Saturday :: Aug 21, 2010

Focus On The Tax Deficit

by Steve

California's annual budget tragedy is once again playing out right before our eyes, and service providers to the most vulnerable in our society have been told that the lack of a budget heading into late August now means that they won't be getting state payments after this week. This will mean a loss of services to the elderly and the disabled, and provider closures as they are unable to meet payroll. Yet we are told by the Democratic legislative leadership that agreement has been reached with the Governor on how to close all but $4 billion of the $19 billion gap this year.

Democrats want to close the remaining gap with a tax shift scheme while the GOP wants all the gap to be closed through cuts and eliminations of safety net programs, and pension changes for public employees. There is no news in this, as the GOP would prefer to lean out and strangle some of these programs before ever raising taxes, and Democrats lunge for revenue increases before ever considering if something really needs to be adjusted or reformed.

But consider this, and then ask yourself why the Democratic legislative leadership hasn't seized upon these related facts to finally undermine the GOP's insistence upon cutting and eliminating programs before anything else.

1. The state's estimated budget gap is around $19 billion;
2. The state's estimated tax gap is $6.5 billion - annually;
3. Corporations get $5 billion a year in corporate tax incentives - without being held accountable.
4. Forty thousand California businesses have yet to file their 2008 corporate income tax returns.

And to add a little spice to the story, I'm sure a detailed analysis of the top 250 delinquent state tax payors will have a fair amount of individuals and businesses from GOP legislative districts, who have probably contributed donations to these same GOP legislators who are demanding that CalWORKS be terminated and the vulnerable be hurt before any taxes are raised.

Exactly how bad for business is California if the state legislature allows $5 billion in annual corporate expenditures (yes, an unmonitored subsidy is an economic choice and expenditure) without demanding performance for that money? How bad for business is California if the state legislature allows another $6.5 billion annually in uncollected taxes under the existing system without at least making every effort at accountability? Shouldn't corporate welfare recipients and corporate tax payors be held to the same standards as the safety net recipients the GOP routinely demonizes? The next time a GOP legislator complains about the drain of illegal immigration upon the state budget, perhaps someone should ask why this bothers them while they ignore $11.5 billion a year. We know the answer: campaign contributions.

Every year, Democrats in Sacramento allow the GOP to frame the debate as a spending problem and deficit, and every year the Democrats then rush to consider additional taxes. Instead, why aren't the Democrats framing the problem as a tax deficit? If the state treasury is afflicted with $11.5 billion a year in uncollected taxes and unmonitored corporate welfare, can we at least focus on that with the same intensity that each side is focusing on harming the vulnerable and new tax schemes?

Steve :: 10:16 AM :: Comments (4) :: TrackBack (0) :: Digg It!