California’s budget crisis reminds me of our energy problems. When oil prices went up to $147 a barrel, our dependence on foreign oil was bemoaned by Democrats as evidence that President Bush’s energy policies were no good. When Republicans (like me) pointed out that Democrats were opposed to drilling for oil in ANWR and offshore, where most of our oil reserves reside, Democrats said that it would take ten years to bring the oil to market.
Ten years ago they said the same thing. If we had drilled then, it would be on the market now.
Now California has an enormous budget problem, and like most of California’s problems it came as no surprise. For many years, through both Democrat and Republican governorships, the Democrat-controlled legislature spent wildly during high tax revenue years. However, all California legislators, and most California Republicans, know that California’s taxation system is fragile since it is built primarily on personal income taxes. When the economy is booming, tax revenues really jump, but when it slows down, revenues fall fast.
Unfortunately, California legislators spend everything during the good times, and then Democrats scream to raise taxes during the bad. “We just can’t cut programs like that,” they cry, then trot out all the “victims” of proposed cuts. Just like our oil supply, if we would show foresight during the fat years, we wouldn’t be in such dire straits during the lean.
As it is, our crises are perpetual, and self-perpetuating. The increased spending buys votes and empowers Democrats to increase taxes to sustain high rates of spending during economic downturns. The higher taxes drive away capital and wealthy individuals until another burst of prosperity and higher income tax revenues starts the increased spending cycle again. First spending, then taxes, ratchet higher, and Democrats in the legislature never think that there is a limit to how much they can raise taxes on the rich and businesses.
Californians, always willing to believe in smoke and mirrors, still haven’t figured out that they are paying the business taxes. As any accountant knows (even Democrat accountants), business taxes are simply passed through in the cost of goods sold to the ultimate consumer of goods and services, namely you and I.
So we support having our taxes raised because we think someone else is paying them.
But that’s another story.