The Governator sees the light, sort of…

Gov. Arnold Schwarzenegger has admitted that maybe it’s time to repeal some of those tax breaks since our budget is looking at an 8 billion dollar deficit.

Gov. Arnold Schwarzenegger told business leaders Thursday he supports a proposal by nonpartisan Legislative Analyst Elizabeth Hill to rescind $2.7 billion in tax credits, but he later softened that stance and said he doesn’t necessarily support all of her recommendations.

“She has identified $2.5 billion of tax loopholes, including the yacht tax,” Schwarzenegger said at a Los Angeles economic town hall, using a long-term annual estimate of Hill’s proposals. “I think that we should go after those tax loopholes because we would need the extra $2.5 billion. This is $2.5 billion we can give straight to education. I’m totally for that … and I agree that we should go for it, and we should do it because everybody has to give something in order to make this work.”

Republicans said Hill’s recommendations were nothing short of tax increases.

“We put these in the tax code to encourage people to locate in California and do business here,” said Senate Republican leader Dick Ackerman of Irvine. “Undoing the dependent credit would raise taxes on families. I don’t consider that a loophole.”

The Sacramento Bee

I do have to say I agree with Dick here though, the dependent credit would raise taxes on families and I’m not sure if that is the way to go and yes, that would be raising taxes. I don’t see why they couldn’t add a salary cap and keep the credit for those families that need it the most.

But cutting the yacht loophole is a whole different matter and closing that “Sloophole” shows that Education should come before buying a yacht. Schwarzenegger said elsewhere that the money brought in due to those changes should go directly to Education and I agree as well.

What has led to this change of heart? Oh, it’s called balance rather than being so stubborn and stuck to your political agenda that you can’t see the solutions.

Legislative Analyst Elizabeth Hill has given legislators what Gov. Arnold Schwarzenegger failed to provide: A rational budget, with specific cuts and fewer accounting gimmicks. She also suggested what Schwarzenegger couldn’t bring himself to propose: Higher taxes.

While Schwarzenegger advocates closing dozens of state parks, Hill recommends charging each visitor an extra dollar. While the governor proposes the early release of 22,000 non-violent prisoners, Hill recommends sending low-level drug offenders to county jails, not prison, by amending the law – an appropriate alternative. Legislators already have passed one unwise cut that Hill opposes: cutting 10 percent from Medi-Cal payments to doctors and hospitals.

Nearly half of the revenue that Hill proposed would come from one idea: Reducing the credit for each dependent that taxpayers can claim in filing personal income taxes. It’s now $294 per dependent; until a decade ago, it was $94, the same amount that a single taxpayer can claim. Reverting to that figure would save $1.3 billion, mostly paid by middle-class families.

Daily Democrat

There has to be some middle ground where in a budget crisis everyone makes a sacrifice for the greater good, which to me would be education. And as many of you know, the biggest hurt on the Orange County economy has been the housing slowdown, Schwarzenegger has also proposed training and job matching for construction workers who have been left jobless by the slump.

The state program will provide job-training and help linking those workers with employers. The governor says they could be put to work rebuilding schools, levees and freeways.

The San Francisco Chronicle

Imagine if Bush had done something like this on a wider scale with the tax rebates rather than attempting to stimulate the economy by pushing people to buy, buy, buy. It is obvious that our Country’s infrastructure is continuing to decline and it would have made much more sense to invest in this (and it’s an important aspect of our National Security as well, the brown out in Florida is a reminder that many of our vital systems are working via toothpicks and chewing gum). Yes, I guess that is a whole different matter, but is it really?

When Republicans refuse to face the reality of the economy’s troubling trajectory, especially in a time of war, then we all suffer from their lack of balance. Spending is a huge issue, but so is revenue. We are spending 50 million dollars a month on this war and much of that is going into the pockets of a very few at the cost of our economy, national security and our many important programs that do matter, such as education, schip and the Country’s ailing infrastructure.

Another issue that I know I’m poorly informed about is how much money that Californian’s pay in Federal Taxes actually finds it way back to our State through the Government. If our Governor would press the Federal Government to insure that a higher percentage of the taxes we pay comes back to California it would also help where out budget shortfalls are hurting the most such as education and investment in our infrastructure.
Disclaimer – My husband Gary Pritchard is running for the California State Senate, district 33.

  5 comments for “The Governator sees the light, sort of…

  1. Bladerunner
    March 1, 2008 at 9:18 pm

    A thoughtful post Heather. I think the GOP has, once again, boxed themselves into a revenue corner. The Governor, as you note, has figured this out in his own post-partisan way.

    We really need to do two things in this budget crisis that will have significant long term value.

    . First, look at all expenditures for state and local programs. After getting rid of waste and programs that might have outlived their usefulness you’ll find some programs might be defensible in good economic times but not bad. Those should face a stiffer cut or suspension but soften the blow by long term budgeting that might restore or even increase the expenditures when better economic times arrive(when Bill Clinton gets back in office–oops, i mean Senator Clinton or Senator Obama).

    Second, look at tax exemption expenditures. After getting rid of exemptions that might have outlived their usefulness you’ll find some exemptions that might be defensible in good economic times but not bad. Those should face either a reduction or a suspension but soften the blow by long term budgeting that might restore or even increase the exemption when better economic times arrive(for you Red County viewers that can’t stay away from Blue County think of a President McCain holding down the spending of an enlarged Democratic majority in Congress and a green economy pushed by McCain and the Congress that makes for a more muscular U.S. economy and dollar.).

    I know this Blue Dog Democrat type of idea won’t hunt for those Reds who want to starve the beast or those Blues that want to engorge the beast but I submit it makes sense and could get us out of this jam. Exemptions are just that–for policy reasons we don’t make a person pay a tax or as much of a tax as others do. It’s unfair but warranted by policy rationales. I’m suggesting that on some(but certainly not all) of these exemptions the policy justification might be relative to the health of the economy and the state of the budget. And if you do this right you might be able to actually lower the basic tax rates over the long haul(the horror to some bluebellies).

    The 13 wing of the Republican Party had a predictable pavlovian reaction to the Republican Governor’s suggestion of looking at exemptions. But let the idea sink in. If they see that the suspensions or reductions in some exemptions are temporary and are coupled with expenditure reductions or suspensions it would give us a way out of this straight jacket besides the historical and bi-partisan way that our politicians have dealt with budget defecits: borrow.

  2. March 1, 2008 at 10:33 pm

    Bladerunner – Thank you for the thoughtful response. It’s obvious that not only does our State need to stop borrowing to fix the ideological gridlock in the budget negotiations it’s an approach that the Federal Government needs to undertake as well. I doubt that will be happening with the current administration, there seems to be no middle ground or it’s such a small piece of real estate only a few can stand on it at a time.

    I think this also goes for American households, including my own, where borrowing is out of control and we’ve all gotten far too accustomed to living beyond our means. I think part of that is due to stagnant wages simultaneously coupled with the increase in gas prices and other goods and services that many families were used to being able to afford.

    Gas was .99 a gallon when Clinton left office (and oil $28 a barrel), it will now head into the four dollar range and very few of us have adjusted our lifestyles to meet this increase. I think this is something that has happened in other areas and it’s the reason why so few are saving and they continue to borrow.

  3. RHackett
    March 1, 2008 at 11:40 pm

    I don’t know what the big deal is with conservatives and taxes. Their demigod Reagan raised taxes both as Governor and President.

    I would have no problem doing it now.

  4. March 2, 2008 at 12:50 pm

    Sorry to pick a nit, Heather, but gas hasn’t been under a dollar (in unadjusted terms) since the late 70s. (It’s quite true, though, that the big hikes have come since Clinton left office.)

  5. March 2, 2008 at 1:36 pm

    Gila – Figures, that’s what I get for taking the word of Johnny Wendel, it sounded a little low to me! 🙂

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