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Jewish World Review Sept. 11, 2003/ 14 Elul, 5763

Larry Elder

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Consumer Reports

Let the other 49 states beware

http://www.NewsAndOpinion.com | Is the California gubernatorial recall election, Oct. 7, an expression of outraged, tax-weary California residents? This remains the bottom-line question.

Yes, California voters expressed outrage at the tripling of the car tax, a primary reason that voters signed petitions forcing a recall election. So far, so good.

But consider California's plight during the five-year tenure of the state's incumbent and now-threatened Governor Gray Davis. During the so-called energy crisis, rather than support legislation for true deregulation, which would have resulted in -- at least temporarily -- sticker shock for tax-weary consumers, he dipped into the state's fund and spent billions of dollars purchasing power to prevent Californians from facing higher energy prices. Eventually, despite the governor's promises otherwise, Californians did, indeed, pay more energy prices, but the governor's spending cushioned the increases, while simply deferring the bill in other direct and indirect ways.

Meanwhile, the legislature doubled and tripled Workers' Compensation taxes, passed the paid Family and Medical Leave Act, and continued spending well above the state's growth rate plus inflation.

After Davis' five years in office, Californians face a budget deficit of nearly $40 billion. Are Californians upset about taxpayer-funded programs that should not be paid for by taxpayers, or are Californians simply upset that the state treasury lacks the funds for the programs that they, indeed, do support?

For example, even now, the California legislature debates a bill mandating that all employers, with as few as 20 workers, who don't already offer health care insurance, must now do so. Davis intends to sign it. And Lieutenant Governor Cruz Bustamante, the only name Democrat on the "replacement" part of the ballot, recently outlined his tax-and-spend economic plan to "save California." It includes increases in state income taxes on the so-called "rich," the top 4 percent of taxpayers. As for the car tax, Bustamante intends to repeal it, but only up to a car valued at $20,000 or less. He also wants to slap a $1.50 sales tax on cigarettes.

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Does Governor Gray Davis now repent the spending? Please. At a recent "debate" (he sat on a stage where reporters and regular citizens asked questions), he vaguely conceded "mistakes," but then defended increases in education and health care. He then incredibly charged that Republicans "would rather shoot their mothers than raise taxes."

At 9.3 percent, California's state income tax is the country's second highest. At 7.25 percent sales tax, which counties can add on to, California ranks as the nation's highest state sales tax.

Libertarian think tank CATO rated the governor's performance an "F": "It is in the context of the current state fiscal crisis that we release the results of our sixth biennial fiscal report card on the governors," wrote Stephen Moore and Stephen Slivinski.

"Governors that have cut taxes and spending the most receive the highest grades. Those that have raised taxes and spending the most get the worst grades. . . . F grades were assigned to the four most fiscally reckless governors: Don Sundquist of Tennessee, Gray Davis of California, Bob Taft of Ohio, and John Kitzhaber of Oregon."

The recall election, many say, reflects Californians' disgust with high taxes. Yet registered Democrats in California outrank Republicans 45 to 35 percent. In fact, Democrats have outnumbered GOP voters by a 10-point margin and a million-plus votes for two decades. Meanwhile, the spending increased.

Employers now leave the state in droves, taking jobs with them. Investor's Business Daily states, "The latest economic disaster, the soaring costs of the state's workers' compensation insurance, has been less visible on the public's outrage screen than some others, but it may prove to be the worst of all. Take the case of Mitchell Greif, who owns a Southern California factory that employs 150 workers and makes plastic bags. . . . (Greif's) required premiums for workers' compensation insurance have soared from $255,000 in 2001 to $570,000 this year. If he stays put, they'll hit $700,000. But he's not staying put. He's pulling up stakes and moving his whole operation to Las Vegas. Two-thirds of his workers have agreed to go with him, and a few are already there."

On education, according to Lance Izumi of the Pacific Research Institute, the state spends annually, per pupil, nearly $9,200, which includes "all state expenditures, including lottery funding, federal dollars, and other local funds." For Medi-Cal (California's version of Medicare), the state spends over $2.5 billion annually, with experts saying that fraud accounts for nearly 10 percent.

All Republican gubernatorial "replacement" candidates promise, with varying degrees of certainty, to hold the line on taxes. Yet none of them, save State Senator Tom McClintock, called for a decrease in taxes, coupled with substantial cuts in spending.

California, if nothing else, shows what happens when voters put free-lunch Democrats in charge. Let the other 49 states beware.

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JWR contributor Larry Elder is the author of, most recently, "Showdown: Confronting Bias, Lies and the Special Interests That Divide America." (Proceeds from sales help fund JWR) Let him know what you think of his column by clicking here.

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