Apologists for the massive $14 billion tax increase being advanced as a solution to the chronic state deficit like to point to 1991 as validation of this strategy.
Then, as now, California was in the depths of recession. Then, as now, the confronted a historically huge budget deficit — which at the time was $14 billion.
At the end of the day, Gov. Pete Wilson struck a deal with the Democratic majority to erase the deficit with $7 billion in tax hikes and $7 billion spending cuts, and succeeding in toppling Assembly GOP Leader Ross Johnson and pealing off the necessary 7 Republicans to vote for the deal.
Conventional wisdom, viewing that deal through the gauzy mists of time, hails it as a grand compromise of statesmanlike proportion that restored health to the budget, and as a model that we should emulate today.
Too bad it’s a myth, because inflicting a massive tax increase on a weak economy had the opposite effect, and the next year the state was faced with a $3 billion deficit.
Former Sen. Ray Haynes laid out the truth of what transpired in this 2005 blogpost:
1993—to solve the real deficit caused by the 1991 tax increase, Democrats proposed raising taxes again, claiming that the 1991 tax was “not enough. Governor Pete Wilson said no to the tax increase, cut spending by $3 billion, and by 1994, revenues once again started to increase.
We study history for a reason: to learn from the mistakes of others, in order to avoid repeating them.
We have been down this path before. We know, from experience, that it doesn’t work. Repeating a failed policy in a more massive scale will only produce worse results.