by Robert Enyeart
Author’s note: the inspiration for this article comes from a Letter to the Editor in the Ledger-Dispatch written by George Runner, Representative-State Board of Equalization, and his closing statement of:
"Don’t fall for the lie. Sacramento does not have a revenue problem, it has a spending addiction. There’s plenty of money—just not enough to fund the endless spending appetite of tax-and-spend politicians.”
I am not going to disagree with his statement, nor am I going to completely agree with it either. It has its merits. In good fiscal times people, and the politicians we elect, are more willing to increase funding for Department X, or approve Project Y, or continue funding Proposal Z beyond its sunset date. In less than perfect fiscal times, there is much calling to decrease funding for Department X, Project Y, or Proposal Z.
We might also see some good fiscal decisions like Governor Brown’s decision to pay down debt incurred under the previous administration, and to provide more funds for a rainy day reserve account. These two actions made fiscal sense, but didn’t win him any points from members of his own party.
I’m sure there were plenty of calls for reducing taxes or extending temporary tax reductions which are already in place. Just like there were more than likely a fair number of requests and proposals for increased funding for one thing, or to begin funding on something new.
No one wants to lose a chance at increased funding when there is still money in the pot. I’ve always found it strange that in California if a department has money left in its budget at the end of the fiscal year, it has to spend it or lose it for the following year. That just doesn’t make sense. Sure, there are fiscal hardliners that would argue that if the money wasn’t spent one year that it wasn’t needed and therefore will not be included in the following year budget. To me, that makes only half sense. Yes, if expenses were less than anticipated then the excess funds are technically not needed, but why not let a department carryover any surplus funds into the next fiscal year by depositing it into a reserve fund? It would make more sense to say “Well gee, we didn’t spend $1.5 million that we thought we needed, we should roll it over just in case we have unexpected expenses next year.” That makes sense to me, yet I can’t speak for anyone else.
So, if revenue is greater than expected, then taxes should be cut, right? But for whom should they be cut, and by how much? And by cutting taxes, you’re effectively cutting revenue, therefore limiting the amount of funds available to maintain programs and operations. If continued over several fiscal years, this might result in spending more than is being taken in. In an ideal world, wouldn’t revenue reductions be paired with spending reductions? I would argue that it would be the other side of the Tax and Spend coin. Raise taxes to spend money, so therefore when cutting taxes, reduce spending. But I never really hear of any proposed spending cuts when tax cuts are proposed. Or is it that I never hear of them because I am not a multi-billion dollar corporation that gets to take advantage of special tax incentives? So, I guess after my rambling on about a topic which most would find so boring that they would rather watch paint dry, my question to Mr. Runner is this: “Why do we still spend when we cut taxes? Why don’t we reduce spending to make tax cuts revenue neutral?”
The most obvious answer would be that no one likes to hear they might have less money for school, or transportation subsidies, or for parks. But why is it that those are the types of programs that make the chopping block when we should be looking at the whole pie? If we reduce revenue by 1%, then spending should be reduced by an equal amount. Spread the burden over a large area so it isn’t as painful. But, alas, we have a spending problem and not a revenue problem, according to Mr. Runner. Maybe, in reality, the real problem is that no one is willing to make the tough decisions without worrying about their re-election campaign.
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