Mar 1, 2004
California Governor Arnold Schwarzenegger, with the full support of most top Democrats, has been campaigning for two propositions on the March 2 ballot that would allow the already heavily indebted state government to borrow 15 billion dollars more – while promising to set spending caps for the future. It's either that, these politicians say, or face immediate and catastrophic budget cuts.
In fact, that is not a choice. For whether the bond passes or not, the state has already planned to make budget cuts in vital social programs and has set ever more state taxes and fees on ordinary people.
There are other choices – requiring, for example, that the wealthiest one% of the state population, with an annual income of over half a million dollars, simply pay the same percentage of their incomes in taxes as do working people. This still wouldn't be fair, of course, but it could eliminate the budget crisis, the deficit, the cuts in social programs and the tax and fee increases – in one blow.
The politicians always claim that the wealthy pay too much in taxes. But the opposite is true. The rate at which the wealthiest one% pay state and local taxes works is actually much lower than anyone else's, lower than any other tax bracket. Their tax rate is even much lower compared to the working poor. Estimates are that the working poor, those who earn less than $18,000 a year, pay 11.3% of their income in state and local taxes, while the richest one% pay only 7.2% of their income in state and local taxes.
And that is just on the state and local level. This year the federal government is handing the wealthiest Californians a tax cut of 13 billion dollars. That comes to $68,000 in tax cuts per person.
So this opens up more possibilities for a supposedly cash-strapped state. California could close its deficit this year and next by simply taking the tax cut that the federal government is giving the wealthy.
Will this happen? Not unless the working class majority begins to flex its muscles.