In one politically clear-headed and economically intelligible step, Gov. Pete Wilson has elevated the debate in Sacramento and brought recession-gripped California closer to balancing a state budget that is out of sorts by almost $13 billion.
In January the governor, then facing a $6-billion to $7-billion deficit, offered a budget that many felt was sure to be overtaken by the state’s continuing economic slide. And it was. But last week, proposing almost $5 billion in cuts and more than $6 billion in taxes, the governor began to offer the kind of serious, no-frills leadership that is required to ride out the economic storm. He has done what has been asked of him, but thought near-impossible for any Republican centrist: constructing a revenue and spending plan that will hurt almost everyone and help almost no one, but that will also--for the first time in a long time--put the state on a sounder fiscal footing.
It is an odd budget--one that in a way offers almost nothing pleasant to anyone. It would wolf down more than ever before--proposing a 1 1/4-cent state sales tax increase (of which a half-penny will be phased out of existence after a year) and assorted other new taxes. And it would give back less for the money, proposing cuts in some programs and handing off others to the counties.
The Sacramento reaction to the no-frills budget was predictable. For the most part, the Democrats, who like Wilson are trying to face reality, regard the proposals as a solid effort to budget-balance. Only a handful of very conservative Assembly Republicans, intent on avoiding reality, have denounced Wilson’s plan, insisting that the deficit can be made up entirely with cuts. The very fact that Wilson appears to have threaded the needle down the political middle suggests that his plan has much merit.
But Wilson’s suggestion that this proposed budget is his final word on the matter won’t fly. Even though he and the Legislature need to reach agreement in June to have a July 1 fiscal year budget fully up and running, the Democrats are entitled to their say. Indeed, in fairness to Democratic leaders, the governor needs to acknowledge that they have already suggested another, arguably fairer revenue package--and a menu of cuts different from those he proposes. The necessary debate might focus on the governor’s preference for higher sales taxes instead of higher income taxes for the wealthier. Because the full impact of higher income taxes for some would not be felt until filing time next year, that approach offers the advantage that it would not throw such an instant wet blanket over an economy struggling to escape this foul recession.
Moreover, higher sales taxes work against the governor’s intention to allow localities to raise new taxes not by the now-required two-thirds but by a simple majority: How many voters will want to do that once they have been socked anew by the government at the retail cash register?
The governor undoubtedly chose the sales tax because it presumably hurts least and hits state coffers soonest. These assumptions should be examined in the Legislature and the governor should keep an open mind. It may be that an income tax on the wealthy might reduce the need to raise the sales tax so much.
THE PROPOSED SALES TAX HIKE
Gov. Wilson’s budget would add 1 1/4 cents to the state sales tax.
Current Wilson’s City Rate Plan Anaheim 6.5% 7.75% Los Angeles 7.0% 8.25% Sacramento 6.5% 7.75% San Diego 7.0% 8.25% San Francisco 7.0% 8.25%