December 27, 2007

Assembly Report

Alternative to slashing essential programs

By Assemblymember Jim Beall
Special to the Times

California’s projected $10 billion budget deficit threatens to shred the safety net for the state’s poorest and neediest citizens and their children.

But there is an alternative to closing this shortfall without slashing the essential programs that help foster care kids or connect the unemployed to jobs: Scouring the books for frivolous tax breaks and eliminating them.

California allows about $17 billion in tax breaks, according to a report by the California Tax Reform Association, a nonprofit organization dedicated to a fair and equitable tax system. Some of these breaks have long lost their usefulness and warrant re-evaluation.

By eliminating these loopholes, the state can in-crease revenue with-out raising the in-come or sales taxes. For example, the state loses:

About $50 million annually be-cause there is no sales tax levied on the purchases of luxury yachts.
At least $3 billion to $4 billion a year because non-residential properties -- unlike homes -- are not periodically reassessed.

At least $1 billion annually in corporate income tax because many major companies based in California have transferred ownership of pa-tents and trademarks to subsid-iaries located in other states that do not tax royalties or similar types of income.

About $40 million in tax breaks to oil companies.

The deficit is the product of an antiquated and volatile revenue system that relies too heavily on income and sales taxes. And so, slumps in the economy have a magnified affect on the state’s coffers.

Lower than expected property tax revenues, a weak real estate market, adverse lawsuit verdicts, and disasters -- such as the devastating southern California fires -- have wiped out a $4.1 billion reserve.

In the midst of this financial crisis, some in Sacramento want to cut back on programs for the elderly, children, people with disabilities and the poor. However, some of these vital programs already have been trimmed.

The state has delayed or suspended cost-of-living increases for Social Security supplements and welfare. The number of people enrolled for public assistance has dropped 50 percent in the last decade while the state grew.

Next month, Gov. Arnold Schwarzenegger is expected to declare a “fiscal emergency’’ and invoke a provision to force the Assembly and Senate to act on his proposed mid-year budget cuts within a 45-day period. The governor’s across-the-board cuts, if enacted wholesale, will drastically affect our most vulnerable neighbors.

Placing the brunt of the budgets cuts on the most defenseless members of society is harmful and short-sighted. There must be a cooperative, bi-partisan effort in the Legislature to draft a balanced budget that protects all Californians.

We must examine eliminating tax breaks that serve no purpose to Californians other than enriching those who have much at the expense of those who have so little.