While the September 2008 and February 2009 state budget agreements cut billions of dollars from state public services, they also included changes to corporate tax rules that will net millions of dollars in tax breaks for some California businesses. A report from the California Budget Project explains how the changes — elective single sales factor apportionment, tax credit sharing, and net operating loss carrybacks — will cost the state $8.7 billion in lost revenues between 2008-09 and 2015-16. The companies that will profit from the changes are some of California’s largest — 80 percent of the benefits will go to companies with gross receipts in excess of $1 billion.
Looking at trends in employment, income, consumer spending, and housing, California Forward predicts that the state’s budget crisis will be longer and more difficult than generally anticipated. Forecasting a drop of 11% over the next two years in the state’s three major revenue sources (sales and use taxes, income taxes, and corporate taxes), the authors argue that more serious, systemic reforms are necessary to prevent further fiscal turbulence.
… or perchance to cut. Though Arnold Schwarzenegger isn’t a natural to play Hamlet, the current state (country, world) economic downturn puts him in an existential budget crisis. A new report from the California Budget Project suggests that raising taxes on those with high incomes is better than cutting state expenditures.
A recent Field Poll shows that most Californian registered voters prefer that the state budget deficit be solved with spending cuts rather than tax increases. 63% prefer spending cuts; 26% prefer tax increases. But the poll points out that no matter how voters feel about tax increases, 81% feel that taxes will eventually have to be increased to deal with the budget deficit.
Yet another in a series of year-end Field Polls indicates that registered California voters view the looming $14-15 billion state budget deficit as either a “very serious” (58%) or a “somewhat serious” (32%) problem. A slightly larger ratio of Democrats than republicans view the deficit as a “very serious problem,” and a slightly larger ratio of Republicans than Democrats see it as a “somewhat serious” problem, although a majority of registered voters in both parties see it as a “very serious” problem.
When asked whether taxes will ultimately need to be raised to help resolve the budget deficit, those in favor of and opposed to taxes tend to split on party lines, with 54-37% of Democrats and voters not identifying with any major party expressing the view that taxes will have to be raised. Republican voters by a margin of 55-36% express the view that taxes will not have to be raised.
Another question asked whether Californians think that existing taxes are too high. 29% think that taxes are “much too high,” and 28% think that they are “somewhat high.” The ratio of voters saying that taxes are “much too high” has tended within the range of 28-32% over most of the last 15 years; the last time that the ratio was over 32% was in 1991, when 38% said that they thought that taxes were “much too high.”
The governor’s approval ratings continue to be high, with 60% of voters saying that they approve of his performance and 31% saying that they disapprove. Although Democrats approve of Schwarzenegger’s performance less than Republicans, a majority of 55% of Democrats nonetheless approves. Schwarzenegger’s approval ratings have been more or less on the upswing since April 2006, when his approval was at 39%. (His lowest approval rating was in August 2005, when the number approving was 36%). The governor’s current approval rating is four points higher than when the question was last asked in October.