Squabbling Over the Bounty

In the lean times of the 1990s, the state’s summertime fiscal struggles involved mostly which critical programs to cut to make the budget balance. Now, with California flush, the problem is reversed. Although it should be easy giving money back to the taxpayers, lawmakers and Gov. Gray Davis are battling over what sort of tax cuts and rebates to make. Details are complex, but the goal is simple: to reap the most political credit for tax cuts in an election year.

Chances are that all sides will claim credit for whatever emerges, even though there has been no public outcry for tax cuts. The odds are good that most voters won’t believe the claims coming out of Sacramento anyway or won’t care.

Curiously, a Democratic governor is pushing a Republican-style cut--a $300-million across-the-board rate reduction giving the biggest benefit to the wealthy. Granted, Davis included child care credits in his package, which aides claimed made it a balanced program.

Minority Republicans are following an old Democratic playbook by pushing a $500-million plan to give the greatest benefit to low- and middle-income Californians via expanded tax credits for children and other dependents.

Either way, Californians will get about $2.7 billion in tax relief during the coming year, including $1.7 billion in a one-time sales tax rebate of $50 to $125 per person, depending on income level. This will be on top of about $3 billion worth of ongoing tax cuts approved in 1997-99.

Another issue--the possible deal buster--is whether the tax reductions in the 2000-2001 budget would trigger a suspension and possible rollback of the step-by-step reduction of the vehicle license fee, or car tax, approved in 1998. The auto levy has been cut in increments of 25% and 10% and is scheduled for another trim next year. Republicans want a guarantee that the cuts will go forward. Senate Democratic leader John Burton (D-San Francisco) said that’s irresponsible because a new recession could quickly plunge the state back into red ink. Indeed it could.

The irony is that Davis’ Republican predecessor, Pete Wilson, to get the Democrats’ support for the car tax cut agreed that any reduction beyond the first 25% would occur only if state revenues soared to an unheard-of high. Democrats said it would never happen. No one expected the economy to boom as it has. So now Sacramento is arguing about a tax cut that was never supposed to be. The obvious solution is to leave the car tax where it is now and offer other, one-time tax cuts. Perhaps that’s too much simple common sense for the Legislature to agree to--but it shouldn’t be.