No one disputes that California has a big budget surplus. According to the Office of the Legislative Analyst, California has budget reserves in excess of $18 billion. Our budget reserves exceed the entire state budget of eighteen other states.
One would think that the funds available for discretionary spending would chill any appetite for higher taxes. But this is California.
Despite the highest income tax rate, the highest state sales tax rate and the second highest gas tax, both our newly elected governor and our extremely progressive legislature desire to impose yet even higher taxes.
The most surprising thing about two of the new tax proposals is that they hurt the very groups the majority party claims that it is trying to help.
During his tenure as governor, Jerry Brown succeeded in shepherding through several tax hikes. However, he was unsuccessful in pushing a new 911 surcharge and a precedent-setting tax on water.
But as is common in California, new tax proposals never really die and these two have been resurrected in Gov. Newsom’s proposed budget.
Both tax hikes would be dedicated (or so we are told) for public safety purposes, unquestionably a legitimate goal. The current 911 system is decades old, can’t accept texts or videos, and has difficulty pinpointing the location of cell phone users.
The water tax would help hundreds of thousands of residents in the Central Valley of California who do not currently have access to clean drinking water.
But these worthy projects do not need a new revenue source. Funding these programs out of the general fund would require about two percent of the surplus.
The only conceivable reason for imposing higher taxes is to establish new, permanent sources of revenue. Especially revealing is that the fact that, with both programs, the tax proceeds are projected to generate revenue in excess of the money needed to fix the problems.
The 911 surcharge would impose a new 34 cents per month tax on landlines, cell phones and any electronic device capable of calling 911. The one-time cost of providing the next generation 911 system is $175 million.
The annual amount of tax revenue to be generated from the 911 tax? It would haul in $400 million and, of course, has no sunset date.
The proposed water tax is the same. This state-imposed tax on all water users raises a number of policy concerns. First, is it fair to have ratepayers in Los Angeles, San Francisco and Sacramento pay higher water bills for a problem that is mostly limited to groundwater contamination in the Central Valley?
Even if the response is that California is a single “community of interest,” the fact remains that water rates have historically been set at the local level to pay for local service.
A state-imposed tax would not only be an outlier from a national perspective, it would be for California as well.
Moreover, there are other ways to fund the one-time $150 million cost of necessary water system improvements. Not only is there federal funding specifically available for this purpose, California has passed several statewide bonds that have allocated hundreds of millions of dollars for clean water infrastructure improvements.
Gov. Newsom was right to acknowledge not only California’s highest-in-the-nation effective poverty rate, but our shrinking middle class as well. That is precisely why his support for two regressive tax hikes makes no sense.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.