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It's Not A Tax Problem, It's A Spending Problem

May 26, 2009, 8:16 am

Via Matt Welch, in response to a Paul Krugman editorial lamenting that California's fiscal problems are all due to prop 13.

Here is where the traditional liberal argument loses me. The California budget "emergency" isn't a tax problem, it's a spending problem. State spending in the past two decades, as this Reason Foundation report [PDF] spells out, has increased 5.37 percent a year (and nearly 7 percent for the past decade), compared to a population-plus-inflation growth rate of 4.38 percent. If the budget growth rate had been limited to the population-inflation growth rate, the state would be sitting on a $15 billion surplus right now. Surely enough to dip into during a real emergency. What's more, despite this alleged tax straightjacket, Californians manage to still pay 21.9 percent in state and local taxes, compared to 14.5 percent for Texas.

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Category: Taxes
  • spiro

    On a similar note, how do universities justify raising their tuition rates by 9-10% every year? This may not be true for every university, but the state universities in my area have been doing this, every year, since 1989. Maybe even longer, I just starting paying attention in 89.

  • Dr. T

    Part of California's problem is that wealthier persons have fled while poorer persons have arrived. Thus, the small increase in population is somewhat misleading. The new arrivals soak up more government services than did the wealthier folks who left, which partly explains why government spending increased faster than inflation plus population growth. The usual government inefficiency and bureaucratic expansionism explains the rest.

    To Spiro: Universities and Colleges don't have to justify huge tuition increases. Since our society (incorrectly and foolishly) tells all teens that they should go to college, the damand is huge. Plus, every increase in government support for college students is immediately followed by an even bigger increase in tuitions and fees. (I taught at three universities and saw this first-hand.) Universities are packed, and they'll keep raising tuition until demand declines.

  • epobirs

    When it comes to California, blaming Prop. 13 is the refuge of scoundrels. This inevitably comes from those who didn't live here then or are too young to remember a time when a large portion of the middle-class was being priced out of their own homes by a blatant state government cash grab and conditions that had ridiculously overvalued homes.

    The house my parents bought for our family in 1974 was a perfectly reasonable choice with a mortgage and other costs rationally factored to their income. This was a big move for the family because each of us kids had our own rooms for the first time. If Prop. 13 had not passed my newly widowed mother would have been forced to move us into someplace far smaller, yet priced several time higher than our house had been just a few years earlier.

    If anyone in the state legislature had the stones to suggest that perhaps it was a good time to slash property tax rates to a level that would still be a big revenue boost without putting people out of their homes, I never heard this person's name. The tax revolt was entirely needed, and is still needed to day since the current crop of legislators are completely immune to learning anything from history, except perhaps how to be even more weaselly than their predecessors.