Thursday, February 21, 2008

$16 billion and counting


Everyone remembers Elizabeth Hill. The day after Christmas she suggested the removal of home mortgage deductibility from California income taxes. She's baaaack. Supposedly she's a budget analyst for the Legislative Analysts Office (LAO) but lately she's appointed herself Governor and started proposing tax legislation and producing budgets. Today's exercise in excess is to go one better than Da Governator and admit to a $16b deficit topping his $14.5b up from $14b up from $10.6 up from $4.5b estimate(s).
In contrast to the administration’s across-the-board reduction budget-balancing approach that fails to prioritize state spending, we offer an alternative approach for the Legislature’s consideration. By making more targeted reductions; eliminating or modifying ineffectiveness or nonessential programs; and adding ongoing revenue solutions, we believe this approach offers the Legislature a better foundation to begin crafting a 2008-09 budget that focuses on essential services. This piece provides an overview of the key components of this alternative approach. Our alternative budget would end the 2008-09 fiscal year with a $1.3 billion reserve, and remain balanced through 2012-13.


Quick glossary:
fails to prioritize state spending= doesn't play favorites
By making more targeted reductions = play favorites
eliminating or modifying ineffectiveness or nonessential programs = trim the fat canard
essential services = union contracts
adding ongoing revenue solutions = taxes, lots of new taxes

At least we've reached the half-way point in admitting to the actual shortfall. Stay tuned.

32 comments:

tk said...

Murst?

tk said...

Yeah, I have nothing of value to add.

Jean ValJean said...

FIRST! .. to add real content.

Who the hell is she again?

Is she related to Tom Leppert?

Jean ValJean said...

BTW, for those who don't live in the great state of Confusion like me, here's a nice little article about Tom Leppert titled, "Lies my Mayor told me":

http://blogs.dallasobserver.com/unfairpark/2007/10/lies_my_mayor_told_me.php

Winston said...

Congratulations, you have correctly parsed the LAO's language. However, a 10 or 15% cut probably isn't the best option. CA needs to cut its social services budget more deeply and take more for education - especially higher education where any cuts can be made up for by tuition increases. Also, its time to bring back the car tax.

Funny Circus Bears said...

I have numerous family members making $200k per year as CA prison system employees (CCPOA members). Two are married, making a family income of $400k as state employees.

That $100k retirement followed by immediate retention as a $100k "consultant" is damn good work if you can get it.

Rob Dawg said...

Winston,
The California Constitution specifically forbids charging tuition.

FCB,
A local police chief is a triple dipper but the Prison Guard scam is legendary.

Akubi said...

@Winston
Also, its time to bring back the car tax.
I agree (but I doubt Dawg does)!

Winston said...

The California Constitution specifically forbids charging tuition.
Which is why tuition at the UC, CSU and community colleges is called "registration fees," which are allowed under the constitution. They were around $1800/quarter when I was at a UC and are doubtless higher now.

Peripheral Visionary said...

Across the board is the only way to cut spending, any time you start talking "focused cuts" you get into an endless legislative battle over what services are "essential."

Although if you can't agree on a budget, nobody gets paid, which is one way to cut those out-of-control prison guard salaries. So maybe there is something to be said for pushing for "focused cuts."

And I am all for auto taxes, which are a very nice progressive tax. Home mortgage deductability, not so sure, but ironing out inconsistencies in the property tax, like Prop 13, would help close the funding gap. Anytime you're looking to raise taxes, I think the first place you should look are asset taxes, which are fundamentally progressive, as opposed to income taxes or sales taxes, which are fundamentally regressive.

Winston said...

On excessive benefits, one of my relatives is a Santa Claus (oops, Santa Clara) county firefighter and makes just north of $200k per year because of all his overtime (he still sleeps at the firehouse despite his job being primarily paperwork based because he is paid overtime for sleeping there).

Ogg the Caveman said...

For those of us not from CA, what exactly is a car tax?

Peripheral Visionary said...

VA, and I suspect DC and MD, also have the car tax. It is an annual tax based on the value of the car; property tax, but for cars. VA has a minimum cutoff, where cars below a certain value are exempt, so I never paid it on my old 10+ year old compact. Not sure what the tax rate is, but I would guess somewhere in the range of 1% to 5% of blue book value.

CA natives can elaborate on their own version of it, and I suspect other states have similar measures.

Winston said...

Ogg,

The car tax or Vehicle License Fee essentially a 2% property tax on the value of your car*. It drastically reduced in 1998 when the state was flush with cash. In 2002, when the state was facing a $38 billion deficit, gov Davis tried to bring it back to its pre-1998 level which triggered his recall and replacement with Ahnold who issued bonds to cover the deficit instead. Bringing back the VLF would raise about $4 billion dollars, which would be a big deficit reduction.

*Strictly speaking it is based on the original purchase price and a standardized depreciation formula which means that you don't have to have the value of your car assessed every year.

Winston said...

Oh, yeah, California's stops taxing cars that are 11 years old or older, so it is similar to VA's car tax in that regard.

rogersmith8080 said...

The car tax is basically your Car Registration. When you register your car you pay it, like the peripheral visionary said it is based on the purchase price of the car and each year it goes down a little. I do not know the percentage, I just know my $18,000 car cost me more $300 for registration.

Last time they increased it they tripled it, then we recalled are Governor and it was removed. Since we are in just as bad of shape it would be at least a double if not tripling.

Also we have to have proof of insurance when you register your car in California which runs about $100~$200 for most. Then you also have to smog your car every two years(new cars have 4~6 year grace period) which runs about $30~$80 depending on if you have a smog only test place. Then if you fail you may have to pay $300 to fix it then another $30~$80 to get another smog check.

The other option is what the Illegals and white trash do is you steal someone else's plates that are registered or you peal off the Registration sticker from a plate. That way you can drive around without a license, without a registered car, with no insurance in a car that is 15~20 years old that can't pass smog.

In most parts of L.A. 50% or more of the drivers are doing the later.

Rob Dawg said...

Akubi said...
@Winston
Also, its time to bring back the car tax.
I agree (but I doubt Dawg does)!


Half and half. I'm all for taxing initial purchases and use and consumption. I don't even mind moderate over taxation for other purposes and even some small amount of disincentive taxation. We have all that already. The gas tax needs to go up 5¢ per gallon but you won't hear that being proposed because it doesn't help the California budget just roads and transit improvement.

Rob Dawg said...

In most parts of L.A. 50% or more of the drivers are doing the later.

I'll dig up the study that found Census Blocks in parts of Los Angeles that had 90% non-compliance with license, insurance or registration or in some combination.

Tach said...

I'm totally in favor of removing the ability to deduct mortgage interest from income taxes. It basically amounts to a subsidy by renters for owners, while preventing renters from building up the equity to become owners.

Property Flopper said...

Mortgage interest is becoming a self-correcting problem. In order to be able to afford to buy a home, you have to make enough that you hit the Alternative Minimum Tax... and your interest deduction goes away.

And no, I'm not bitter about the AMT, not at all... grumble!

Rob Dawg said...

Tach,
Renters pay property taxes and benefit from the mortgage interest deduction. Really. Think about it. Do you honestly think a rise in operating costs for landlords would not eventually show up in rent increases?

Rob Dawg said...

Tach,
Renters pay property taxes and benefit from the mortgage interest deduction. Really. Think about it. Do you honestly think a rise in operating costs for landlords would not eventually show up in rent increases?

Ogg the Caveman said...

Does the mortgage interest deduction apply to investment properties?

w said...

Elizabeth Hill is part of the problem but she sure did not put that in her report. She makes $170,000 a year. That puts her in the top 3-4% of all incomes. If she has a spouse who works then they are probably in the top 1% of household incomes. When she retires (probably before age 65) she will still be earning 6 figures for the rest of her life. She does not seem to see the budget implications of this however.

Property Flopper said...

Ogg -

Yes and no. You only get the mortgage interest deduction on your primary residence (and in some instances a vacation home).

If it is a full time rental, you can deduct the interest as a business expense and write it off against the income generated by the property.

Akubi said...

Ogg -

Yes and no. You only get the mortgage interest deduction on your primary residence (and in some instances a vacation home).


But if your primary residence happens to be a unit in a 4-plex and you're renting out the other 3 units you can deduct that.

Lou Minatti said...

I have numerous family members making $200k per year as CA prison system employees (CCPOA members). Two are married, making a family income of $400k as state employees.

That $100k retirement followed by immediate retention as a $100k "consultant" is damn good work if you can get it.


They won't be making that kind of scratch for long. I am amazed at the bullshit California taxpayers will put up with. Sounds to me like California is flush with cash, even now. Your government simply doesn't control spending.

Akubi said...

BTW Luba wants YOU to save the wolves from Dick Cheney's sick mind and Admin.

Sun said...

Foreclosure Auctioneer's Lonely Task

"I don't know if people are afraid, or if they're not sure if we've hit bottom"

or maybe they know the music has stopped....

http://www.washingtonpost.com/wp-dyn/content/article/2008/02/21/AR2008022102790.html?hpid=topnews

schizoid said...

Simple solution: tax unions

Tach said...

Rob, maybe you're correct on the mortgage interest deduction, but the flip side of it is that if the deduction went away, prices would fall, maybe back to reasonable levels.

The deduction artificially raises the bar for non-owners to build the equity to buy.

Rob Dawg said...

HMID or no, I'm neutral except for one bit. People made long term financial commitments to this State on the basis of the current tax law. Phase it in over 15 years so as not to blindside current deductors and fine, that's a policy change but it doesn't raise any money. This is all about casting about looking for money with complete disregard to policy issues.