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Home Articles The Partisan Partisan Number 27 The Schwarzenegger-Democratic Budget Deal

The Schwarzenegger-Democratic Budget Deal

by Marsha Feinland

Supporters of Propositions 1A—1F are telling us that if we defeat these measures we will unravel the budget deal. That sounds like another good reason to vote NO.

Governor Schwarzenegger signed the final budget deal February 20, 2009. It includes $14.9 billion in spending cuts and $12.5 billion in new taxes. The governor and the legislature tell us this is necessary because the state does not have enough money. They do not explain how $2.5 billion in corporate tax breaks will help balance the budget.

Taxing the poor more

Two of the tax increases in the budget package are particularly regressive. The first, a 1% sales tax rise, went into effect April 1. Sales taxes hit the poorest people the hardest because they spend most of their income on the basic necessities of life. They do not have money left over for buying stocks and bonds, which are not taxed. The sales tax increase is temporary. It will expire on June 30, 2012 if Prop 1A passes. If we turn down Prop 1A, the sales tax increase will stop a year earlier.

The second of the very regressive tax increases is an enormous reduction in the state income tax exemption credit for children. For the 2008 tax year most people got a $99 credit for themselves and $99 for a spouse, if filing jointly. They got a $309 credit for each dependent child. This $309 per child credit is one thing which makes California's tax system more progressive, because people who work to support their children pay less in taxes.

The budget deal lowers the child tax exemption credit to the same amount as the adult credit—for most people, that is $210 less per child.

It is important to remember that this is a tax credit and not simply a deduction. This means that all taxpayers, regardless of income, get the same benefit, unlike deductions which are more valuable to those in higher tax brackets. This piece of thievery starts with our 2009 taxes and lasts for four years—unless we defeat Prop 1A. Then it will end after two years.

The third tax increase is an additional 1/4% raise in the personal income tax for every tax bracket. It would be more progressive to raise the tax rate on the higher tax brackets and lower it for lower incomes. The higher state income tax rates start in 2009 and end after 2012, or after 2010 if we beat Prop 1A.

The fourth and final tax increase is a raise in the vehicle license fee from 0.65 percent to 1.15 percent. This is the same fee Schwarzenegger made such a big deal about lowering when he first ran for governor. The higher rates will last for four years if Prop 1A passes and for two years if it fails.

Cutting the bone

California's students will suffer the most from the budget deal. Kindergarten through twelfth grade schools, community colleges, the California State University system, and the University of California are all getting cut. The state is even taking away $100 million earmarked for emergency repairs to schools in low-income minority areas. These repairs were mandated by a court settlement because the schools were so much more dilapidated than other schools that serve wealthier children.

California's neediest residents will also be hit hard. Seniors and blind and disabled people will not receive the cost of living increases that the Federal government sends to the state for the SSI/SSP program. Medi-Cal benefits and Cal WORKS grants will be cut. Local governments will receive less money for public transportation.

The budget deal transfers money from mental health and child health programs to the general fund. Since these are programs that the voters mandated in the past, the legislature put propositions 1D and 1E on the ballot.

The rich get tax breaks

While most people suffer, the governor and the legislature are helping out a few of their friends. There will be $100 million per year for five years for television and movie producers. People who buy brand new houses can get a $10,000 tax credit. There will be $400 million for businesses that increase employment, even though in the past such programs have not increased the number of jobs. And multi-state corporations will be able to choose a method to pay less of their income taxes to California, resulting in a $1.5 billion loss in revenue every year.

The best way to show the governor and the legislature that we don't like their budget deal is to vote NO on all the propositions on May 19. Then we need to build a party that really represents working class people. Register into the Peace and Freedom Party and contact us to find out how to get involved.

Marsha Feinland is State Treasurer of Peace and Freedom Party and a former State Chair of the party.
 
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