California Voters Reject Tax Increase Extensions

May 20, 2009

By a margin on nearly 2 to 1, Californians rejected a package of propositions that would have extended increases on the income, sales, and car taxes; shifted money from dedicated funds; and borrowed against lottery revenues. The taxes would have shaved $6 billion off a $21 billion budget shortfall stemming from a decade-long unwillingness to match desired spending and expected revenues. Only Proposition 1F, which suspends pay raises for legislators, passed.

The major initiative, Proposition 1A, also would have required that any funds in excess of revenue growth trends be deposited in a rainy day fund. For some government worker unions, this was too much of a spending restraint and many came out against the measure. Joining them in opposition were Californians opposed to extending the new tax increases, which we detailed in our recent California report. Proposition 1A failed in every county, from the bluest to the reddest.

This voter seemed to sum up the attitude:

“We have a dope for a governor and the legislature is completely incompetent,” said John Brockage outside a polling place in Oakland, California, on Tuesday. “I voted ‘no’ on all of them.”

Governor Schwarzenegger, who campaigned for the measures, must now go back to the drawing board. He’s been warning of a “doomsday” budget that releases non-violent prisoners, suspends more-than-frills education programs, scales back health programs for some groups, and sells off unneeded assets. The details will be interesting to see.

Californians have now made it clear that the tax burden to pay for current state services is excessive. Some activists will certainly argue that the way around this is to stick the burden to a minority of people, like imposing new punitive taxes on high-income earners or smokers or something. More than one commentator has sneered at the notion of initiatives deciding such topics, since the Legislature would have been more than happy with the tax package. But that’s the point. Government programs often involve taking a little bit from everyone and giving a lot to a few people. The little bit doesn’t get us too angry (until it becomes $6 billion, I guess), but for those few people, it’s life and death. Since they are the folks that legislators interact with (and take contributions from), government grows and grows even beyond any sustainable revenue source.

Everyone uses California state services and everyone should help solve the problem of paying for them. The questions will now likely be how the state can do things more cost-effectively, or whether the state needs to do them at all. Our fiscal fact might be a good place to start.


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