California's rolling budget fiasco - spending the state to ruin

Arnold's 'Ishtar' - The Governor surrenders on taxes.


A big part of the problem [in California] is the Terminator himself. When Mr. Schwarzenegger ran for Governor in 2003 amid the last California fiscal crisis, he promised a new ethic of spending restraint, no new taxes and less debt financing. Six years later none of that has happened. Once California crawled out of that last fiscal emergency, Mr. Schwarzenegger made one more stab at budget reform, got clobbered at the ballot box, and has since given in and let the budget grow to $144.5 billion -- a 40% hike over four years.


Mr. Schwarzenegger even boasts that his tax plan will "invigorate our economy and generate jobs." Well, perhaps jobs for moving van companies to help people flee to better tax climes. The sales tax could not be more poorly timed: Golden State retailers have already seen a rapid slowdown in sales. The last time the sales tax was raised, in 1991, California's retail sales slumped to their lowest ebb in 30 years.

The only politicians standing against the media-political consensus for higher taxes are Republicans in the Assembly. Under California law, a two-thirds vote by the legislature is needed to pass a tax increase. Assembly leader Mike Villines has it right when he says that "We just believe that higher taxes will lead to more businesses leaving the state and encourage even more spending."

Democrats refuse even to trim the budget. Neither they nor the Governor have proposed shutting down a single government program. Many California voters also seem to live under this delusion that government is free. The state has a debt of $60 billion and the worst credit rating among the 50 states. But in November Californians approved a $10 billion bond for a high-speed rail system that will add $600 million in annual debt servicing costs to the state budget every year until the middle of the century.


We'd suggest Mr. Schwarzenegger and the rest of the Sacramento establishment take a field trip to New Hampshire. That state maintains better schools, roads and general public services than California, though the Live Free or Die state has no sales or income tax. Meanwhile, California labors under the second highest income tax rates, and the politicians now want to impose the fourth highest sales tax. And the state still has the largest budget deficit in the nation.

The real crisis isn't a lack of tax dollars. It's a political class that is spending that beautiful state to ruin.

Comment: Michigan's another state that taxed small businesses to emigrate: Michigan: A Taxing Place To Do Business. Note author's comments on Detriot:

Our state’s largest city still has a per capita tax burden far higher than the average for Michigan municipalities. It is burdened by bloated bureaucracy, corruption and cronyism, and old ways of thinking and doing things. Instead of being the engine for Michigan’s growth that it ought to be, it’s too much of a drain on both the economy and state taxes. Indianapolis, a city that works, has one-fourth the bureaucracy per citizen and spends about a third as much. Mackinac Center recommendations for fixing Detroit would go a long way to improving Michigan’s overall tax and business climate.


  1. They need a Taxpayer's Bill of Rights there--need a vote to increase taxes faster than the rate of inflation plus population growth. It worked wonders in Colorado to restrain things. We could use it here, too.

  2. Bert ... that's the key: keeping government spending growing at or less than the rate of inflation!

    I appreciate you and your comments.


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