Over-Hyped Sequestration Amounts to One Week's Worth of Spending Cuts

Given the amount of doom and gloom that is reported surrounding the impending sequestration cuts, one may be surprised to learn that the cuts will result in a decrease in projected spending by only 2.3%.  Hardly an unmanageable amount.

Put another way, it would be equivalent to having Federal spending take a week long holiday.

Despite these figures, sequestration has been presented by politicians and the media as the next "cliff" (didn't we just avert one a few weeks ago?).  For instance, just this weekend, the White House released a menacing 7 page memorandum listing all the programs, services and agencies that would be affected.  Obviously, the list is meant to incite emotion and evoke fear.  After all, the document tells us that their will be cuts to food safety inspectors, airport security, national parks, education, amongst many, many more.

As I read through the list, I couldn't help but remember a similar menacing list produced by Governor Jerry Brown in his campaign to pass Proposition 30.  Californians were told that if we didn't vote for increased taxes, key government services would be shut down.  In fact, the Governor even released the names of dozens of state parks that were to be "closed" in the event that Proposition 30 did not pass.  These scare tactics apparently worked and Proposition 30 ultimately passed.  Of course, its passage seemed to only wet the appetite of those who have always sought increased taxes--within weeks the democratic super majority was alluding to other ways to increase revenues.

The pattern is clear.  If you want create the perception that a small decrease in spending will have terrible consequences, you have to place on the chopping block those services that are most near and dear to taxpayers--public safety.  I am not saying that public safety will actually be cut, but the government will publicize "planned" cuts to public safety more than anything else.  I suspect though that sequestration will not result in a drastic drop in public safety as the politicians would lead us to believe.

Surprise, Surprise...Prop 30 Funds Steered Towards Salaries and Benefits--Less Than Half For Education

Governor Brown's budget proposal for the upcoming fiscal year has a big surprise for those who voted for its passage, believing that the bulk of the funds would be used for education.  Of the $6 billion raised by Prop 30, only $2.7 billion would go to K-14 eduction.  In addition, the budget has at least $1.3 billion for salaries and benefits to state employees who don't work in education and would generally cease the one furlough day a month policy.  The budget also includes $502 million for negotiated pay raises and health care benefit contribution hikes for state employees.

The OC Register points out that the advertising for Prop 30, however, led voters to believe that this wouldn't be the case:

Yet the Prop. 30 campaign led voters to believe that the majority of the money from higher sales and income taxes would go to schools. One TV ad run by Gov. Brown's official Prop. 30 campaign, "Teachers for 30," featured several teachers explaining the need for the money for schools. Then state Controller John Chiang was shown, assuring voters: "With strict accountability, money must go to the classrooms and can't be touched by Sacramento politicians." The spot ended with Gov. Brown positioned in the midst of 17 school kids about age 8, as he implored, "For the students, and for California's future, vote Yes on 30." The kids cheered.

Are Tax Hikes The Cure For CA Budget Woes?

One can only wait and see how the Passage of Prop 30 will affect California, but politcal cartoonist Michael Ramirez has his own take.

(Coutesy of National Review)

What the Passage of Prop 30 Means for You

Proposition 30 was passed on Tuesday carrying about 54% of the vote.  Here's what it means.

There will be an across the board sales tax increase from a base rate of 7.25% to 7.5% for the next four years.  This will have an impact on all consumers.

In addition, there was a significant increase in marginal rates for those making more than $250,000, which will be retroactive to the beginning of 2012 and last for seven years. 

Under Prop 30 the new brackets for single filers will look as follows:

             In excess of $250,000----10.3% (up from 9.3%)
             In excess of $300,000----11.3% (up from 9.3%)
             In excess of $500,000----12.3% (up from 9.3%)

Proposition 30 will keep California in first place for having the highest state sales tax in the nation and should move California from second (behind Hawaii) to first place in state income tax. 

The biggest question I have, however, is will this seven year "temporary" tax increase be enough or will Governor Brown and his new super-majority legislature push for additional tax increases. Also, is Proposition 13 also soon to be on the chopping block?  Time will only tell. 

Gov. Brown Forces His Tax Initiative to Top of Ballot--Courts Uphold

Conventional wisdom holds that ballot initiatives listed at the top of the ballot are more likely to pass than those listed at the bottom (slothful voters get tired of reading or confused and tend to vote no).  Because Gov. Brown's tax initiative was certified late, it would have ended up on the bottom, below Molly Munger's competing tax initiative.

In order to finagle his initiative to the top and increase its chances of success, the legislature recently changed the law on how initiatives are ranked.  Now, initiatives dealing with bond measures and constitutional issues are given priority--which would place the Governor's initiative at the top of the ballot. 

This legal wrangling, which was decried by competing tax measures and anti-tax groups was recently upheld in court. 

3 Tax Increase Measures Qualify For November Ballot

Come November, Californians will will have a chance to vote on three different tax proposals.

Governor Brown's proposal would raise state sales tax and raise income taxes for those making more than $250,000.  Funds raised would be used to backfill the state's general funds and to guaratnte funding for local governments and public safety.

A competing initiative, backed by L.A. attorney Molly Munger, would instead raise income taxes accross the board for nearly every California taxpayer as well as increase the Millionaires tax to the highest in the nation--13.3%. These funds are to be used to go directly to publich schools. 

The third proposal would change corporate tax calculations for multi-state corporations--basing the liability on their share of sales in California.