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No-tax stance won't solve state's problems

George Skelton CAPITOL JOURNAL

April 16, 2007|George Skelton

Sacramento — At tax trauma time, the famous words of Supreme Court Justice Oliver Wendell Holmes may ease the pain: "Taxes are what we pay for civilized society."

Holmes wrote that in a 1927 court dissent. It later was inscribed on the headquarters building of the nation's chief tax collector, the Internal Revenue Service, which wants to hear from all of us by midnight Tuesday.

Much less famous is the reported response of Holmes' law clerk: "I've got about as much civilized society as I can afford."

State Sen. Tom McClintock (R-Thousand Oaks) says he subscribes to the law clerk's observation.

The Capitol's most outspoken fiscal conservative asserts: "When tax rates are low and the economy is strong and there's a demonstrated need for more revenue, then a tax increase is warranted. But none of those conditions can be found in California today."

McClintock recruited 46 of the 47 GOP legislators to sign a "no-tax pledge" last week, even before the traditional mid-May kickoff of state budget bargaining.

The lone Republican holdout was Assemblyman Roger Niello, a Sacramento County car dealer. Niello said he's against raising taxes, but also is opposed to politicians signing pledges. A wise man. There'll be no "read my lips" poison for him.

Gov. Arnold Schwarzenegger loudly and repeatedly vowed not to raise taxes when he ran for reelection last year. But three days after being sworn in, the governor proposed hiking taxes on doctors and hospitals to help pay for universal healthcare. He wants to call them "fees."

"The test I've always used," McClintock says, "is: Are the payments compulsory or voluntary. If a gun is involved in collecting the money, it's a tax and not a fee. If you can say, 'Thank you very much, I'd rather not,' then it's a fee and not a tax."

You pay a fee to enter a state park, buy a fishing license or register a vehicle.

Forcing medical care providers to dig deeper for state government is a tax, based on McClintock's logical definition. So Schwarzenegger's plan is a nonstarter for GOP lawmakers under their "no-tax pledge," the senator asserts.

McClintock's main purpose, presumably, in assembling a dozen Republicans at a news conference to figuratively wave the pledge was to highlight what has become the party's favorite political issue in recent years: taxes.

"This sends a strong message to the Legislature that taxes are off the table," McClintock declared to reporters -- not that Democratic leaders already hadn't gotten the word.

No one has seriously suggested raising taxes to balance the deficit-ridden budget. A tax increase requires a two-thirds vote in each house, and Republicans previously had indicated they'd love to take credit for blocking one.

More and more, it's looking like a long summer of budget gridlock. The state will spend $8 billion more than it takes in during the current fiscal year, the nonpartisan legislative analyst has projected. And that prediction was made before the state Finance Department totaled up tax revenues through March. They were down $1.3 billion from expectations.

The Schwarzenegger administration hopes a lot of very big checks currently are in the mail to the state Franchise Tax Board. But if the income tax take is what they fear, the only way to balance the budget is by borrowing more and spending less.

"Spending is out of control," McClintock maintains. And there is some merit to that contention.

In Sacramento and at county seats all over California, weak politicians have provided public employee benefits that far exceed those offered in the private sector. And the benefits have become a major drain on public treasuries.

But the only places to cut spending immediately and significantly are in the big-cost items: schools, healthcare, prisons and the elderly poor and disabled. And there's no appetite for that among Democrats.

McClintock points out that state spending per $100 of Californians' personal income is higher under Schwarzenegger than it was under the fired Democratic Gov. Gray Davis. Currently, that figure is $9.58. When Davis was recalled, it was $8.80.

But based on that measurement, spending gradually has been increasing in California for the last 60 years. There was one significant jump when welfare was expanded and Medi-Cal created in the mid-1960s -- then an even bigger leap in 1978 when voters drastically cut property taxes with Proposition 13 and shifted most of the burden for funding local schools to Sacramento.

Beyond that, the more crowded a state becomes the more expensive a civilized society seems to get. Crime is harder to control. Longer, wider freeways are needed to bring people to work. A very diverse school population requires special attention. Water becomes more costly to develop. Natural disasters are increasingly likely to devastate property and lives.

Keeping up with growth requires increasingly larger per capita investments. That's what logic and the evidence suggest.

Anyway, there's too much whining about taxes in California.

Legislative Analyst Elizabeth G. Hill studied how we stack up against other states and reported that California's "aggregate tax burden" -- state and local -- "is about average" when calculated on the basis of taxes per $100 of personal income.

In the 2004 fiscal year -- the last one for which there are solid interstate figures -- Californians paid $11.10 per $100 of income in state and local taxes.

That was slightly above the national average, but below the average for other industrial states.

Our state income tax burden is higher than average. But the combined state and local sales tax is about average. The corporate tax rate is high, but there are a ton of loopholes. The property tax is low -- 35th in the nation.

Holmes' words are as true today as when he wrote them 80 years ago. His clerk probably became a rich lawyer, sheltered a lot of income and never paid his fair share.

George Skelton writes Mondays and Thursdays. Reach him at george.skelton@latimes.com.

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