The Tired Old Budget Game

It’s summer in Sacramento. The temperature is nudging 100 degrees. And the state faces a budget crisis with a new fiscal year just five days away. So what else is new?

One new twist is the magnitude of the problem, a deficit of $24 billion, caused primarily by a free fall of income taxes on capital gains and stock options in the technology industry. Another is that this is a gubernatorial election year.

Politics were definitely afoot in the Senate on Tuesday when Republicans blocked passage of a $4.7-billion revenue program, including a temporary increase in the income tax on the wealthiest Californians and a 50-cent-a-pack boost in cigarette taxes. Sponsored by the Democratic leadership, it is a reasonable program, resembling the hikes then-Gov. Pete Wilson, a Republican, proposed in a similar crisis in 1991.

Even with the state facing a huge deficit, Republicans say they won’t raise taxes. Yet they voted for more money for schools and other programs, which everyone wanted. In addition, they voted for a massive cut in the auto license tax. Cut programs, they say. But billions of dollars already have been cut.

The GOP is not the only problem for the tax plan. In the political campaign, Davis needs to keep his Republican challenger, Bill Simon Jr., from successfully labeling him as a tax booster. Such an effort by Simon might be blunted by a Davis proposal to roll back half of the vehicle license tax cuts, for a savings of $3.7 billion.

Far better for the state than that Davis proposal, however, is the Democrats’ plan to boost the 9.3% income tax to 10% for couples with taxable incomes of $260,000 to $500,000 and to 11% for those over $500,000. These people got a big federal tax cut last year. The 10% and 11% brackets were first established by Gov. Ronald Reagan but later repealed. A couple with $400,000 taxable income, in the 10% bracket, would have a $601 tax increase after taking the federal deduction.

Under the Democrats’ tax plan, Californians still would experience cuts in important state services. But the proposal would provide funds to restore some vital items to the budget, including better Medi-Cal reimbursement, the expansion of the Healthy Families program, aid to local government and additional money to fight forest and brush fires.

Republicans seem willing to gamble that a budget stalemate will damage Davis and improve Simon’s chances. However, history teaches that the budget holdouts suffer just as much politically. And all Californians would see once again that some of their legislators are incapable of fulfilling basic duties.

But Sacramento has five more days. It’s still possible to get a budget on time.