Rabbit From Wilson’s Hat: A Bid for a Big Tax Cut

Gov. Pete Wilson has thrown a political monkey wrench into state budget negotiations with his eleventh-hour proposal for a 10% state personal income tax cut. Tax cuts always are politically popular, and Wilson, perhaps with an eye on his legacy, has been pressing the tax button intermittently for several years. But his sudden resurrection of the issue more than two weeks after the deadline for adopting a 1997-98 state budget, and weeks into budget negotiations, raises more questions than it answers.

The Republican governor called his plan a deal maker in terms of resolving the major budget issues. The proposed deal is that Wilson would approve a modest pay raise for state workers if Democrats went along with the tax reduction. Most state workers have gone without an increase for three years, and a raise has been a priority for Democrats this year.

But it’s not that simple, Democrats say. For one thing, they claim the money that would be used for the tax cut would erode future spending for schools. Democrats might be willing to support an alternative tax plan that included more help for lower-income Californians, but Wilson immediately rejected that idea. The ultimate resolution will be worked out by Wilson and the top four legislative leaders in secret bargaining negotiations in coming days.

This is an example of why it is bad government to attempt to resolve major policy issues through the budget process, under intense deadline pressure and without adequate public debate. Proposals should stand or fall on their merits and their ability to attract bipartisan support.

If Wilson and legislative Republicans insist on a tax cut to get a budget deal, there is serious doubt that the state then could afford other sorely needed programs. One case in point is the state fiscal relief that has been promised to local governments. Another is repayment of an overdue loan from the state employees’ pension fund. And education officials say the tax proposal, if implemented, will deprive the state of billions in school funds in coming years just as California is struggling to lift its education system out of the wasteland.

Wilson’s plan puts the Democrats in a political box. They either must come up with a credible reason for opposing the cut or offer an acceptable alternative tax plan. In the meantime, the state stumbles even further into the new fiscal year without paying its bills. That too is not good government.