How Much Will the State Budget Deal Cost Californians?

In an attempt to address its budget deficit estimated at $42 billion, California recently enacted a budget deal consisting of significant tax increases, spending cuts, and, of course, more borrowing. The plan includes nearly $13 billion in new taxes over two years. Several budget-related measures will also appear on the ballot in a special election to be held in May. Perhaps the most controversial of the measures would impose a spending cap, but only if voters agree to extend the tax increases to four years.

If you’re a California taxpayer and you’re wondering how much of this new new tax burden will fall on you, check out the tax calculator devised by the Sacramento Bee. Simply enter your marital status, annual household income, how much your car(s) is/are worth, and how many dependent children you have and the calculator will determine how much more you will owe the Golden State through additional sales taxes, income taxes, and vehicle license fees (VLF), as well as how much you will lose in dependent tax credits.

California state government has a long-standing addiction to spending. As I noted in my recent policy brief on California’s spending problem, over the past three gubernatorial administrations—spanning an 18-year period and covering the administrations of Arnold Schwarzenegger, Gray Davis, and Pete Wilson—if the state had simply held spending growth to the increase in population plus inflation since FY 1990-91, instead of having to plug a $42 billion budget hole California would be sitting on a $15 billion surplus today. That’s a $57 billion difference.

A true spending and revenue limit is definitely needed in California (we briefly had a decent limit in the form of the Gann Spending Limit, but that was gutted back in 1990 and has not been effective since), but not with the poison pill of additional taxes. The state already has some of the highest taxes and one of the worst business climates in the nation. More taxes will only drive even more people and businesses from the state, which is already suffering from an unemployment rate of 10.1%.