California’s never-ending budget fiasco offers a lesson to those who believe governments can tax their way out of fiscal irresponsibility.
On Saturday, Gov. Jerry Brown announced that the state’s projected deficit was much higher than anticipated. January estimates that pegged the shortfall at $9.2 billion were too optimistic – the gap has ballooned to $16 billion.
More than half of the increase was attributed to lagging tax collections, while almost all the rest stems from the fact that the state has “spent $2.1 billion more than expected,” the Los Angles Times reported Sunday.
Why are tax revenues running 20 percent below projections, including a 21.5 percent shortfall in personal income tax collections? Punitive levies on moderate to high incomes – upon which California relies heavily – are no panacea for profligate public spending. Yet Golden State voters this fall will again be asked to jack up state income tax rates on “the rich.” Go figure.
In addition, as The Wall Street Journal noted Monday, a recent analysis of businesses moving from one state to another found the migration out of California since 2009 “has increased fivefold due to high taxes and regulatory costs.”
Meanwhile, Democrats in Sacramento have no interest in serious spending restraint. “Senate President Pro Tem Darrell Steinberg, D-Sacramento, said he didn’t regret holding off on budget cuts earlier this year, even if it cost the state millions of dollars,” the Times reported.
The mystery is why anybody could possibly think California’s predictable predicament is any mystery at all.