Here’s the deal. Governor Arnold Schwarzenegger wants to raise our state sales tax by one cent. In return he is going to force the Democrat controlled State Legislature to adopt automatic spending controls – and Schwarzenegger would get new powers to “cut programs whenever the state falls into the red,” according to the L.A. Times.
I don’t like raising taxes. But is this tax increase worth it in return for the automatic spending controls and expanded gubernatorial ability to cut programs? Does this proposal mean Schwarzenegger is two-faced? Or that he is doing what he can to stop the crazed Democrats in our State Legislature?
Predictably the Republicans in the State Legislature are freaking out. Assemblyman Chuck Devore (R-Irvine) had this to say about the Schwarzenegger proposal in an email he sent out this evening:
After utterly failing to restrain government spending since 2003, government has grown 40 percent or $41 billion since then, the Governor has now proposed to increase taxes by $5 billion a year.
An excerpt from the L.A. Times story which will appear tomorrow in print:
Almost every Republican in the Legislature, meanwhile, has signed an oath never to support a tax increase. Assemblyman Chuck Devore (R-Irvine) predicted that Schwarzenegger’s proposal would win no GOP votes.
“You’re talking about raising the cost of living on working Californians at precisely the time inflation is beginning to raise its ugly head,” he said. “The last thing that hardworking Californians need right now is, in effect, an increase to their cost of living by making everything they purchase, with the exception of food and medicine, more expensive.”
Yes. It sucks that government has grown under Schwarzenegger. But should the Republicans be fighting a one cent sales tax increase – when the Democrats could do a lot worse – and when this increase is attached to spending limits? I am not so sure.
DeVore by the way also used his email blast to make a pitch for campaign contributions:
As one of the legislators who will be voting to block this tax increase, I need your help. Please support our campaign with a $10 online contribution or more to signal your support for fiscal responsibility in California at this link.
Shameless Chuck!
Art –
I was going to cover this story, but you actually found more info than I did, excepting that I noticed one thing that you didn’t: the sales tax hike would cease after four years and fall to a level lower than the current 7.25%.
So is this really a tax if the inevitable result, in effect, is a refund? Or is it more like the state borrowing money from the citizens? Personally, I think it’s a reasonable idea.
And why is John Chiang still providing cover for the governor? I appreciate his standing up for the law and for regular people (as he should), but as long as the pay cut isn’t actually affecting state workers, it doesn’t really hurt Arnold as much. People need to see first-hand how evil this is. Maybe Chiang should take one for the team and resign?
SMS
Maybe Penn & Teller will do a show on this subject, “temporary tax increases”
You know the name of their ShowTime hit series.
so much for Libertarian Week…
Carl –
Come on. A penny per purchase to pay off our MASSIVE debt? Don’t you think that, for the moment, it might be worth it? If it lowers the tax rate when the cycle is complete, I say it needs to be done in order for the state to even be in a position to look at lowering other taxes when we’re in better shape.
It’s like the drilling issue. A lot of us want more offshore drilling for now, but nobody’s saying it should be allowed as a permanent practice. If hydrogen cars replace gasoline-powered cars, do you really think we won’t want those oil rigs removed? Of course we will!
Back to the sales tax, do you have a better idea? Do you really think state employees are that overpaid? If that’s the case, maybe as a compromise, Republicans can alter the proposal to include a demand for more decreased spending, but I think you’re exaggerating just a bit.
There are plenty of other ways to slash a budget without resorting to slashing salaries, even if it must involve layoffs. At least with the latter scenario, morale doesn’t suffer as much among the employees that work hard enough to remain in their jobs, which usually means more productivity.
We’re all against new taxes generally, but rejecting a measure that eventually puts us in better shape to reduce them, and out-of-hand no less, isn’t the answer either. We all need to remain reasonable in order to get out of our current fiscal hole.
Besides, don’t get me fired up again about all of the stupid voter-approved bonds nobody knows how to pay for! People who vote for them want to waste all of our money, but they don’t want to pay a penny for them? Maybe we should take spending bills out of the initiative process?
One penny: worthless. Ending government welfare: priceless.
SMS
There is nothing quite so permanent as a temporary tax increase, just like the last sales tax increase and Measure M.
I don’t for a heartbeat believe either the Gov or the any of the rest of them up there in Sacramento any more than I would believe anyone from BIA. “So long as winds blow and grass grows and water runs down hill.”
HELLO, they speak with forked tongue.
Call me whatever you like, they are NOT responsible, not now, nor have they been for many years.
You want to believe them, be my guest, but not me. I know the name of Penn & Teller’s show and it’s the same thing as the legislative collective word. BULLSHIT!
Carl,
I agree that new taxes suck and cutting spending is the way to go, and that Arnold has failed to stop the Dems from bankrupting our state. However, what is he to do? The Dems are intractable.
We wouldn’t be in this fix if not for the Talibani platform of the majority of the GOP leaders and electeds. The GOP would own this state if they would set aside their crazed social agenda.
The CA GOP also agreed to a gerrymandering scheme that makes it impossible to win in most legislative districts.
So Arnold has to compromise – but if the Dems accept the spending limits he is proposing, we all win. And as Sarah pointed out, the one cent sales tax increase has not only a sunset clause – it also ultimately lowers the sales tax in the future.
The Reeps are missing the big picture on this proposal. They put us in this mess by agreeing to a stupid gerrymandering scheme that makes them a permanent minority, and by lurching so far to the right that they are unpalatable to many Californians. Now they have to sleep in the bed they made.
“Giving money and power to government is like giving whiskey and car keys to teenage boys.” P.J. O’Rourke
Art and Sarah,
Remember Props. 57 & 58? They were supposed to end borrowing and deficits forever too. They didn’t. Sacramento spending caps always seem to have a hole in the top of them.
Spending is now 40 percent more than in 2003. Do you feel as if you’ve gotten 40 percent more in government services since then? Didn’t think so.
All the best,
Chuck DeVore
California State Assemblyman, 70th District
Who was it that said? – “There is nothing so permanent as a temporary tax increase.”
Hey Chuck,
I hope you understand that my feelings about the lack of trust isn’t ALL inclusive, but collective. Some of you folks are fighting the good fight up there!
40% more…nope, sure don’t.
Art.
For the past hour I was transcribing Mayor Pringle’s warm up act for the govenor and had not checked this post before adding mine.
Arnold can not dodge the eye of the camera.
Other than his own staff, we were the only media covering this event that anyone can watch at no cost 24/7. Larry
Folks.
Be careful with “sunset” provisions. Having lived in New Jersey when we approved a Bond for the NJ Turnpike, based on a promise of it reverting to a fee road once the Bond was paid off, never happended.
Typo.
FREE road not a fee road. Major difference. Some day I will proof read comments before hittng the send button. Sorry.
I think that discipline is something that you start and stick with.
Trying to tighten the belt by first going to the cheesecake shop for one last slice, turns into taking home a slice. Then comes the bargaining: “If I get online and order a cheesecake before sun up… it still technically my amnesty day… I’ll ask them to deliver a whole one once a week, and still be on my diet!”
Lets concentrate on the guys ordering cheesecake. For the most part, Arnold primarily is playing the part of the waiter. He makes menu suggestions, but it is the legislature that heaps the rich and decadent yumminess onto their plates and throws pepper shakers whenever a salad with vinaigrette is suggested as the better choice.
We the voters only ever get to pay the for the bill and the heart surgery down the road.
ALIVE * FREE * HAPPY
Libertarian
Sarah.
Are you bringing us into the spin machine?
“Come on. A penny per purchase to pay off our MASSIVE debt?”
If it’s only a penny a purchase than how long will it take to offset a $15 billion hole?
For every purchase of a $25,000 vehicle the additional cost would be $250.
The 2006 Measure M tax extension alone is costing those of us who fill up in OC an addition $13 Billion dollars on top of the fuel taxes we already pay. Sarah. We are not talking “chump change” here.
All:
I am self employed and collect sales tax as part of my day to day operations.
My quarterly check to the Franchise Tax board is currently larger than my gross margin. In other words, the citizens of California make more money off of my customers than I do. Of the part I do keep I get to remit part of that back to the State (in the form of income tax) for the privlidge of the state.
Am I decrying higher or lower taxes? No. I just wanted to bring some perspective to the discussion. If the state increases the tax rate 1%, it nets them the same increase in free cash flows as a 13% price increase would to my operation.
This sales tax hike is transfer costing the revenue shortfall caused by capped property taxes (Prop 13) and the lowering of the vehicle licensing fee.
I have a real problem with internet competitors as it is. This makes it worse.
I’m sorry, that should of been “net” margin not “gross”. I apologize.
no_vaseline,
Wow, I hear ya.
To make it worse, to maintain cashflow, you would also have to raise prices 13% of your margin because of that hike. Taxes are inflationary.
I disagree with you on one point: There is no revenue shortfall. The taxes regardless of licensing fees and prop 13 are very predictable. The legislature simply needs to live within its means and do the job the state constitution mandates first, then throw their moneyed supporters pork only with what is left over.
Larry –
‘For every purchase of a $25,000 vehicle the additional cost would be $250.‘
If that’s true, we’re no longer talking about a penny and I’ll likely change my mind on the issue. Can you refer me to a source on it?
Chuck –
What do you propose we cut? As I mentioned before, a lot of our spending is voter approved. We need to get the message to them that the money they’re wasting needs to come from somewhere! Perhaps we should INCREASE spending on voter education?! Or as I mentioned, maybe we should remove fiscal proposals from ballots altogether as the electorate is clearly lacking experts on the subject.
#15 –
‘I have a real problem with internet competitors as it is. This makes it worse.‘
I can help you with that. Email me. My address is on the ‘About Us’ page!
Oh, and Carl… that’s my cynic. 😛
SMS
Sarah.
In an earlier post you added: the sales tax hike would cease after four years and fall to a level lower than the current 7.25%.
Let me share the wisdom of Judge Judy which hopefull will get to the governor.
“Don’t pee on my leg and tell me it’s raining.”
Larry –
“Don’t pee on my leg and tell me it’s raining.”
Wow. You may actually be more cynical that Carl. I’m still waiting for someone to design a better plan to balance the budget and get our debt paid down at the same time. I have a feeling I’ll be waiting for a while. As Art pointed out, this is a compromise; and it’s going to take compromise. This is NOT a black or white issue.
SMS
Sarah. Unless my math is incorrect, if you purchase a $25,000 vehicle with a sales tax rate of .0725 percent your tax is $1,812.50. Ratcheting the tax rate up to .0825 would become $2,062.50, or an increase of $250.
Larry –
Actually, it’s a penny, not a point. According to the L.A. Times it amounts to .5%, bringing OC’s effective sales tax up to 7.75%. To use your example, the effective increase on the purchase of a $25,000 vehicle is a mere $132.50. If you can afford to pay cash for the car, what’s another $132.50 every time you buy a new one over the next 4 years? How many times will you do so? Twice at most (unless you have a fleet – perhaps we could get a business exemption put into this proposal)? If you finance, the effect on your payment is negligible.
How about another example? Say you spent $2500 on a plasma screen TV, your tax would only go up $13.25.
And of course we don’t have sales tax on food and medicine.
Do you really think this is an unreasonable compromise if it includes guaranteed spending controls AND provides the governor with a budget scalpel AND eventually lowers the tax rate below current levels?
Call me crazy, but I find the proposal appropriately inventive and at least worth a try.
SMS
Sarah,
In response to your appeal regarding a reasonable compromise:
You use the word “guaranteed” and that word simply does not exist for lawmakers.
The proposal could be paraphrased as: “I will gladly pay you Tuesday for a hamburger today.”
I do not understand why we need to wait. Cut the spending now. We should not put a greater burden on the guy struggling with his mortgage to pay for a “temporary” spending spree.
ALIVE * FREE * HAPPY
Libertarian
Sarah – OK, I will call you crazy. This is a 14% increase in the sales tax.
When will the lunacy stop? “Guaranteed spending controls” – what a JOKE. If you believe that I have a bridge over the Charles that I will sell to you cheap. Wanna buy Fenway ? Ha – ha – ha !!
Do really think that this tax hike would be temporary? What about the next “emergency” ?
Do you really think that this governor, or any governor elected in California, will bite the bullet and cut taxes?
That is how it would be portrayed by democrats – cutting taxes. We all know what a sin the dems say it is to cut taxes.
AFH –
Welcome to the Juice.
Trust me, I COMPLETELY understand why everyone is so distrustful of Sacramento. I really do. I’m from Taxachusetts, so I’m inherently familiar with this game.
But I also know that we need to cut spending AND pay off the debt, and since the budget has us outspending our revenue by so much, merely cutting back will do nothing to that end. We’re THAT over budget.
I’m still waiting to hear a better plan. Face it guys, we’re screwed either way.
SMS
BREAKING NEWS:
The LA Times is reporting that LA County Supervisors have rejected the transit tax ballot measure. According to a previous story, their sales tax rate would have climbed to 9.75% if both this measure and the proposed statewide sales tax were to be enacted. So that helps a little, right?
SMS
“…LA County Supervisors have rejected the transit tax ballot measure…. their sales tax rate would have climbed to 9.75% …”
Sarah,
PLEASE do not compare LA to the OC – that is like comparing “horse apples to oranges.”
LA should have had their “Measure M” transit tax 20 years ago – what does LA do with their current 1 1/2% bump in sales tax?
At least the OC got some majorly improved freeways and streets for our 1/2% sales tax bump.
The streets and freeways in LA are gawd awful.
junior –
“PLEASE do not compare LA to the OC – that is like comparing ‘horse apples to oranges.’”
Oh BELIEVE me, I’m not making a comparison. I’m just pointing out that the Schwarzenegger proposal just got a little political cover in L.A. county, that’s all.
SMS
Sarah – The Schwarzenegger proposal needs a nuclear bomb (direct hit proof) fallout shelter for cover. That proposal is going nowhere.
Sarah,
Thanks for the welcome! The Wayne Root coverage caught my eye, and got me reading. The juice has a nice culture, beat and mix. You can bet the farm, I’m also going to tell my friends all over the place to have a look-see.
I’m one of those guys that when they hear of a complicated social issue, immediately disbelieves and seeks to break the problem down to something simple. Sometimes issues are really complex, but most of the time the complexity is really the issue.
If you have $20 a month to spend, and you barrow so much that you owe $15 a month off the top and only have $5 a month for food: It’s time to go on a diet. I might suggest spending only $4 a month on food for a while putting $16 toward the debt, and refinancing to get the monkey off your back.
Politicians do not earn the money they spend. I do, and I have to tell you, I work really darned hard for it. Politicians when they get money, spend it. When they have bond issuances, they blow them. They are clearly not thinking of the future but only how fast they can funnel our taxes into their best friends pockets.
The generation before us spent foolishly, now the bill is due. It makes me a bit unhappy that people 30 years ago could spend then lay it off on me to pay two or three times over. I do not want my kids to suffer the same and curse me as I do my parents for unjust spending.
When government overspends, they need to pay the piper, not tax more and spend more. We can’t afford it. Our children cannot afford it.
I think we should institute the governors discretions on cuts now and deny any apeals for new taxes and new fees.
ALIVE * FREE * HAPPY
Libertarian
The juice has a nice culture, beat and mix. You can bet the farm, I’m also going to tell my friends all over the place to have a look-see.
AFH,
Do you mind telling how you came to read at the OJ? Was it by chance, by google, you live in OC, etc? I am very impressed by the diversity of posters here, also. Somehow it all works!
Red –
‘I am very impressed by the diversity of posters here, also. Somehow it all works!‘
It’s all part of the master plan! 😛
SMS
“It’s all part of the master plan!”
and that explains why we added Sarah, the Purple Pagan Princess.
Art does have a great sense of humor and an eye for talent. Where do each of us fit in thos etwo categories remains to be stated.
Awwww thanks! *blush* 🙂
SMS
I see your evil plan coming together beautifully, Sarah! 😉
I just came for the corruption, but stayed for the RE. Really.
I knew there was a conspiracy!
I knew it, I knew it, I knew it…
(jk) 😉
All very cute. Now what about this crazy sales tax increase proposal?
junior –
As far as I know, we’re still waiting to hear a better solution.
SMS
Sale’s Tax increase, I think it’s not a good solution to the problem. Maybe Gov. Schwarzenegger should think twice before doing that because surely many people will react on it and some also could not agree about that idea. He should think for another solution than increasing the tax sale. ‘Yes. It sucks that government has grown under Schwarzenegger. But should the Republicans be fighting a one-cent sales tax increase – when the Democrats could do a lot worse – and when this increase is attached to spending limits? I am not so sure”. I also agree to this statement. We should be aware of what is happening to our place and we need to observe things because those can affect our living. We should also seek our own solution to this problem. Be an observer, don’t just listen to what the people in the higher position saying but we need to think of it. Lets try to read some blogs that can educate us. Just check this site: http://personalmoneystore.com/moneyblog.
Spend only what you have, a very simple concept. IF the Dems could only figure out that very simple concept it might be acceptable to raise the sales tax. But the cheesecake analogy works very well.
“Just a tiny little thin mint, sir?” (Monty Pythons, Meaning of Life)
When will the gluttons in Sacramento finally explode?
This post could fuel a text book on the ability of statistics and percentages to confuse the average person. Priceless. Glad it all got straightened out.
Curious though as to where that 40% increase came from (“After utterly failing to restrain government spending since 2003, government has grown 40 percent or $41 billion since then…”)? Did it come from initiatives like SMS suggests?
Carl –
Let’s talk about that for a minute. Everyone says, ‘cuts, cuts, cuts,’ but what should we cut?
Art posted a story
about some interesting ideas from Ron Getty. That’s a good start. At least the process is moving along. Thank Goddess for that.
SMS