My favorite economist, Paul Krugman, has called on the nation to pay heed to the debate over California’s worsening budget crisis. Since Saturday, lawmakers have struggled to find the required two-thirds vote needed to pass the tax increases included as part of a proposed plan to close the gap in the budget for the remainder of the current and upcoming budget years. The package under consideration includes deep spending cuts and a measure that, if approved by the voters, would sharply limit future spending. The package also includes massive corporate tax reductions that, when fully implemented, will reduce state revenue collections by more than $1.5 billion.
This change, while the most costly, is only one of several “sweeteners” added with the goal of rounding up the votes necessary to ensure passage of the total package. Others include a tax credit for homebuyers that is restricted to never-before-occupied residences, leading some to christen it the “developer bailout” bill. Other provisions would eliminate large commercial vehicles from the increase in Vehicle License Fees (VLF), while another would allow rental car companies to pass on the cost of the higher VLF directly to consumers as an “add on” on top of advertised rental rates.
If this year’s budget negotiations don’t increase public support for reducing the vote requirement for approval of a budget and tax increases, it is not clear what will.
— Jean Ross