California, A Cautionary Tale?

The other day I linked to a Paul Krugman column on California’s budget crisis. In it, he uses California’s trouble raising revenue as a cautionary tale for the federal government.

Despite the economic slump, despite irresponsible policies that have doubled the state’s debt burden since Arnold Schwarzenegger became governor, California has immense human and financial resources. It should not be in fiscal crisis; it should not be on the verge of cutting essential public services and denying health coverage to almost a million children. But it is — and you have to wonder if California’s political paralysis foreshadows the future of the nation as a whole.

Proposition 13 made it extremely hard to raise taxes, even in emergencies: no state tax rate may be increased without a two-thirds majority in both houses of the State Legislature. And this provision has interacted disastrously with state political trends.

While he admits, rightly, that California’s situation is not entirely analogous to that of the federal government’s, he does, in passing, hit on the most important hurdle of politics: It’s really hard to raise taxes. Yet, undisputably, tax dollars are going to have to pay for our lender-funded bailouts, wars and stimulus packages, sooner or later.

I heard Pennsylvania Gov. Ed Rendell (D) speak once at a transportation roundtable in Denver. He and the other politicians were talking about how to raise money for public works projects, and the gas tax (which funds the Federal Aid Highway Act) came up. Rep. Rosa DeLauro (D-Conn.), rightly, called any attempt by Congress to raise the gas tax “dead on arrival.”

Here was Rendell’s response:

When I became governor I had to raise $2.4 billion in taxes. When re-election came around — people aren’t stupid — one incumbent lost and she voted against the tax increase. This is the time we have to challenge the American people. Folks, you get what you pay for.

I think what he said is true, but it’s something that, for whatever reason, seems to work best at the local, and sometimes state level. Part of this is because there are more opportunities for direct democracy. How often have we seen city or county propositions to raise the sales tax for a specific project get approved? Take a look at the sales tax for your state. It likely varies wildly by city and county, because local governments are constantly using some form of consumption tax to raise revenue. It can even vary within a city — a mall in a publicly funded development area might have a higher sales tax to help pay back the city.

Why is this? Because people, as much as they hate taxes and distrust big government, are willing to pay a little extra if they know exactly what that money’s being used for. A 1/4-cent on the dollar sales tax to help pay for new schools? Sure! But if your local member of Congress tried to get that same 1/4-cent, (s)he’d be burnt alive in the next election campaign.

This seems pretty elementary, and, indeed, as individuals, most of us could probably be convinced that that aforementioned 1/4-cent to Congress was worth it. But on a massive scale, like an election, the perception of a tax can have a ton of power, mostly to the detriment of the legislators who supported it.


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About the Author

Brian Eason is a University of Missouri graduate with bachelor degrees in Journalism and Political Science. He has covered Congressional elections and local government for the Columbia Missourian and worked as a general assignment reporter for the State Journal-Register in Springfield, IL. Brian has also had articles published in Roll Call.

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