Saturday’s Sacramento Bee had a story about the increasing heat from the Governor to raise taxes by $5 billion a year.The paper quoted me:
Assemblyman Chuck DeVore, R-Irvine, said the governor has little sway with GOP legislators because some of his closest advisers are Democrats, he is ineligible to run for re-election, and he has now broken his vow not to support a tax hike.
More taxes at this time is not the answer.California is now the 4th highest taxed state in America. We have the highest income tax, the highest state sales tax rate, the highest gas tax, the highest corporate tax in the West and our property taxes are only at the national average. Is it any wonder that we have the 4th highest unemployment rate in the nation? Raising taxes at this time will only worsen our economic situation.
As for spending, our overall state spending has increased 40 percent since the recall in 2003, some $41 billion more in the general and special funds. I cautioned about this coming train wreck two years ago when I implored my colleagues to restrain spending. (See: http://republican.assembly.ca.gov/members/a70/Index.aspx?page=VIDEO&id=68)
For new revenue, I have proposed opening our state territorial waters (3 miles and in) to slant drilling to recover the $120 billion in oil we know about. I have also proposed increasing the royalty rate to 22%. This would yield more than $26 billion in new state revenue without raising taxes. We could securitize this revenue stream if we wished, gaining us about $10 billion in the present fiscal year that we could use to completely close the deficit and build up a rainy day fund. Majority Democrats are growing more interested in this idea.
I’ve had Op-Ed pieces published in the Asian Wall Street Journal, a sister paper of the Wall Street Journal, but don’t believe I’ve ever been quoted in one of America’s most influential papers.Tuesday, in an article entitled “California Budget Impasse Persists As GOP Refuses Income-Tax Rise” I was quoted as saying:
“I’m very skeptical of any politician claiming they want a temporary tax,” said Republican Assemblyman Chuck Devore. In the future, he said, legislators will argue that they have “grown accustomed to the tax and we need the revenue.”
Meanwhile, the San Francisco Chronicle reported in Monday’s paper, on Republican efforts to enact a true spending limit in California:
Republicans called the plan meaningless, saying that the rules also allowed the Legislature to transfer the money out of the reserve fund on a simple majority vote.
“We need a spending limit to force the state to save money,” said Assemblyman Chuck DeVore, R-Irvine.
The Republicans had proposed a state constitutional amendment to impose a “hard” budget spending cap that would have only allowed the budget to rise at the combined rate of the cost of living rate and the state’s population growth, but it was killed in committee Friday in a party-line vote.
Meanwhile, Democrats punished one of their own, Central Valley lawmaker Nicole Parra, for abstaining on the failed Sunday budget vote.Ms. Parra and her staff were kicked out of her Capitol office within a day of withholding her vote on a budget that raised taxes by $8 billion, increased spending by $2 billion and cut law enforcement funds by $600 million while ignoring any attempt at building new water systems (Parra’s main concern).This move certainly won’t make her any more likely to vote to approve the budget when that time finally comes, potentially increasing the number of Republican votes needed to achieve the two-thirds requirement to eight.
A clearer illustration of the vast gulf separating Republicans from Democrats couldn’t be found than Friday’s Budget Committee hearing on Assembly Constitutional Amendment (ACA) 19, a bill to limit California state spending to inflation plus population growth.
The purpose of the Republican-drafted bill was to keep the annual rate of spending increases in Sacramento at a steady and predictable pace so that sudden large influxes of revenue would not be immediately spent, but rather saved for a “rainy day” – such as the $16 billion fiscal flood we are now facing.
Most other states do this which is why most other states have carried large cash reserves with them into this current economic slowdown.
California’s unemployment rate is at 7.3 percent, the fourth highest in the nation, with 400,000 more Californians out of work than at this time last year.Now is not the time to be proposing to hammer the economy with an additional $9 billion in taxes, as the Democrats are proposing to do.Raising taxes at this time will only deepen our economic slowdown and ensure that California will be among the last of the states to recover.
Yet, in spite of the obviously negative effects of massive new taxes, the Democrats at Friday’s hearing were unanimous in their scorn for a spending cap.Democrat after Democrat challenged the very concept that there should be any limits on government spending at all.Several Democrats attacked ACA 19’s restrictive language dealing with emergencies, wherein the state spending cap could be lifted to deal with an enemy attack or “…fire, flood, drought, storm, civil disorder, earthquake, or volcanic eruption.”
“Wouldn’t you say that our educational system is in crisis……that it’s an emergency?” one Democrat asserted.While another Democrat said the same of healthcare.
This line of reasoning starkly illuminated the Democrat’s mindset: that every foreseeable “need” for larger government can be construed as an “emergency” requiring more spending, more taxes, and more borrowing.
It became quite clear that the 40 percent increase in overall state spending since 2003 was not enough to satisfy any of the Democrats on the budget committee.
So, while California has the highest income tax in the nation, the highest state sales tax rate, the highest gas tax, the highest corporate tax in the West, and with property taxes only at the national average, Democrats say it is not enough.Democrats want higher taxes so government may grow without restraint.Meanwhile, Forbes magazine recently listed California as having the highest business costs in the nation (a combination of tax, energy and labor costs) while the Tax Foundation says that California has the 47th worst business tax climate in America (just ahead of New York, New Jersey and Rhode Island).
Clearly, any additional state tax increases would only add to California’s economic woes – especially income tax increases, since there is nothing more mobile in the 21st Century than the wealthy and their money.Superstar Golfer Tiger Woods used to live in my district.Now he lives in Florida because Florida has no income tax.Or take the case of former California inventor Gilbert Hyatt, the creator of the modern computer chip.Hyatt moved to Nevada in 1991 to escape California’s high taxes (as with Florida, Nevada has no income tax).The state Franchise Tax Board unwisely pursued Hyatt, harassing him, going through his trash in Nevada, and generally making his life miserable.In defense of their fellow Nevadan, a Nevada jury just returned a $388.1 million verdict against California for “invasion of privacy” and “emotional distress.”
Rather than drive the most successful Americans out of California, our tax policies should welcome them – and their job-creating capital.
One last example of what we are up against in Sacramento.At the conclusion of the very able testimony from Assemblyman Roger Niello, a co-author of the bill, the Budget Committee heard from members of the public.Only Jon Coupal of the Howard Jarvis Taxpayers Association spoke in favor of the proposed spending cap. In contrast, the spending lobby was out in force with 23 of the 25 people lined up to speak against the spending cap representing government union members.
25 to 1 vividly captures the challenge facing us in California.
The Orange County Register, one of California’s top five newspapers, quoted me in their lead editorial today about why raising taxes is not the answer to California’s budget woes:
As Assemblyman Chuck DeVore wrote in a recent column, “California already has the highest income tax in the nation, the highest sales tax rate, the highest gas tax, and the highest corporate tax in the West without property taxes being at the national average, combining for the 47th worst business tax climate in America. Clearly, additional taxes in this time of economic weakness would make it highly likely that California would be the last state to recover in this present downturn.”
We had a recall almost five years ago. California had a huge deficit. And soon-to-be-governor Arnold Schwarzenegger was promising to “Cut up the credit card.”
In the March 2004 primary, Schwarzenegger, now Governor, was promoting the passage of Propositions 57 and 58. Prop. 57 was a $15 billion deficit bond designed to refinance the short term debt California incurred under Gov. Gray Davis (with a few billion left over for future needs, the last $3 billion of which was borrowed a few months ago). Prop. 58 was a supposed spending cap of which Schwarzenegger said, “By voting yes on Proposition 58, you are basically taking the credit cards, cutting them up and throwing them away so that the politicians over there (at the Capitol), those big spenders, will never ever get the state into this kind of trouble again.” Yea, right.
Others at the time called Prop. 58 a ruse, saying, correctly, that it was weak and opened the way for more borrowing, spending and taxing by politicians. At great risk to my own campaign for Assembly at the time, I was one of those people, with my main opponent using my opposition to the then-popular governor’s borrowing plan against me.
With due credit to Schwarzenegger and to history, Prop. 58 was initially supposed to be an iron-clad spending cap that would have would limited spending increases to population growth and inflation. Of course, Democrats in the legislature fought the plan, saying the cap was too restrictive because it did not account for programs such as education and public health, in which costs often grow faster than either population or inflation (that’s the point, isn’t it?).
So, the compromise Prop. 58 was worthless and here we are today, with government spending 40 percent higher than it was at the time of the recall in 2003 – $41 billion in additional state spending and a $16 billion deficit. Schwarzenegger is again calling for a spending cap, and more borrowing, and now, a $5 billion a year tax increase, even though he promised never to raise taxes.
The problem with a spending cap is one of believability. History has shown us that no spending cap devised by politicians sticks in California. The question is, will earnest Republican lawmakers once again play Charlie Brown to the Democrats’ Lucy holding the football?
As for taxes, California already has the highest income tax in the nation, the highest sales tax rate, the highest gas tax, and the highest corporate tax in the West with our property taxes being at the national average, combining for the 47th worst business tax climate in America. Clearly, additional taxes in this time of economic weakness would make it highly likely that California would be the last state to recover in this present downturn.
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.”
To sum up, this budget battle goes to the core of the major parties’ conception of the role of government. Democrats believe in an expansive administrative state that ministers to all our needs, whether we think we need them to our not. In this worldview, you can never have enough government and taxpayers can never pay enough. Republicans, Schwarzenegger now apparently excepted, believe in a more modest government that does for the people no more than what they cannot do for themselves through individual effort, family effort, and community effort. In the Democrats’ view of government, even our 40 percent increase in spending since 2003 is not enough as their current budget plans are to spend billions more on welfare. Schwarzenegger seems to agree.
The Los Angeles Times story below covers Gov. Schwarzenegger’s violation of his no new tax promise along with my response. 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.
As one of the legislators who will be voting to block this tax increase, I need your help. Please consider supporting our campaign with at least $10 to signal your support for fiscal responsibility in California at: https://www.completecampaigns.com/FR/contribute.asp?campaignid=Devore08
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.”http://www.latimes.com/news/local/la-me-budget5-2008aug05,0,6637454.story