Enough Whimpering Already

There is much garment rending and teeth gnashing in the state Capitol over California’s fiscal condition. 

This fiscal year alone, which is nearly half over, there is at least an $11 billion gap between revenue and spending commitments. The governor predicts another $13 billion gap for the fiscal year beginning July 1, 2009. 

The Legislative Analyst puts the 18 month total closer to $28 billion and adds that absent some corrective action quick the 2010-2011 fiscal year and the 2011-2012 fiscal year will have revenue holes of around $22 billion – each.  

That’s so horrendously bad as to be almost stupefying. 

For his part, the governor has called a special session, which runs until the end of November. In December, a new batch of solons gets sworn in. 

The current Legislature, which aided and abetted in approving the 85-day late abomination they and the governor candidly admit stinks worse than Epoisses cheese, don’t seem to care much about doing squat right now. 

Not that they have a plan or anything. 

They are, however, engaged in traditional budget jabbering: It’s so big we can’t cut our way out of it, we must raise taxes, chant the Democrats. An economic calamity is the cause of the problem and thus businesses need stimulation and tax breaks in order to create jobs, quoth Republicans. No new taxes. Read our tightly pursed lips. The kids will suffer. As will the halt and the lame. Woe unto us! 

Ad nauseum. Ad valorem.  

Enough whimpering already. Please pull all heads out from wherever they are buried, take a deep breath and examine the problem critically. 

California’s gross income is approximately $1.6 trillion as of the end of the second quarter of 2008. This according to the United States Bureau of Economic Analysis.

So how much money in additional taxes would it take to erase this year’s $11 billion revenue shortfall? What onerous burden would California’s saintly taxpayers stagger under? 

Seven-tenths of 1 percent. 

Yup. Seven-tenths of 1 percent. Take $1.6 trillion and multiply it by .007. Presto: $11.2 billion. 

In the interest of equity, everyone should pay this surcharge. All Californians are in the same rickety lifeboat, regardless of income level. 

It’s a fair surcharge in that a family earning $40,000 a year would pay $280 while a family earning $200,000 would pay $1,400. 

This is the point at which Democrats loudly proclaim that $280 means a lot more to a family making $40,000 than $1,400 does to a family taking down $200K per annum. 

No doubt. But it seems a damn sight more equitable than raising the sales tax and/or broadening its base to services such as accounting and dry cleaning. 

That $40,000 family of four is paying the same 7.5 percent in sales tax that Charlie Munger, Warren Buffett’s long-time business partner, is paying.  And Mr. Munger is earning significantly more than $40,000 annually.  

While on the topic of equity, don’t forget that every penny of state income tax paid is deductible on federal taxes. 

So not only is a Californian’s federal tax nut smaller but the federal government, through lower collections, subsidizes as much as 40 percent of the seven-tenths state increase. 

Weigh the policy choices. 

Right now, the typical American school has 30 percent more teachers than a school in California does. The typical American school has 61 percent more school site administrators and 92 percent more counselors. 

The governor proposes a $2 billion reduction in public school spending to help close this year’s $11 billion revenue gap. That likely means California won’t be adding teachers, counselors or administrators any time soon and the education California’s children receive will likely suffer. 

Dunno but it kinda seems like — maybe — a fully deductible, seven-tenths of 1 percent personal income surcharge might be a slightly sounder long-term strategy. 

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