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Ear to the Ground

Democrats Aren’t Buying What Schwarzenegger’s Cutting

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Posted on Jun 2, 2009
gov.ca.gov

As if delivering the tagline of his latest movie, California’s governor announced to the state Legislature Tuesday that the “day of reckoning is here.” But Democrats are fighting Arnold Schwarzenegger’s plan to cut funding for schools, the poor and sick children while refusing to raise taxes.

Watch the address here.

AP via Google:

He has outlined a series of cuts that include an additional $5.2 billion reduction in funding for public schools, laying off 5,000 state workers and further cutting the pay of 200,000 others. He has proposed eliminating welfare for 500,000 families, terminating health coverage for nearly 1 million low-income children and closing 220 state parks.

“People come up to me all the time, pleading ‘Governor, please don’t cut my program.’ They tell me how the cuts will affect them and their loved ones,” Schwarzenegger said. “I see the pain in their eyes and hear the fear in their voice. It’s an awful feeling. But we have no choice.”

The Republican governor and legislators of his own party say they will not raise taxes, after agreeing to $12.8 billion in higher sales, personal income and vehicles taxes earlier this year.

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By Mateo in So-Cal, June 20, 2009 at 11:46 pm Link to this comment
(Unregistered commenter)

I live in Cal and I do work that is directly affected by what the State “chooses” to give to local governments, although I’m not a government employee myself.  What is unfortunate is that certain groups (which shall remain un-identified in my post) are really the ones who have bankrupted the system.  Sad to say, and we rely on these “groups” heavily here in CA.  I’m not a Republican by any stretch of the imagination, but I think A.S. is doing his best to save the state from almost inevitable bankruptcy. The trickle down effect is hurting local governments bad, and it’s really not his fault.  Very sad indeed.

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By ardee, June 10, 2009 at 4:03 am Link to this comment

Smoove, June 9 at 8:25 pm #
(Unregistered commenter)

ardee,

I bet we are more in agreement then we think.

My initial point was California already has high tax rates. So how effective will raising taxes be if loopholes exist that can be easily exploited?
..........................

I do not wish to harp on this subject, especially as we are not as close as you believe us to be. Low income folks are hurt far more by taxes than are the wealthy. It isnt a question of actual numbers at all.

Just as it isnt a question of raising taxes as much as it is of closing loopholes and assuring that all pay a fair share, rich, poor, corporations, all.

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By Smoove, June 9, 2009 at 5:25 pm Link to this comment
(Unregistered commenter)

ardee,

I bet we are more in agreement then we think.

My initial point was California already has high tax rates. So how effective will raising taxes be if loopholes exist that can be easily exploited?

Nonetheless, suppose everyone had free access to a fancy tax lawyer. What exactly do you think that would that do for someone making $30k/year? It isn’t naive to think that if you don’t earn a lot, then you’re not going to pay a lot in taxes. Even if that person completely avoids paying taxes, making $30k/year in California is still going to be an issue.

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By ardee, June 9, 2009 at 2:27 pm Link to this comment

Smoove, June 9 at 3:55 pm

You cite textbook analysis that fails utterly to mirror the reality of the tax codes and the loopholes they contain. When Bush 43 first granted the tax breaks to the wealthiest among us Warren Buffet declared himself outraged that he now paid less in taxes than his personal secretary. Why do you suppose that might be?

I am sorry to have distorted the term “coupon clipping” and of course you are correct that one must pay taxes as one “clips those coupons”. But you are far from correct if you believe that the wealthiest do not escape the luxury taxes on their most expensive purchases, they absolutely do , and in a variety of ways. Just as they escape the taxes we see taken out of our weekly paychecks in fact.

Do you not remember the embarrassment Obama suffered when four of his nominees were found to have paid less than they were obligated to on their taxes, whether social security tax or “honest mistakes” from years back? Now these folks are relatively small potatoes compared to those who I claim fail utterly to pay their fair share of the tax burden through artfully constructed devices prepared for them by those $600/hour tax lawyers.

I would also mention the loopholes our corporations employ to avoid their obligations as well. There is no level playing field whatsoever in the way the tax codes are employed. To say that a person making 30K/ year has the same opportunity to find loopholes as the fellow making 30M/yr. is rather naive of you.

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By Smoove, June 9, 2009 at 12:55 pm Link to this comment
(Unregistered commenter)

ardee,

The only coupon clipping that is tax free is from Muni-Bonds. Of course, all of the proceeds from selling muni-bonds goes right back to the state/local gov’t which in turn thye use to build important public projects, e.g. schools, sewers, & roads. Their is a very valid reason why the income from muni-bonds is tax free: It’s so the state/municipalities can receive below market financing for public works. Other coupon clipping is taxed as ordinary income subject to your tax rate. This same is true for bonuses and all “realized” stock options. Also, many tax loopholes are available to everyone. The issue is that in order to get a lot of tax savings, you first need to make a lot of money (compare the tax savings of $10,000 worth of income at a 5% tax rate versus $100,000 of income at a 10% tax rate).  Their is little to no incentive for many people to hire a fancy tax lawyer because the cost far exceeds the value at lower incomes/tax rates.

Furthermore, sales tax is a tax on consumption. Consumption is a function of income. Generally speaking, the higher a person’s income, the more they consume and the more taxes they pay. Of course, with the internet their are some loopholes to paying sales tax, but then those loopholes are available to rich and poor alike.

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By ardee, June 8, 2009 at 3:44 am Link to this comment

Err, smoove
California income tax rates (especially for the wealthy) and sales tax rates are among the highest in the nation. It’s not nor has it ever been about too little revenue.
............................

Tax rates often bear little weight as to the actual collection of taxes. Corporations have so many loopholes that citing corporate rates is meaningless. The wealthy do not pay taxes as do you or I, assuming you are a wage earner. Their income is often the result of coupon clipping, bonuses and stock options, not weekly paychecks. Thus they have endless deductions and loopholes that create a thriving industry of tax lawyers who, for several hundred an hour, find many tens of thousands of deductions ( and much more )unavailable to you and I.

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By Smoove, June 7, 2009 at 11:34 am Link to this comment
(Unregistered commenter)

hippie4ever, you can’t be serious.

California income tax rates (especially for the wealthy) and sales tax rates are among the highest in the nation. It’s not nor has it ever been about too little revenue.

Changing Prop 13 won’t solve anything because the clowns in Sacramento have demonstrated they are incapable of spending restraint.

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By Davr, June 4, 2009 at 1:10 am Link to this comment
(Unregistered commenter)

Arnie is a Republican in sheeps clothing.

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By Beltwaylaid, June 3, 2009 at 5:49 pm Link to this comment
(Unregistered commenter)

Yes, close the State Parks.  The weed growers need the acreage.

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By ardee, June 3, 2009 at 5:06 pm Link to this comment

Leefeller, June 3 at 11:04 am #

Not only possible but probable.

My reference , however, was more to the fact that it is always the poor, the young, the elderly that suffer the most in a down economy. When money is scarce one never hears a plea to enforce the tax codes on the corporations, close the loopholes that enable the wealthy to escape their fair share. After all they can afford to pay a bit more, if only because they benefit the most.

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Virginia777's avatar

By Virginia777, June 3, 2009 at 4:54 pm Link to this comment

The Dems freaking better well be fighting draconian cuts to State Parks, Education and services for the poor!!

I only fear, based on past performance, they are not strong enough to defend the State from these mindless bullies.

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By BobZ, June 3, 2009 at 3:00 pm Link to this comment

California never recovered from the Enron debacle which Gray Davis mismanaged. Davis also mismanaged the raises given to the prison guards. Arnold has now made an even bigger mess. When will California learn not to elect Hollywood celebrities to govern us?  We now have had two bad governors in a row, one Democrat and one Republican. They had zero competence in real governance once they got beyond the photo ops. As for Arnold’s budget proposals, they are not only doomed to failure, they aren’t nearly good enough to close this deficit which is massive. Taxes have to be raised and probably at all of the bracket levels unless somehow Proposition 13 can be dismanteled which won’t happen anytime soon. The legislature should raise every possible fee imaginable in order to get a budget done that is realistic. There is no way to cut our way out of this mess without throwing the state into chaos. Unemployment taxes need to be raised immediately and without caps on income.

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By hippie4ever, June 3, 2009 at 10:35 am Link to this comment

There is great poverty in California because it has tremendous wealth; the rich are protected by the legacy of Prop 13, which created a two-tier property tax between the established gentry and recent immigrants. Also between owners and renters, and between established corporations and new start companies.

As an example, take just two Californians: one was born here, bought a home in 1970 for $40,000, pays taxes of $600 a year. Another arrived in 1996, bought a home for $465,000, and pays $6,000 in property taxes. Both homes are now worth $400,000 each, and without Prop 13 the state would receive about $10,500, but the reality is the state gets $6,600, leaving a deficit.

The ballot has been used before to remedy this inequality but fails, because those with unfair advantage wish to keep the status quo and they all vote. Renters, newly arrived, start-ups vote less often, sometimes because they work two or three jobs to make ends meet

Solving this fundamental problem is going to require (gasp!) maturity and a sense of fairness from Californians.

I expect no change in my lifetime but am willing to be disappointed.

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By johnj, June 3, 2009 at 9:35 am Link to this comment
(Unregistered commenter)

“Both parties are equally to blame” is a popular notion… and a fallacy. The Republicans hold more power than they deserve thanks to the 2/3 vote requirement for the budget.

The Legislature DID pass a balanced budget in January, with a responsible mix of revenue increases and spending cuts.

The Governator vetoed it, because it did not have a 2/3 majority. A REAL action-hero would have signed it and said “sue me!” to the anti-tax jihadis in Sacramento.

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By Folktruther, June 3, 2009 at 9:29 am Link to this comment

Sure the Dem leaders will buy it, just hive them a little time to disguise it.

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Leefeller's avatar

By Leefeller, June 3, 2009 at 8:04 am Link to this comment

RD,

Question on question.

“Why is it that, when it is the Boardroom that causes the mess it is the classroom that suffers the most”?

Is it possible as the classrooms suffer, increased ignorance is easier to manipulate then educated masses?

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By Jimmy L Porter, June 3, 2009 at 7:45 am Link to this comment
(Unregistered commenter)

Concerning California’s economic problem:  Has anyone thought of asking the people of California what they think needs to be done?  Place the State budget online and ask the Californians to tear it apart; put it back together in a way they think it would work.  Do not second guess the people’s choices; do not change or modify what they suggest.  As these ideas are applied to the budget, show what happens in reality (no computer profiling); make sure to print the name of the individual or group of individuals who made this particular recommendation.  Try it, it might work.  And do as the poster G. Anderson recommended:  Lock up the legislatures until the people have made their changes.

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By Jim Yell, June 3, 2009 at 6:34 am Link to this comment
(Unregistered commenter)

Either the rich are going to have to pay their taxes and by rich I also mean the corporations or the poor and working class are going to live bleak lives such as haven’t been seen since the worse days of 19th century industrialism.

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By ardee, June 3, 2009 at 3:30 am Link to this comment

Thank goodness Ahnold is unable to attain the presidency or we’d see another form of Reaganism for certain. The voter is going to have to separate personality from ability when casting a ballot!

During his first campaign, the Governator swore he would never need special interest money as he is so personally wealthy. The day after his election he flew to NYC and raised more such money than anyone in history.

This is sour grapes for the voter’s refusal to pass a garbled and semi coherent set of bills that would have solved nothing. Why is it that, when it is the Boardroom that causes the mess it is the classroom that suffers the most? Not overlooking the hardships to families and essential service providers…..

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G.Anderson's avatar

By G.Anderson, June 2, 2009 at 9:05 pm Link to this comment

At this point I seriously doubt that California can be saved by anyone. When the political system cannot solve it’s problems there are few other means available to do it. Most of those are highly distasteful.

If it was me, I would give the legislators a chance, to consider the pain they will cause us if they don’t act, then I would declare a state of Emergency and then declare martial law. I would bring in marshalls to lock them up in the state house until they get off their ass and do the right thing. I would   make them work around the clock until it’s done, come hell or high water, or throw them in jail for contempt.

Both parties are equally to blame, no matter how they rationalize it. The people should recall every last one of them.

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By david middelstetter, June 2, 2009 at 8:30 pm Link to this comment
(Unregistered commenter)

Reagan’s first budget director, David Stockman, got fired in the early 1980’s for revealing that his boss had a hidden agenda for cutting taxes (for the rich) and driving up the deficit: eventually bleed the government dry so it would have to be cut back to nearly nothing. It appears to have finally come to fruition under Bush II/Obama. 

I wonder if the same thing was planned in California?

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