Give Working Families a Tax Break

A ray of good news just burst through the clouds that have too long crowded California’s economic horizon: Our state economy is growing faster than the rest of the nation, causing tax revenues since July to come in $336 million higher than expected. At this pace, the state could end fiscal 1996-97 with a $1.5-billion surplus.

That’s good news for Sacramento budget writers. And it could be good news for taxpayers, if a few old-guard legislators can be convinced that Californians deserve a tax cut before a dime of the surplus is spent on another government program.

Assembly Republicans fought long and hard this session for a three-year, 5% per-year tax cut for businesses and individuals. Unfortunately, we were drowned out by a chorus of Democrats declaring that the state couldn’t afford such a “giveaway” to taxpayers. Especially disappointing were Assembly Democrats, who claim to champion the little guy, but who rejected any across-the-board tax cut for individuals as too expensive. They argued that tax relief would reduce school funding, but then refused to vote for a tax cut that guaranteed schools would be protected.

Using schools as an excuse was especially misleading, given the historic increase in education funding achieved this year. Schools received $3.9 billion above what had been budgeted, including $1 billion for class-size reduction, and we are still going to end the year with a surplus.

The most that the Democrats would accept was a single 5% cut in the bank and corporations tax.

Make no mistake, I and my Republican colleagues are proud of that achievement. The business tax cut was the largest in the country and reduced the rate to the lowest since Ronald Reagan was governor. California is now competitive with neighboring states and is back in contention as a great place to do business. Still, we would have liked a tax cut for working Californians at least equal to the relief given to businesses.

High earners also received tax relief this year, when the top two income tax brackets--for income over $100,000--automatically expired last December. If legislative Democrats had agreed to Gov. Wilson’s tax cut proposal last year, these top rates would have remained in place in return for an across-the-board tax cut to every taxpayer, rich and poor alike. By refusing that compromise and forcing a stalemate, they allowed the top brackets to expire by default. Fairness dictates that hard-working, middle-class Californians should get the same break those in the upper brackets received.

Fairness aside, it makes good economic sense to let consumers keep more of their hard-earned pay. Who better to decide how to spend and invest their money than the people who earn it?

The pressure in Sacramento for the government to spend on itself is unrelenting. Advocates for programs ranging from the worthwhile to the ridiculous are already lining up at the budget writers’ door. True, California just weathered four tough years of flat budgets. Yet if there was a silver lining to the recession, it’s that during those lean years we reined in spending on hundreds of out-of-control programs and nibbled at dozens of bureaucracies, while managing to keep per pupil school spending constant. That era of belt-tightening is over, but that doesn’t mean we should return to wasteful ways and start gorging at the trough of taxpayers’ money.

We should do what’s fair and what’s good for continued economic growth: Give Californians--working poor, middle-class families, retirees--a tax cut.

With the projected budget surplus of $1.5 billion, we could provide a $500-per-child tax credit and a credit for first-time home buyers who lose money when they sell their home, and still have money left over. Or, we could pass a 5% across-the-board personal income tax cut benefiting every California taxpayer.

When the Legislature returns to work in January, one of the first orders of business should be enactment of broad-based tax relief. I hope that it can become a bipartisan effort. Californians deserve no less.