Posted by Ray Haynes at 12:00 am on May 17, 2010 Comments Off on Spending, NOT Tax Cuts, Caused the Budget Crisis
In today’s column in the LA Times, George Skelton points to
Governor Schwarzenegger’s decision to cut the car tax in his first
day in office in 2003 "forced [Governor Schwarzenegger] into the
budget box he found himself in Friday." Skelton also cited
borrowing $15 billion to pay off the accumulated Gray Davis debt as
another reason. He later cites other things, which I will
address later, but I wanted to address these two first.
Let’s look at the numbers again, just to reiterate the impact of
the car tax cut on state revenues. The day the car tax was
first cut in 1998, total state revenues were $57 billion
(Schwarzeneggger’s cut restored the rate to its 1998 level).
Today, those revenues are $84 billion, a $27 billion increase in
revenues. The total amount of the car tax cut, even assuming
the cut had no positive impact on state revenues (by increasing
private sector growth, and therefore increasing revenue) was $5
billion. It is simply illogical to conclude this $5 billion
reduction in taxes, and not the huge increases in welfare,
education, state government and government health care spending,
from $57 billion to over $102… Read More