 434,000 signatures would also need to be collected, but I don't think that would be an issue. Any ideas on this?
Tim ~ I do not believe that an initiative repealing the sales tax increase is the answer. Our liberal-dominated legislature has demonstrated time and time again that they will just look to some other source of revenues to support the ever-blossoming state budget.
Zero-based budgeting, as echoed in Chuck's recent posts, might provide a better solution. We need to find someone who's courageous and willing to commit the time and resources necessary to reform our state budget process.
Perhaps they could tie the timely passage of a BALANCED state budget to other legislation. Say, an annual ban on all other legislative activities after June 1 until the budget is passed. Forcing our legislators to work on nothing but the budget for one month would stall the passage of other (mostly bad) bills!
MN
Thank you for expressing your appreciation Assemblyman Devore! I'll pass that on to my staff..(who actually read this blog on their lunch hour LOL). The problem is that we are not given the option of zero based budgeting - we are given a formula to use which applies various components of our particular environment to calculate what we should "need". It does not take in to account vast variables. It does not address the need for a reserve. It does not plan well for the overcommitment of those "above" us to those we have to manage in our department. This is the proverbial egg between a rock and a hard place. I think the entire organization should use the zero based budgeting method - accounting for that which they need. But this environment breeds "budget padding" and after my recent experiences, I'm afraid I may fall morally below my standards into the "padding" myself to insure future survival.