Let's
talk TAXES
According to a May 10, 2019
Associated Press news item, Governor Gavin Newsom has increased his budget from
the original spending plan of $208.5 Billion to $213 Billion.
He is proposing - among other things
- to add $150 million more in grants to communities to help the homeless, $40
million to public colleges and an additional $20 million to help renters facing
eviction. He is also suggesting our
State should tax drinking water and increase taxes for the State 911
system.
Frankly, I don't get it. California is already ranked tenth highest
when comparing the tax burden with other states. We have an estimated $21.5 billion surplus,
so why is anyone suggesting a "water tax?"
According to a Sacramento Bee
article written by Dale Kasler June 18, 2018, it was Senator Bill Monning who
introduced SB 623 (in 2017) which would impose a .95 cent tax on California
water users ($11.40 per year) to correct approximately 360,000 residents who
are served by water systems that violate State law. This bill did not get out of legislature.
The vast majority of California's
39-million-plus residents have access to safe drinking water so why should the
entire state pick up the tab for this small percentage of water users when
alternative funding solutions exist and the state has a huge budget surplus?
Much like Gov. Jerry Brown, Newsom
continues the argument that a "rainy day" fund is necessary and plans to add
$16.5 billion to that fund as well as starting the new "education reserve fund"
with an opening balance of $400 million.
Why put any more money in this
so-called "rainy day" fund, when California has approximately $83 billion of General Fund-supported bonds on
which it is paying $6 billion in annual principal and interest. In addition, the voters and the Legislature
have approved another $39 billion of General Fund-supported bonds that have not
yet been sold.
Add to this
the four voter approved bond measures which appeared on the November 6, 2018
Ballot. Together,
these measures would authorize the state to borrow an additional $14.4
billion. It will cost approximately $26
billion (including interest over a period of 40 years) to pay off these new
bond measures with annual general fund payments of $650 million.
It does not
take a financial genius to recognize that borrowed money costs far more than a
direct payment of cash . . . and yet, this State persists in putting cash in a
rainy day fund that does not offer anywhere near the interest income that the
State is paying out (well over $6 billion per year) in principal and interest
on these bonds.
It is well
established that California suffers from periodic recessions as does every
State in the Union. It would appear to
me that if California did not have a huge debt obligation amounting to
$billions in annual payments, another recession might be a bit easier to
handle.
Piper's Papers