Taxes and State Revenue

By Patrick L. Marsh

Taxes are a necessary element of a functional government, and we all generally agree that some tasks are best provided equally to all citizens. However, tax increases should be the last possible solution. Spending needs should always be resolved first within current revenue.

That same budget expects general fund expenditures of $92.6 billion, and lists the state's top five expenditures: $38.2 billion for K-12 Education (41.2%), $26.4 billion for Health and Human Services (28.5%), $9.4 billion for Higher Education (10.2%), $8.8 billion for Corrections and Rehabilitation (9.5%), and $2.6 billion for Legislative, Judicial, and Executive branch functions (2.8%).

Including bond funds and special funds, the total budget is almost $140 billion. Tables to support these figures can be seen at the budget's website. It should be noted that revenue figures assume the Governor's tax plan passes in November.

A thorough examination of individual tax law would be boring and pointless. We all understand that tax law is a convoluted mess of incentives (some of questionable purpose), loopholes, some very broad and very narrow breaks, and language that the average person will never understand. This is a system that will not change until the Federal level makes a change first.

What is more important to understand is how a legislator will act given the proposed revenues and expenditures. My initial reaction to the budget is that the totals are staggering. Certainly, a billion dollars means less and less in worldwide terms each year, but do we consider our return on this immense investment adequate? You do not need to be seriously tuned in to local or state politics to hear the ocean of complaints about services. As an outsider now, I am not in a position to opine on whether a given dollar spent by the state is well spent, and I can certainly make no promise about changes, given the walls set up to prevent such sweeping reforms. However I can say that if elected, I will be auditing everything to which I have access, looking for ways to save money or improve what we currently do. That said, it should also be understood that cuts to personnel would be my absolute last recommendation in any cost savings plan. Cost savings at the expense of people is no real solution. We take care of each other first, but at the same time, when we are all pitching in, we have a duty to be as efficient as possible, especially considering how bloated the budget has become.

So to put this point of view into practice, I would like to assert that I will not cast a vote in favor of a tax increase under normal circumstances. This is not a tax pledge. A situation may arise that the we can all agree will require a tax increase. A legislator must always remember that he or she is a representative, not always a lone wolf. As such, if the consensus is there for a tax increase outside the realm of the expected (say a natural disaster with astronomical costs and damages) I would be willing to vote in favor, again, ensuring we take care of each other first. However, I will not vote in favor of legislation that adds most cost to you in the normal course of business.

Considering the size of the budget, there absolutely has to be a way to do it more efficiently with the money we have. There has to be.

My next consideration is the mix of revenues. There is pretty sharp difference in 2102-2103 between the portion paid from Personal taxes (62.5%) and Corporate taxes (9.7%). Of course, there are details missing from these numbers, such as additional costs to corporations that are not classified as taxes, and the level of tax break that must be extended to corporations to encourage them to do business in California. To build off my prior point of not raising the cost to the citizens, I would add that I would like to keep the mix steady, at least in the examination period of expenditures. I do not for a minute believe the cries of "Class Warfare" when the Governor speaks of increasing taxes on the wealthy. Under that logic, any change in taxes, or even the setting of tax rates in the first place is also class warfare. A ridiculous assertion, and one that would not sway me from ensuring that those with the most ability to pay should shoulder that burden. After all, those most able are the ones that benefit most from structuring society as we do- a form of Capitalism that virtually ensures we have poverty and need. It is inherently unfair to impose such a system and then require equal sacrifice from all members regardless of ability to pay.

That said, I am still not in favor of an immediate shift in the mix, as we do not need that cloud of opposition in a period where I believe we should be focusing on how we are spending our money. In the future, however, a shift in the mix has got to be on the table (as is has been throughout our great history), but hopefully the reductions we can enforce will offset any perceived or actual negatives of a shift in the mix.

My final thought for this article concerns our sourcing. Generally speaking, I am not a believer in taking advantage of cigarette users, and to a lesser degree alcohol users, via the tax system. I understand the arguments that smokers, for example, increase society's medical costs because they may contract lung cancer. In the June election, we will have a ballot measure to increase the tax on a pack of cigarettes by $1.00, with some of the proceeds going to cancer research. While it is true that the vast majority of lung cancers are caused by smoking, there are enough cases from alternative sources to at least make me wonder why only cigarette users are singled out to pay for research. Corporate toxins released into the environment can play a role. Air pollution from our automobiles can play a role. However, we seek to take advantage of people with an addiction (read guaranteed to continue paying the tax) to provide for the ends. Without a wider net being cast for a ballot measure like this, I will not be supporting it, simply for reasons of fairness. While I do not like cigarettes in any way, I do not believe in potentially taking advantage of an addiction.

To summarize, where taxes are concerned, I prefer to look to how we spend our money before going out and raising taxes. For sure, we have many needs in our state, and many problems. When we look to the government for solution, they will help in the way they can- pass laws and spend more money on these problems. I would like to start a trend of legislator that asks first whether we can achieve our goals with the current money. It is difficult to say how successful one person doing so might be, but with a full disclosure of findings to the district (and the rest of the state) perhaps in the not so distant future, we can have a shift in the attitude in Sacramento.

I do not want to raise your taxes or cost you more money in any way, and as mentioned, barring only the most extreme circumstances, I will not do so. And no, solving a budget crisis is not an extreme circumstance! That is certainly not the time to go throwing tax increases in the mix. However, this should be tempered with my philosophy that we always look out for each others' well being. I do not subscribe to the idea that we simply do governmental layoffs to save money. All that does is make more out of work people, and clearly does not demonstrate caring for our people.

But I am not of the idea that tax increases are the only solution. I really believe we can do this together, and really make life a little better, by hopefully putting more money back in your pocket, and not lose what this great state offers its people.