A Guide to Spreading the Pain

The war is over. Sort of. The drought is over. Sort of.

So maybe it’s time to waltz toward the next crisis. That would be the state budget crisis. I am aware, of course, that no one goes to this dance with anything other than a sense of dread. Budget crises tend toward the ugly and the dull.

And even worse, we all know the outcome before the action gets started: Someone’s benefits will get cut, someone’s taxes will be raised. Everybody loses. At this dance, the pretty girls never even show up.

But wait! This budget crisis is special. Even as we have wallowed in the war and the drought, the state’s deficit has grown to terrible proportions. Last week the governor estimated its size at $12.6 billion, up from $10 billion a few weeks before.

California has never faced a shortfall of this dimension. It amounts to 25% of the state’s budget, or $400 for each citizen. Put it another way: California’s deficit is greater than the entire state budget of Pennsylvania or Florida or Ohio.

Also, bear in mind that California budget crises differ from their federal counterparts: Namely, they must be resolved with a balanced budget. Unlike the United States, California cannot borrow against the future.

So the level of pain promises to be very high this time around. California will not escape with marginal cuts in welfare and a new tax on Snickers bars. Someone is going to pay. And the question, as always, is who. You? Me? The guy behind the tree?

I offer here some possibilities toward that end. They won’t, by themselves, get all our $12.6 billion back. They are simply suggestions as to who should bleed first.

In the area of cuts, I nominate the state prison system. This may seem an odd choice, in view of the clear consensus that the only way to deal with crime is build more prisons and fill them with the state’s hooligans.

Here’s the problem: In our rage against crime, we have built the largest, most expensive prison system in the Free World. Inmate population has quadrupled over the past decade, from 24,000 in 1980 to 100,000 today. Each of those inmates costs us $20,000 a year to feed and house.

And many of those inmates should not be there. About 35,000 are cooling their heels in brand-new prisons for simple parole violations.

There are better, cheaper ways to handle this. California now spends $3.2 billion a year for Corrections. We could save a billion or so if we leavened our rage and played it smarter with crime and punishment.

On the revenue side, how about undoing some of the idiocies of the Jarvis/Gann era? I don’t mean unraveling Proposition 13, just some parts.

One bill, introduced recently by Sen. Quentin Kopp, would level the playing field between corporations and individual homeowners. The Kopp bill would force a reappraisal of corporate property whenever 100% of the stock has changed hands.

Because most corporations do not get bought and sold outright, they have largely escaped the reappraisals that are visited on homeowners any time a house is sold. The Kopp bill would change that and produce about $1.5 billion in new revenue for local governments that would, in turn, relieve the state of some of its reimbursement obligations.

Moving on, let’s forget the regressive and unproductive notion of slapping a sales tax on snack foods, and pursue instead a broad tax on services for attorneys, accountants and architects. This tax would act as a counterweight to the sales tax that unduly burdens the poor and would recognize that California has switched from an industrial to a service-based economy.

There are some more soak-the-rich ideas that make good sense in light of the tax breaks extended to the wealthy in the 1980s. California, for example, repealed its inheritance tax. Let’s get it back for estates in excess of $5 million. The state could pick up $300 million there.

And the deductibility of mortgage interest for a second home never made sense. It wouldn’t get us much, about $65 million in revenue, but every little bit helps.

Finally, there’s the you-know-what. One way or the other, the state’s income tax will go up to feed the deficit. We should take this opportunity to shuffle its structure.

At present the top bracket kicks in at $55,000, which means a millionaire pays the same rate as a good plumber. We need another bracket with a tripwire at $100,000 or so.

That’ll do for starters. Surely there will be more to come as spring turns to summer. Welcome to the un-Reagan years.