Today’s Tax Choices Will Shape the Future for All

Most Orange County residents are in an upbeat mood about California, despite all the talk of severe budget cuts in the coming year. After voting overwhelmingly and successfully to remove Gov. Gray Davis on Oct. 7, they are feeling lucky: Half think the state is headed in the right direction, and 56% expect good economic times in the state in the next 12 months, according to the 22nd Orange County annual survey conducted by the Public Policy Institute of California in collaboration with UC Irvine.

Why this rosy view in Orange County while other parts of the state remain mired in doom and gloom? The local economy is humming along and, so far, residents like what they hear from their new governor. Indeed, 55% say they approve of Gov. Arnold Schwarzenegger’s policies and plans for the state; only 25% disapprove.

Most county residents also agree that the Schwarzenegger administration’s top priority should be to deal with taxes and spending. Their preferred method for closing the budget gap? Three in four think state government needs to cut spending. Three in four believe the state could spend less and provide the same level of services, and half say that budget cuts in excess of 10% would not make a noticeable dent in services.

Many residents seem to think an Orange County ZIP Code offers insulation from the state’s budget problems.

Views about the endgame in the state’s budget battles depend on which side of the economic divide Orange County residents find themselves. Many of the new arrivals to the region define themselves as economic “have-nots” in a state that is politically attuned to the wish list of the “haves” who dominate voting -- the middle class, homeowners and the college-educated. As the have-nots look to the future and strive for the American Dream, they see a role for state government. Specifically, they believe that public schools, higher education and health and human services -- programs that make up most of the state’s expenditures -- are critical to their success. They are not so quick to advocate shrinking state government.

Statewide, residents are sharply divided about what type of state government they want and whether they are willing to pay for it. In Orange County, 54% of residents say they want a smaller government with lower taxes and fewer services; 38% want a larger government with higher taxes and more services. However, the county’s have-nots -- many Latinos, immigrants, renters, and the youngest, least-educated, and lowest-income residents -- prefer to pay higher taxes to support a larger government with more services. The “haves” -- whites, the U.S.-born, homeowners, and the oldest, most educated, and highest-income residents -- say the opposite. Among likely voters, six in 10 would opt for lower taxes and fewer services; six in 10 of those not registered to vote would pay higher taxes to support a larger government.

The new governor has made it clear that California voters will have a large say in how the state resolves its current budget deficit and sets future tax and spending policies. Orange County voters will undoubtedly be asked to make decisions about spending caps, borrowing, and taxes on the 2004 ballots. Residents on both sides of the economic divide would be well served to think about how the choices they make about state government today will bear on the people of Orange County and California tomorrow.

Mark Baldassare is research director and survey director at the Public Policy Institute of California in San Francisco. He is founder and director of the Orange County Annual Survey at UCI, 1982-2000. The 2003 PPIC Special Survey on Orange County with UCI is available at www.ppic.org.