NYT: The Sorry State of the States

[steven johnson]

California is suffering from a collapse in tax revenues partially brought on by the recession but also disastrous tax cutting and gridlock-inducing budget procedures. Schwartzenegger's proposed spending cuts could create as many problems as they solve. Time to stop living of the state credit cards and pay up.

OPINION
EDITORIAL

The Sorry State of the States

Published: May 24, 2009

Is California next in line for a bailout? Facing a $21 billion budget gap, California has asked for federal aid, probably in the range of $5 billion to $10 billion. Whatever form it might take, say loans or loan guarantees, taxpayers nationwide would be kicking in to help clean up California's mess.

What the Obama administration should make clear is that a bias for spending cuts - and against tax increases - is the wrong approach for California and other states.

Both spending cuts and tax increases are harmful in a downturn, because they reduce already weak consumer demand. But most states are required by law to balance their budgets, so when deficits emerge, they are forced to do one or the other, or both.

Contrary to conventional wisdom, raising taxes may be better than spending cuts because tax increases, especially if they are focused on wealthy taxpayers, have less of a negative impact on consumption.

Spending cuts hit consumption hard, depriving the economy of money that would otherwise be spent quickly. They also have the disadvantage - so evident in the cuts proposed by Mr. Schwarzenegger - of falling heavily on the needy.

The Sorry State of the States

[spag68]

1. California

Don't forget the rethugs and their cries about raising taxes and how it will drive everyone out of the state. Really!!! I can just see all those empty beach houses, can't you? I have an idea, every state, at the same time raise taxes on the top 10%. Where would they go, to another state? How about the myth that they will move out of the country. Really!!!Where would they go that is as safe and beautiful as California for them? Also make a special exit tax, anyone moving out has a surtax on all money moved from the country. Apply the same surtax on rich corporations that move to that PO box in the Caymans.These are all stupid arguments designed to distract everyone but the rich, who know better.I would be willing to give up my mortgage deduction and every other deduction I am entitled to if the just make the wealthy pay the same rate that I do. Every time I hear about that corporations here pay the highest tax rate in the world, I want to hurl. They don't tell you that is not the effective rate after their tax breaks, which is among the lowest in the world. I'm glad I'm retired, I just feel so bad for my child and all those who must pay for this crap long after I am gone.

[dgibby]

2. No federal bailout for any state that doesn't support civil rights for GLBT!