Editorial: State can recover without new taxes

Regardless of what anybody might think of Democratic gubernatorial candidate Phil Angelides’ “soak the rich” tax pronouncements, he deserves some points for at least bringing a controversial issue into a California state campaign, which has become all too rare in this era of play-it-safe electioneering.

However, The Examiner disagrees

with Angelides that raising taxes on any Californian is a good or even necessary solution for ending the state’s yearly deficit spending and $25 billion debt drain.

Even as Angelides was telling a polite but unreceptive California Chamber of Commerce audience in Sacramento last week that they ought to “invest in our people” by paying higher income and business taxes to balance the budget and improve education, news was emerging about record-breaking revenues flowing into state coffers.

With an astonishing $1.65 billion arriving at the Franchise Tax Board on Wednesday, California was on track to end its biggest yearly revenue month $4 billion ahead of the increasingly optimistic official projections. This economic comeback appears to indicate that Gov. Arnold Schwarzenegger is on the right track in stubbornly refusing to raise taxes even during the depths of the deficit.

Another problem with the Angelides tax-hike proposal is that its targets include small businesses and couples earning $500,000 a year, which is not exactly the same as the “top 1 percent” billionaires.

Angelides might be aiming his campaign pitch at the majority of Californians who would not be directly affected by new high-earner taxes. But Rob Reiner’s current preschool initiative, Proposition 82, would already raise taxes on couples earning $800,000 and up.

All this chipping away at higher incomes and corporate earnings could well push some taxpayers and businesses across the border into Nevada or Arizona. Angelides points out that there was no big exodus out of the state when Republicans Ronald Reagan and Pete Wilson raised taxes to stop earlier deficits.

However, the state’s robust 2006 revenues do seem to reflect a strengthening economy that could steadily overcome annual budget shortfalls such as the $4 billion deficit spending penciled in for next year— but only if there is sufficient political will to bring under control California’s huge spending habits.

The best way to maintain and widen California prosperity is to strengthen the state as an efficient, competitive, job-creating machine. And this is best accomplished with policies that promote business instead of seeking to constantly skim off more of its profits to finance feel-good measures.

Any serious thought of state tax increases ought to be packaged with true reforms in California’s spending burden, including such sacred cows as the ballooning unfunded pension benefits for public employees.

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