Arnold Schwarzenegger didn't just vow to keep taxes low, he ran an entire campaign in 2006 based on scaring people into believing that his opponent would raise taxes by $18 billion dollars. None of it was true, but he hammered away at it. In the one and only debate he chided Phil Angelides, saying "you love taxes" and other nonsense. Dan Weintraub even remembered this spiel:
"They get into their car, they're taxed. They go to the gas station, they're taxed. They go for lunch, they're taxed. This goes on all day long. Tax, tax, tax, tax, tax. Even when they go to bed, you can go to bed in fear that you are going to be taxed while you're sleeping, that there is a sleeping tax."
The admission of defeat, that there's no way to balance this budget without revenue increases, is truly astonishing. What's more, the broad-based sales tax he's proposing, the most regressive imaginable, really would tax Californians at virtually every point of the day. He's become a caricature (if he wasn't one already).
The proposal amounts to an admission of failure. Running in 2003 as a novice politician after careers as a bodybuilder and actor, Schwarzenegger thought he could cut taxes, control spending and balance the budget, ending what he called "those crazy deficits." But the fiscal and economic problem was more complicated than he knew, and the politics far more vexing.
Schwarzenegger did cut taxes. He campaigned on a pledge to roll back the vehicle license fee, or "car tax," which his predecessor, Gray Davis, had tripled. And on Schwarzenegger's first day in office, the new governor issued an executive order reducing the tax by two-thirds.
But controlling spending proved far more difficult, as, ironically, that first tax-cut order foretold. The car tax against which Schwarzenegger had railed, while controlled by the state, was actually a source of revenue for local governments. And so when Schwarzenegger reduced it, he also made good on a pledge to pay cities and counties what was then $4billion a year to make up for what they lost when he cut the car tax.
The state, however, did not have that money to spare, and the payments to cities and counties added to the deficit Schwarzenegger had vowed to eliminate. That obligation to local government has since grown to $6 billion - not coincidentally the same amount that would be raised by the sales tax increase Schwarzenegger now supports.
The VLF was the original sin here, but not the only one. The problem is structural and the VLF would have only delayed the inevitable. The truth is that the state is only built for success, never for a downturn like we're currently having. And so this results in gimmicks like slashing state employee salaries and putting them in the middle of a budget spat, or borrowing more and more to pass the deficit on to our children and grandchildren.
(The latest on the wage cuts, by the way, is that the governor is demanding that his order be followed, which John Chiang will refuse, leading to a likely lawsuit. Chiang really is a hero in all of this, and he's filling a leadership vacuum. Marcus Breton has a nice profile today.)
Schwarzenegger has never concerned himself with the business of governing - he preferred slogans to policy. And with the policy going to crap, the slogans sound more hollow - especially the one that goes "tax, tax, tax, tax, tax." |
