Schwarzenegger’s Newfound Fiscal Conservatism

Full article (here).

The Golden State can’t seem to catch a break these days, with a budget deficit that widens by the hour, factory closings, declining exports, state-issued IOUs, and restive labor unions seeking to reinstate higher taxes for California’s beleaguered businesses.

When my last HUMAN EVENTS column appeared in June, California’s deficit was $24.3 billion. Now, three weeks later, it’s $26.3 billion. It may likely be $27.3 billion as State Controller John Chiang (D.) has reported that June personal income taxes were $987 million below Gov. Arnold Schwarzenegger’s May estimates with sales taxes down $154 million. California gets about half of its general fund revenue from income taxes, having the second-highest personal income tax rates in the U.S. after Maryland recently raised theirs to eclipse California in at least one category of economic stupidity. California increased its highest-in-the-nation state sales tax rate from a base of 7.25% to 8.25% beginning April 1, a 14% increase.

At last count, California was going into debt by about $25 million a day. In the fiscal year ended June 30, California went about $10.4 billion in the red.

Meanwhile, a coalition of government employee unions, led by the American Federation of State, County and Municipal Employees California (AFSCME) has filed paperwork to repeal $2.5 billion in tax breaks for business. These tax cuts were enacted to encourage economic activity as part of last February’s budget agreement that also saw the largest state tax increase in U.S. history. The public sector unions have long lobbied to hike taxes, including property taxes and taxes on crude oil production.

As if to signal enough is enough, the Toyota Motor Co. has announced it is preparing to close its New United Motor Manufacturing Inc. (NUMMI) plant and the 4,700 Bay Area jobs that go with it. NUMMI, a joint venture between Toyota and General Motors Corp., has been on shaky ground since GM decided it would back out of its end of the business as part of its bankruptcy reorganization. No doubt, California’s high energy, labor and tax costs, along with its uniquely crushing regulatory burden, played a role in Toyota’s decision.