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California referenda and the tax dilemma

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Because California moved its presidential primary to February 5 only a few propositions could qualify in time to appear on the upcoming primary election ballot. One of these is Proposition 92, a constitutional amendment and statute affecting California Community Colleges.

Prop 92 will lower student fees in the community college system, will provide more funding than they now get, and provide an independent board of governors much as in the CSU and the UC systems. These changes make sense in terms of the growing community college system and its importance in California. Prop 92 would put an additional $300 million a year into the system for the immediate future while reducing student fee income by about $70 million per year. On balance these are sensible improvements.

Prop 92 also raises the usual problems and debates which voters must consider. The most difficult issue: while Prop 92 does not raise taxes it also does not identify new sources of revenue to fund the proposed changes. Without new sources of revenue the changes will be paid for from the present-day K--14 funding, taking money from the K--12 grades, or funds must come from the general fund – most likely competing with CSU and UC funding. So this is quite similar to what we call an unfunded mandate.

When a legislative body enacts a law requiring an individual or organization to carry out a specified action and provides no funds to do this we call it an unfunded mandate. Beginning in the 1970s unfunded mandates grew rapidly. In 1995 Congress passed, and President Clinton signed into law, the Unfunded Mandates Reform Act. This reform act has had some success although many ways have been found around it.

Unfunded mandates, user fees in lieu of taxes, and now the resurgence of toll roads rather than freeways are associated with the Boomers’ allergy to taxes. In the depression years the top bracket income tax rate (married couples) was 60 to 80 percent. During World War II this went to 88 to 94 percent. Top bracket rates remained at 82 to 91 percent until the mid-1960s when they began to decline, eventually to their present 35 percent.

Early-on the Boomer generation was frequently called the “Me generation.” Tom Wolfe called them the “Splurge generation.” But “Boomer” had a cachet that fit better with merchandizing. And the Boomer generation became the greatest consumers of all times. They devalued public investment and the taxes to support public investment. In the past seven years even the public investments necessary to wage war and defend the country have been satisfied only by borrowing on a massive scale – handing the bill on to the unborn.

President Eisenhower began the program that produced our magnificent interstate highway system. It was paid for by taxes. No one complained and no one wanted it to be paid for as a network of privately-run toll roads. This and other public investments in infrastructure contributed to the economic engine that produced a middle-class America that became the envy of the world. Such infrastructure investments are impossible today and it’s not because we are a poor nation.

Infrastructure improvements, whether they be roads and bridges or community college upgrading, are increasingly rare due to political mantras that have been sanctified into quasi-religious tenets. A politician who suggests that some tax increase would provide a more responsible source of funding than borrowing from China for our public needs is cast into political perdition. President George H. W. Bush was put out of office for the heresy of raising taxes. Where are the constituents who would support the candidate who suggests tax increases? They are not much in evidence. But they might be found if political leaders could show that public investments are to the benefit of all. This, in turn, would call for the kind of candidates for public office who would give the voter credit for having good sense.

As retirement approaches for the Boomers they have developed new interests in public investments, particularly social security and health care. But will the “Me generation” attitudes continue with the next generation? Certainly the consumerism will continue but the looming economic downturn may change the balance of views on the worth of public investments versus the present mantra of “the only good tax is a dead tax.” Until then governments must continue to borrow by issuing Treasury Notes (Federal), or selling bonds (State), or borrowing from (fill in the blank) to fund the changes in the California Community College system as proposed in Proposition 92.





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Bob Williams is an emeritus professor of the University of California. He and his wife live on their ranch in northern California. He has written op-ed pieces for local papers regularly for the past four years.
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