One Possible Solution for a Sustainable Budget

Posted on 06 April 2011

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By David Atkins

As anyone who hasn't been living under a rock in this state probably knows by now, California politics are at an unsustainable impasse.  Californians support extending taxes to balance the budget, and in particular support making the ultra-wealthy pay their fair share. On the other hand, when phrased generally, Californians prefer budget cuts to tax increases, but oppose any specific cuts to the budget that would make the slightest impact on the state's fiscal health. Additionally and more importantly, Californians don't support a repeal of Proposition 13, which creates the need for a 2/3 supermajority in both chambers of the Legislature to actually raise taxes.

The California Republican Party, meanwhile, has just over the 1/3 in the Legislature to not only prevent revenue increases, but also to stop commonsense efforts by the Governor to place commonsense budgeting that include a mix of cuts and tax extensions on the ballot. Nor does the CRP have any incentive, electoral or otherwise, to compromise even an inch on the issue without a offering ridiculous and ever-growing list of demands in exchange for the hostage.

Democrats in both the Executive and Legislative branches, whom Californians voted into office overwhelmingly against the national 2010 tide, have little power but to attempt to minimize the damage caused by unnecessary and devastating cuts. And even if a combination of redistricting and GOP unpopularity were enough to deliver 2/3 of the Legislature to Democrats in both chambers, it is probable that just enough conservative Democrats afraid of Chamber of Commerce money could be found, to vote against their Party and continue the gridlocked status quo.

The only potential way out of this complicated mess is through an already over-powerful and deeply flawed initiative process. But with voters unwilling to eliminate supermajority rules on revenue increases, real solutions seem to be few and far between. One potential solution offered by the folks at Calbuzz would be to offer a conditional all-cuts budget, forcing a "yes" vote for awful cuts and a "no" vote to deny them. This is an interesting idea, but fraught with great risks and potential hurdles.

But another path of lesser resistance may lie open: one that takes the confirmed desires of Californians into account while providing a permanent and sustainable solution to the budget crisis.

The solution would involve keeping the 2/3 requirement for revenue increases on all households falling below a certain prescribed income level, while moving to a simple majority vote on revenues for corporate entities (with possible small business exemptions), and all households with incomes above that level. The level itself could be open to debate but due to high cost of living in California, should probably fall on the higher end (say, around $250,000 to $300,000 per annum). Such an initiative should be free of significant legal challenge, as the California Court of Appeals already ruled the "Millionaire Tax" Proposition 63 to be constitutional, and not a violation of the equal protection rights of the ultra-wealthy.

Californians like the idea of raising taxes on the rich and on corporations, as a way not only to balance the budget but also mitigate the growing income inequality so damaging to the fabric of society.  But they don't want to see taxes raised on themselves, as they already feel nickel-and-dimed in most aspects of their lives, even as basic cost of living continues to rise.  Further, any politician seeking to implement regressive taxation in a state where the bottom quintiles already pay a greater share of their incomes than the top 1% as is should probably have their head (or heart) examined. 

The answer to both California's budget crisis and to feckless Democrats' political woes lies neither in regressive taxation nor in continual "compromise" with those who value the well-being of John Galt over those of the sick, the elderly, the destitute and the middle class, but rather in a sustainable economic system in which investments are made in the future with equitable contributions from all levels of society, particularly those who have been most fortunate and demand the most in externalized costs from society to support their lifestyles.

A ballot initiative specifically designed to leverage Californian's basic economic populist sentiments should have the power not only to be successful at the ballot box, but also to permanently end the legislative gridlock in Sacramento in a way that reflects the actual values of the people of California.


David Atkins is a qualitative research professional and prominent blogger. This article originally appeared on Calitics.

None of the state-funded programs have proved that they need $27 billion more.They simply each year ask for more money, never accounting for how they spent the previous years' money.

From Calitics today:
Assessment of property owned by large publicly held corporations when 100% of stock is sold cumulatively a specific number of times.
Said this could raise 26 billion and close the deficit.
Great idea!

When the 100% of a stock of a large public corporation is sold cummatively? So, if McDonald's is sold about 1% per day on the stock exchange then after 100 days it is 100% sold? So, every 100 days it is reassessed and then taxed?

What about private companies? For example, Cargill has huge grain elevators in Los Angeles. They have no stock. So there assets are never reassessed?

What constitutes large? Is it based upon the amount of donations to the democratic party?

And, of course, being actively sold has nothing to do with profitability. If the property is reassessed and the company does not have the cash do they just file bankruptcy?

What about companies that don't own properties but just lease? Heck, if such a law was passed every company would either lease or get out of dodge (err, California).

Too complex, too many questions, too many unintended consequences.