New Budget Assaults Taxpayers

John Seiler:

Welcome to the desert of sanity.

On the eve of having their pay suspended for not passing a budget, the Demcoratic-run California Legislature passed a budget.

On the positive side, Gov. Jerry Brown’s tax extensions-increases didn’t make the cut. And the Legislature voted to kill the wicked witch of redevelopment, saving $1.7 billion. One of the best things about the ongoing budget crisis is that it is forcing even backers of bad programs — and few government programs are worse than property rights killing redevelopment — to kill some of the worst programs.

On the negative side, the Legislature passed a slew of new “fees” and taxes. According to the Contra Costa Times, they are:

$900 million — Raised with local sales tax rate by 0.25 percentage point
$300 million — Raised with an annual car registration fee by $12
$200 million — Raised by requiring online retailers, such as, to bring in sales taxes
$160 million — Raised by imposing $150 fee on residents in fire zones

By some estimates, the “Amazon tax” will kill 25,000 small businesses in the state because Amazon and other firms have threatened to cancel contracts with California “affiliates” — in-state sellers. So the projected $200 million in “new revenue” well could evaporate as the 25,000 dead businesses stop paying other state taxes, as on income and property, and many of their owners and employees go on unemployment, food stamps, Medi-Cal and other state programs that would increase state spending.

It’s they typical myopic view of small-town union bosses and government officials, the most influential group of Democratic lawmakers, who have no idea how businesses really work.

With the state’s unemployment at 11.9 percent in April — second highest in the nation, and likely to go up when May numbers are relased on Friday by the U.S. Department of Labor Statistics, this is no time to make a kamikaze attack on the state’s jobs creators. But that’s what the Legislature has done today.

Even though Gov. Brown pledged he wouldn’t let the Legislature pass a budget salted with the usual “gimmicks,” it includes those aplenty. As the Contra Costa Times tallied them:

$2.85 billion — Delays paying schools and community college bills until the next year
$540 million — Delays paying some UC bills until next year $1.2 billion — Pending settlement on a new proposal to sell state buildings
$1 billion — If state wins lawsuit to siphon from early-childhood programs
$800 million — Higher tax revenue than expected
$750 million — Old school debts not repaid
$700 million — Federal government expected to cover Medi-Cal costs

The whole budget charade this year — which isn’t entirely over yet — shows how California continues to be a global example of economic foolishness. It’s Greece on the Pacific, a state ripe for default, disaster and destruction.

June 15, 2011

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