California has the largest economy of any state in America with a gross domestic product of just over 1.9 trillion dollars. However, next year, Californians are going to spend less than $85 billion on the state budget, and there is still a $12 billion deficit. These statistics mean that the total state budget is less than 5% of the state economy, and the deficit is less than 1%, yet California is considered to be a high-spending, high-taxing state. Nothing could be further than the truth; rather, California is a very wealthy state where many wealthy individuals and corporations pay little if any taxes.
Rich State, Poor Government
The cause of the state deficit is then clearly not the pensions and benefits of unionized workers. While on paper, California has a relatively high corporate tax rate, very few large corporations pay anything near the official rate. Due to many tax breaks and loopholes, some of the richest corporations in California pay little or no state taxes. Likewise, many of the richest people in the world live in California, but most only pay a small fraction of the already low state income tax rate. And of course, due to Proposition 13 and the fact that the value of homes are not reassessed, people living in multimillion-dollar homes are often paying only a few thousand dollars in property taxes each year.
What is so shocking is that even with this low tax burden, the one and only plank of the Californian Republican party is a strict stance against any tax increases. In fact, each year, due to the need for tax changes to pass by a two-thirds vote in the state legislature, the Republican minority forces the Democrats to come up with more tax breaks for wealthy individuals and businesses. The end result is that the wealthiest state has one of the poorest governments, and this means that as large multi-national corporations flourish, the vast majority of Californians are forced to pay for the increased costs of education, health care, and housing. For instance, each time, the state cuts the University of California's budget, the world's greatest public university system simply turns around and increases the tuition for the students.
A Progressive Tax for California
Luckily, all is not doom and gloom in California, and there is a possible solution that could provide a positive example for other states. Since it appears that Governor Jerry Brown will not be able to get any Republicans to agree to his plan to put tax extensions on the ballot in June, he has to change his strategy. His Plan B is to try to get tax initiatives on the ballot for a November election, and to do this, he will most likely need to work with outside groups to collect signatures for a ballot proposition. Since organized labor is the only progressive group large enough to fund a signature collecting campaign, the governor will be forced to work with unions to come up with new tax solutions. This turn of events may mean that out of a fiscal crisis, a real progressive choice could be made.
The unions should only agree to support Governor Brown, if he endorses the following tax solutions:
- Allow a simple majority of votes in the legislature to pass any new taxes.
- Increase the top tax rate from 9.3% to 11%. This change would bring in more than5 billion per year in state revenues, allowing the state to provide desperately needed education, health, and safety services to its population.
- Close corporate tax loopholes, which according to the California Tax Reform Association would raise an estimated6 billion per year or more.
- Tax oil extraction at 9.9% and dedicate the revenue of1.2 Billion to support higher education.
These four progressive solutions would balance the California budget without resorting to drastic cuts in needed services. Moreover, by fighting for progressive tax solutions, unions could show that they are still a vital force in our political system.
Of course some politicians will state that polls do not support these initiatives, but we need to work together to show the public that these policies are fair and productive. Instead of simply defending against the Right's assault on unions, public employees, and needed social services, we should promote a positive vision for California and the rest of the nation.