Monday, November 17, 2008

State Budget Proposals

There are a lot of tough choices on the table. Long-term solutions should be preferred whenever possible. I expect a new federal stimulus plan for Washington will provide some short-term money.

Taxes and Fee Increase Proposals (not a full list, in order from best to worst):

Expand Sales Tax to Services: A good long-term policy. I would go further than the Governor's proposal and add even more items such as movie tickets. Helps local governments too.

Alcohol Tax: Proposed increase is modest and good policy.

Oil Severance Tax: Yes.

Community College Tuition Increases: Yes. These fees are incredibly low in CA compared to other states. I would go beyond the LAO proposal and double and triple these fees, which will still leave them at half the level (or less) of other states.

Temporary Increase in Sales Tax Rate: No. A temporary solution, and the rate is already too high.

Temporary Income Tax Surcharge: No (although less bad than the temporary sales tax).

Cut State Holidays: Yes, this is a reasonable concession to ask of state employees.

Furlough Days for State Employees: A temporary budget solution that is tough on morale and has long-term impacts on performance. If the state payroll must be trimmed, I would prefer to strategically cut the state workforce but this is slower to implement than furloughs.

Increase vehicle fees: No. I prefer to increase the marginal costs of operating a vehicle (gas tax, toll roads) than the fixed costs of owning one (registration fees). Severin Borenstein has an interesting proposal in the today's Sacramento Bee.

1 comment:

  1. CA sales increase should be a prelude to a National sales tax. Too many americans have little or no buy in to the country. Income taxes on a national level allow to many people to skate from responsibility to their country. The sales tax system is in place, no new bureaucracy. Remember when they built the first building along Hwy 50 for the FTB? Now here are several building and lot of people.