If there is any problem with government budgeting, it is how the government budgeting analysts approach their job. They always (not sometimes, not once in a while, not even frequently, but always) start the budget discussions with what they spent last year on a program by program basis. Take a look at the Governor’s Budget Summary I referenced in my last post on this item. Go to the Table of Contents. The first substantive item? 38 pages of "Summary of Major Changes by Major Program Area," summarizing how much the change is spending on each program area is. There are then 8 pages of "Economic Outlook," recognizing that government revenue is based on growth and activity in the private sector. Finally, on page 63 of an 85 page document, the analysts discuss revenue. Finally.
Want a real budget solution? Talk about revenue first. Analyze why revenue is dropping. Is it a "general economic malaise? Is it a government induced recession? Are government policies toward the private sector inhibiting private economic growth? What things can government do to enhance revenue growth in the private sector, thereby increasing revenue to government?
Take a look at Table REV-03 on page 69 of the Summary. We find that 10% of the taxpayers (those earning over $100,000) pay almost 90% of the taxes. So, what would be the best government policy? Figure out ways to increase the number of people in the state who earn $100,000 or more in the private sector (it will not increase revenue to the government if we increase the number of people who work for the government who earn 100,000 or more, and yet, that has been the policy of the state over the last several years).
So, if our first goal is to increase the number of private sector people in this state who earn $100,000 or more, will we accomplish that goal if we increase taxes on that group? Of course not. If we increase taxes on those who earn $100,000 or more, what will they do? They will move if the tax burden becomes too onerous. That is not conjecture, that is fact.
Here’s another interesting fact–if the economy in the private sector is good, Capital Gains revenue increase. Check out Figure REV-04 at page 69 of the summary. Now take a look at REV-05 on page 70, regarding the mental health tax (the 1% tax on millionaires), it is going down. It has dropped over $700,000 in the last two years. Why? Because we have fewer people in this state earning $1 million or more. Of course, one of the reasons for that is the tax. Want to save a minimum of $10,000 a year in taxes if you are a millionaire? Move out of California. And, by the way, they are.
So, the next discussion in the budget solutions meetings must focus on revenue first. How to improve the private sector economy in order to increase government revenue. A good starting point is looking at government regulations, taxes, fees, and other things that government does, to figure out how to improve the economy in the next year to increase revenue, since, quite frankly, those are the only things that government can change about the economy. If government is doing something that slows or stops growth in the private sector, it should stop doing those things, as quickly as possible. Government, particularly at the state level, can’t spend money to stimulate the economy. It can, however, do lots of things to make it easier for people to grow their own incomes and businesses. If government actually looks at those things, it may actually do more to solve a lot of the budget problems than it would solve by raising taxes on the people who are already looking for reasons to get out of the state. Just a thought.
May 24th, 2009 at 12:00 am
More songs for the sheep….you just don’t get it. 2/3 vote demise is the communists and socialists mantra now….taxing the rich has reached critical mass….the rich are leaving or sheltering…
Flash Report should ONLY have pitbulls write articles…there are so many moochers in California that they outnumber the producers….the tipping point has come and gone…
Prop 13 is the target….get it….Prop 13. Vast sums await plucking from seniors, commercial property owners and daft rich liberals.
May 24th, 2009 at 12:00 am
Oh goody, another government hack to post a commentary on Flashreport. Let’s look at the typical hack comment:
“Want a real budget solution? Talk about revenue first. Analyze why revenue is dropping. Is it a “general economic malaise?”
No Mr. Hack, if you dramatically reduce the size of state government, i.e., cut the hell out of the programs and lay-off about 100,000 government employees, you won’t have to worry about fleecing the public for your pet-projects.
Thanks Flash for having ANOTHER hack/spin-miester give his Sacramento take on things.
May 24th, 2009 at 12:00 am
Ray, take on Ken Calvert in the GOP primary! You know he wastes tons of our federal money on worthless earmarks. He almost lost this last November. Run Ray Run!
May 24th, 2009 at 12:00 am
Bowden Russell is a true PATRIOT!!!
His rant reflects our frustration out here in the trenches, our California reality …the political elite, mostly burnt out incompetent attornies with NO BUSINESS EXPERIENCE, soothing us into RINO BLISS!!!!
I would hope more who are frustrated with the hacks, career losers, rich want-to-bees and golden throated RINOS writing on FLash Report chime in here….we are sick of losing, paying high taxes, watching firemen make 150k a year and laugh at us at parties, see fat frau teachers almost cracking 90 grand a year for nine months work lecturing us while they are incompetent on all levels….and we are sick of greenhouse gas laws, CEQA, City Planning Departments, Coastal Commissions, Air Quality Boards that have driven millions of manufacturing jobs out of California leaving with a dumbed down and incredibly needy workforce only capable of tying on an apron and wearing a ballcap at their burger flipping job or office supply “career opportunity”.
Flash Report should be proactive and challenge and expose the political elite, chastise personally every lobbyist group running the state into the ground and investigating the ilk in our school systems and colleges fermenting liberal pap and the demise of freedom.
And God Bless Our Service Men…and remember the fallen!!!
May 25th, 2009 at 12:00 am
I think Mr. Russell missed the point of this article, and perhaps it is because of the language I used. Of course, I agree that cutting thousands of people from the state employment rolls is the way to go, but I am trying to outline a process that makes sense, recognizes what is wrong in the budget process, and tries to align the desires of folks like Mr. Russell with what decision makers in Sacramento are doing. As I have said a million times, government budget analysts don’t speak English, and they don’t understand guys like Mr. Russell. I am trying to speak their language, and make their language the same language that Mr. Russell is speaking.
Truth is, I understand the rant, and I understand the language of the budget analysts. To the budget analysts I say, if you don’t listen to Mr. Russell, you will be the cause of the collapse of the entire system. To Mr. Russell I say, you are right, but what I am trying to do is get to where you want to go, using words that the analysts and decision makers understand. It may be an exercise in futility, but it is the solution that I believe will actually change how we do business in the state.
Read chapter 3, you will get a clearer picture of where I am going
May 25th, 2009 at 12:00 am
I don’t agree that we should look at revenue first. We have to look at spending. We must dig deeply into the bureaucracies and salaries and pensions and figure out a way to bring back some fiscal sanity to the state.
We continually hear that if we fired every single state worker we would still not close the budget gap. That sounds like rhetoric from someone trying to save their job.
Lets really look hard at the bureaucracy, make those cuts and then start looking at revenues.