Sandberg: Everyone needs to sacrifice
By Amy Sandberg
Dick Lyles makes several false claims regarding the governor’s tax initiative.
First, California tax revenues have not increased. The conservative blog Breitbart recently reported “State tax collections for February  shriveled by $1.2 billion or 22%. The cumulative fiscal year decline is $6.1 billion or down 11% versus this period in 2011.”
Second, Dick argues Governor Brown hasn’t “earned” the right to propose a tax initiative. Seriously? He’s twice been elected by the people as governor of a state with the eighth largest economy in the world, and was a two-term mayor of a major metropolis. What does the guy have to do?
Third, Scott Walker did not really balance Wisconsin’s budget. He used the “cash method” to make it look like he did. The cash method accounts for how much money is in hand at a certain point without looking at upcoming obligations and expected revenues. The GAAP method is the standard for every public company and most government bodies. It provides a more complete and realistic picture and eliminates this kind of sleight-of-hand.
Dick (and Walker) ignore that spending mandates don’t necessarily decline when revenue does. For instance, my personal revenue recently decreased by 30 percent. Obviously, I should reduce my spending by 30 percent. The problem is that I have a lease and I’m stuck for a period of time with expenses that match my previous income, not my current income. I can make cuts in discretionary spending, but that’s only half of what’s needed. I also need to increase my revenue.
Predictably, Dick blames unions for our debt crisis — even though salaries and pensions make up only 11 percent of the state budget. While unions make themselves hard to love in a lot of ways (pension plans, can’t fire a tenured teacher, etc), doing away with them is economic suicide. As union numbers have decreased, income inequality between the upper and middle classes has increased. The economy suffers when the middle class loses its buying power.
Nobody wants taxes raised. However, two-thirds of Californians surveyed say they don’t want further cuts in local government services either, and 60 percent of likely voters say that K–12 public education is the area of state spending they most want to protect from budget cuts. Dick conveniently ignores that California is heavily dependent on property and capital gains taxes for revenue which limits the government’s ability to adjust to economic downturns, like the housing busts. California also relies heavily on stock revenue, likewise limiting its ability to adjust during crises like the dot.com bust.
Wisely, Brown is addressing both the spending and revenue sides of the ledger to get us out of this mess. Brown’s initiative would temporarily increase personal income tax on annual earnings over $250,000, and increase sales and use tax by 1/2 a cent. New revenue would not only help close the budget gap, it would stabilize funding for K-12 schools and community colleges, and also guarantee funding for the public safety services that were shifted from the state to local governments in 2011.
As with all things, a balanced approach is the one most likely to work. It will require sacrifice on everyone’s part, not just the rich, and not just union employees. Politicians need to stop making unrealistic assumptions about tax revenues and rates of return. Republicans need to give up their insistence on no new taxes. Democrats need to stop their votes-for-protection agreement with those unions who refuse to make necessary concessions. And voters need to start behaving rationally rather than voting for contradictory mandates that hamstring the Legislature and governor.
Sandberg works in the book publishing industry. Reach her at email@example.com.
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