We Couldn't Afford it Before... How can we Now?

California's government has been generous to the poor. So generous, in fact, that being poor isn't stigmatized as much anymore unless one is also homeless, because being poor doesn't limit one's ability to still be able to live a full life. The enabling of the poor to continue to be so stifles their initiative because there is no need to be productive when the government will provide for you. That's another story, though.

California's government has also allowed for those who are poor to be able to be provided for as if they were not so. Providing preventative health care for those who can't otherwise afford it through their means alone is all well and good, if they are poor but working. Subsidizing health insurance for those who CHOOSE to obtain preventative medicine is noble, but mandating that every citizen obtain preventative medical insurance, fining those who CHOOSE not to, taxing federally those who CHOOSE to provide more for themselves and their families because they have the means to do so, and increasing the fiscal burden for the states that have chosen to do the "right thing" all along is not only wrong, it will have a very hard time standing up to Constitutional scrutiny.

This brings me to the core of this post. Today's SJ Mercury News contains an article  detailing some very good points concerning the costs to the State should the rumored contents of the current bills in Congress pass. California can barely afford to maintain its current fiscal load for health care under Medi-Cal. If the State's projected budget deficit grows past the $20B the budget offices have published for 2011-2012 California won't be able to afford the increased burden the Federal government is looking to impose on ALL of the states. One thing that isn't being very well covered by the mass majority of the media outlets is that the Federal solution (read: swatting a fly with a shotgun) is to build up funding for the intended reform by taxing first, spending later. This translates into increased taxes for individuals, businesses who provided their employees' health insurance, and the states NOW, without benefits enacted by the reform coming into effect until 2013. If California is forced to pay now for services that aren't to be rendered until after California's coffers run out there won't be services to render!

Sounds like fun, huh?

Beer Me!

As seen in today's San Jose Mercury News, a California initiative having been attempted on several fronts, and supported by an overwhelming majority of the State's voters, would impose a tax on the sale of alcoholic beverages on a volume basis. Basically, the proponents of this tax are looking at a per "drink" tax of up to $0.10, so a 12oz beer, a 6oz glass of wine or a single shot of 40 proof liquor would cost $0.10 more after the imposition. That is, of course, if its allowed to pass.

So how could a tax increase that is supposedly supported by 85% of the voters in California and attempted by the Governator himself not be part of our beloved laws here? Well, the answer lies in the ability for the Liquor Lobby to buy off opposing votes to this sort of legislation. Basically, the initiatives akin to this that have been introduced in the past have fallen on their sword before they even made it to committee due to assembly members in Sacramento not being willing to vote for it because the business partners they have in the Liquor Lobby oppose it. Neat, huh?

Now, I don't know much more than what was in the article, but it would seem to me to be a beneficial tax increase. I'm conservative to the bone, but I also know the toll alcohol abuse takes on those who are directly and indirectly affected by it. If legislation was put in place that forced revenue generated by a tax of this sort to be spent ONLY on programs that directly benefit those affected by alcohol abuse then I would support it.  I should also note that after a decade of being an avid beer and scotch connoisseur I have quit drinking. I guess my opinion on this subject should count, taking this into consideration, but having spent the majority of my adult life as a sailor, with the drunken stigma that is associated with that lifestyle, a tax of this sort has been felt by me as it exists in other states and in the other countries I've visited, and it wasn't a deterrent to my partaking of the drink. Take that as you will.

Unfortunately, with California's representatives being who they are morally, that won't happen. They'll dip into every dollar that hits the coffers because they don't see a reason to segregate pots of money based on the laws that created them. Its all the same money, right?

Trains, Busses and Budget Mobiles

The SF Bay Area transit authorities are having a huge problem. The poor economy has forced riders to cut back on their transit budgets. That, coupled with poor budget policy by the powers that be in Sacramento, where a huge portion of the State's various transit authorities get their revenue, has caused what amounts to an economic emergency for the Bay Area.

Ridership is down, cuts have been made to service and prices have been increased to improve the bottom lines, but revenue projections are still in the tank. This was all reported as front page Sunday Paper news in the San Jose Mercury News today. They eloquently worded the situation as the search for the Answer, with a capital "A".

The answer is to cut prices and service together. Ridership will improve when people realize their commute would be cheaper than by driving. Currently, ridership is being lost to driving because people are finding that the basic single stop fee for any transit system in the Bay Area is just too expensive. If you increase the cost of something to the point where your competition is less expensive you lose to them, which is exactly what's being described as happening in this case. What the transit authorities need to do is reduce their operating costs by reducing service, and then reduce their prices to lure customers back to their trains. Unfortunately, this is California. Because ridership is a given in the revenue predictions they use to figure their future budgets they will never understand that if you increase the cost to the customer the customer will invariably find a new way of doing things. This is doubly true when you're talking about people who have a ready alternative available. In their prediction methods reality should allow for the assumed DECREASE in ridership with any given increase in pricing. The hard nut here is that the typical transit authority executive is going to be a California Liberal (YES! THIS IS POLITICAL!), so an increase in price is exactly the same as an increase in taxes. People will find another way to do business, or leave. End of story.

I hope this won't be the end of story for the Bay Area Mass Transit System. I use it regularly because at this point it is cheaper than my commute, and also because my usage is subsidized to encourage my usage. I know you can't subsidize general ridership, but increasing their prices as an alternative is not the answer.

Where's My Money?... Going?

So California's budget woes aren't going away any time soon. They're looking at another $20B shortfall in projected tax revenue vs. expenditures in the upcoming two years (2010 and 2011). The neat part is that when the Governator tries to make cuts on his own the legislature tells him no. When he asks them to make cuts they tell him no. So the answer of our wonderful elected officials is to continue to spend more money than the State has.
My first thought would be to remove from employment those who aren't performing up to par, regardless of tenure. I know the SEIU won't allow for that, but I think having the State government take a leadership stand instead of caving to a union would set the stage for some pretty good, sweeping changes in how things work here in California.
Eliminating employment waste alongside cutting spending on programs we don't need would be good starts. The problem is, the programs we don't need most often end up being handouts to an uneducated voting public who have found they can vote for the representative who will give them the most benefits for the least amount of work. Since this majority often has little to no tax liability it makes no difference to them; that is until the program they rely on runs out of money because the State that runs that program has as well.

An Education in Economics Seems to be Lacking

"State needs more tax revenue - Steve Poizner's plan (Page 1B, Jan. 6) sounds more like a 1990s AT&T commercial, which is old, useless and lousy. I guess it doesn't cost money to run the state of California, so we will just cut taxes and go further into debt. I never understood the reason why we cut taxes when everything is constantly going up. Ignorance is bliss.

Michael McWalters

Alviso"

The above, quoted text, was taken directly from the 07JAN10 edition of the San Jose Mercury News Reader's Opinion section. The major issue I have about this, other than the fact that this genius doesn't mention cost controls to mitigate the costs involved with running the State of California, is this reader's complete lack of knowledge where it pertains to economics.

As proven during the Presidency of Ronald Regan, a dramatic reduction of taxation has an inversely proportional increase in tax revenue. This is an economic function that has been proven time and again. Economics is the science of economy; basically the science of commerce, government or otherwise. This basic principal is the cornerstone of sound public governance where the governing body functions solely through the generation of tax revenue. A zero tax rate results in zero tax revenue. A moderate tax rate resulting in maximum benefit for the governing body would be somewhere around 8.5% of one's gross annual  income (in an income taxed system, i.e.: ours). The point of diminishing returns as it pertains to the tax rate is directly proportional to the economy's ability to function in a market based environment (i.e.: ours).

Basically, if you tax the hell out of people they invariably spend less because after they receive their paychecks they HAVE less. Directly related to this is the effect of a public with less disposable income driving less commerce. If, alongside the public, you tax businesses heavily they have less capital after their revenue is calculated. For businesses like Apple, where profit is almost a foregone conclusion, the decreased revenue means lower stakeholder profit. Apple will mitigate this lower profit by trimming back their payroll, as payroll is typically the single highest expense any company has, and is typically the easiest to immediately reduce.

Lets carry these thoughts out to their final outcome. Taxing people decreases their purchasing power, removing them from the market. Taxing businesses decreases people's employment, removing them from the tax base, thus reducing the businesses' revenues, thus also reducing the tax base. The long and the short of it is that an increase in taxation is a deterrent to participation in the open market, resulting in reduced tax revenue. Unfortunately, Liberals have never learned this basic principal of economics. Unfortunately for California, they never will. The only way to get California back on track is the reduce spending and taxes in order to keep people from deciding places like Nevada, Arizona and Texas are more desirable places to make a living.

UPDATE - 1008100841 - The link to the news article by Mr. McWalters is broken due to either the SJ Mercury News removing the article, or putting up a PayWall to keep those who don't pay for their recycled news away from it. Also, Mr. McWalters managed to find himself online. Check out the comments to see what I mean!