2008 November 29 Saturday
Higher California Car Taxes Coming?

California car drivers might soon pay 2% of the worth of their vehicle in yearly taxes.

Reporting from Sacramento -- State lawmakers began moving toward a deal this week to close California's deficit with the help of steeper car fees that would cost many drivers hundreds of dollars annually, according to people involved in budget talks.

Under the plan, GOP lawmakers -- most of whom have signed anti-tax pledges -- would vote to triple the vehicle license fee that owners pay when they register their cars every year in exchange for a ballot measure that would impose rigid limits on future state spending. Motorists' annual license fees would rise from 0.65% of the value of their vehicles to 2%. For a car or truck valued at $25,000, the increase would be $336.

By itself that car tax might only pay for a third of the shortfall expected in the next 18 months.

On the bright side, the public reaction to higher taxes might drive the voters to pass an initiative that places sharp limits on future state budget growth.

Some analysts say that in the current economic climate, the plan could be an unwise gamble for Democrats. Voters, they say, may be inclined to approve the kind of spending restraints that GOP lawmakers have long sought. The Republicans' proposed cap would limit growth in government to a modest percentage each year, regardless of how well the economy does and how much revenue flows into the state.

"I suspect the public would vote for it," said GOP political analyst Tony Quinn. "This deal could make a lot of sense from the perspective of Republicans."

Part of the "solution" proposed by the Governator is more borrowing. Enough borrowing already.

The man in the middle, politically and fiscally, is Gov. Arnold Schwarzenegger, who is looking about three years down the road, roughly coinciding with his departure from Sacramento.

Schwarzenegger's centerpiece is a 1.5-cent sales tax boost for three years. Another important piece is borrowing $15 billion against the state lottery's profits to provide $5 billion a year for three years. Many of his spending cuts are also limited in term.

Schwarzenegger's approach conflicts with forecasts of potentially immense deficits for many years because of economic uncertainty and the underlying structural deficit, and because so many recent fiscal moves are short-term gimmicks. It could leave his successor with a big mess.

Temporary measures will not fix the problem.

The latest deficit in the California state budget came on very quickly.

Nov. 6 (Bloomberg) -- California Governor Arnold Schwarzenegger said his state's finances have deteriorated so rapidly that a budget he signed just six weeks ago has already fallen into a $11.2 billion deficit and taxes must be raised.

How could we solve this problem without tax increases or spending cuts? Deport the illegal aliens and many state government costs would plummet.

Californians for Population Stabilization (CAPS) says that a 2004 study indicated that California's illegal alien population imposed a net cost of $9 billion per year on the state's taxpayers just for education, medical care and incarceration. "After adjusting the figure for current costs and increases in the number of illegal aliens, it would exceed the state's projected deficit," according to Diana Hull, the organization's president, "and this is a very conservative estimate."

We might be able to move to a budget surplus if we deported the illegals.

The costs of illegal immigration to California are likely much higher. A 2007 study by Philip J. Romero, formerly a research economist at RAND, top economic adviser to Governor Pete Wilson and later Dean of the University of Oregon School of Business, estimated that illegal aliens in California receive somewhere between $10 and $38 billion more in state services than they pay in state taxes.

We've imported a 3rd world population into a 1st world economy. Decay lies in our future.

Share |      By Randall Parker at 2008 November 29 01:40 PM  Economics Government Costs


Comments
JSBolton said at November 29, 2008 2:12 PM:

I suspect that they will have the Fed buy state debt issues the way it buys treasury paper. There's a search on for such methods which are classically inflationary, yet throw money out to ultimate consumers more directly.

tim said at November 29, 2008 9:25 PM:

I work for a semiconductor company in Ca, I bet this global economic slow down will further kill the semiconductor industry in the US. With the exception of Intel, everything is close to dead or has moved to Asia. Nothing like more taxes to hasten the end. My company has laid off about 20% of the work force and the hits have been disproportionately in Ca (we're global) where the company started and has its headquarters. I guess that leaves Hollywood and agriculture.

I also listen to Dave Ramsey (a talk radio guy who gives advice to people in financial trouble), and one of the things I find most interesting is almost everyone says where they are from and how much they make. It's amazing how many people in Ca make over 100K and just aren't very smart. To the point that their almost bankrupt and don't really know why.

Jerry Martinson said at November 30, 2008 1:10 AM:

It wasn't hard to predict that all the state budgets would mysteriously go to heck the day after the election. After all, those who produce the state budget forecasts answer to the incumbents. The problem is that the manipulated forecasts might have contributed to passage of bond measures that are foolish. And money could have been cut from this years procurement budgets to slow down the blow.

However, since many state government budgets are a large portion of the state's economy, doesn't it make some sense that states have some flexibility in providing a Keynesian stimulus? Unfortunately, the cynic in me says that once states can dip into the beltway money printing press there will soon be a surge of abuse that will lead to more bread-and-circus waste that is destroying the once-proud empire that I believed in.

realist gun nut said at November 30, 2008 9:15 AM:

The problem, Jerry, is that people of average intelligence are unable to see that the good times will not last forever. And our politicians are not much better and never bother to put something away for a rainy day.

Thai said at November 30, 2008 12:36 PM:

Not sure if you saw this particular Naked Capitalism post but I have to agree with Yves, you can't make this stuff up.

m said at November 30, 2008 8:25 PM:

Any tax on cars that taxes a percentage of the car's market value is a tax that unfairly punishes someone for wanting to drive a nice car.

To wit, my Taurus is probably worth 13K or so with the mileage, so if Im taxes 2% this year on that, I pay 260 bucks.

If I buy that 60K Cadillac loaded with all the goodies, I'll end up paying 1200 bucks.


Im being punished buying the nice new expensive car instead of going for the long haul with the 2 year old model..............


But it gets even better if you think about it. What if I wreck my car and have a big dent on it..................making it lose a couple of thousand in market value? What if some rust sets in on the paint job? Who is going to "assess" that to make sure my tax is fair? Are we going to have state employees rate the value of everyone's car (the way the overvalue everyone's house???!!!!). How many new jobs will have to be made to do this, as one little guy can't do it all? What if you dispute their assessment? Will there be a court date? Court time and money wasted? Another bureaucrat to mediate the dispute instead?

California has just hatched another bad idea. The sporty Cadillac wont harm the road any less than the Ford will.....................and that what the tax is for (ostensibly), the roads....................

BTW----This:

"The Reserve Bank of Zimbabwe Commends US and UK Authorities for Following Its Lead

You simply cannot make this up. I found a section of this priceless commentary from the Reserve Bank of Zimbabwe via Marc Faber's latest newsletter (hat tip reader Dean), and had to verify it. The original provides an even richer mine of material. "

................was hysterical, thank you for linking it.

averros said at December 2, 2008 3:11 AM:

Makes no sense to deport illegals... this is costly and hugely prone to police abuses and corruption - and requrires total surveilance and new enormous budgets for immigration bureaucracy and police.

There's much simpler solution - eliminate laws which mandate provision of publicly funded services to illegal immigrants.

Suddenly, schools will be less crowded, lines in the emergency rooms will disappear, and a lot of former welfare queens will head South.

Even better solution would be elimination of publicly funded services altogether, fire all government "workers" and let people and businesses to keep their money.

Oh, and stop the insane drug war and building mega-prisons. Let all prisoners convicted of victimless crimes out.

Seccession of CA (net federal tax payer) from the US - so no federal taxes will need to be paid, would be nice, too.

But, of course, police, teacher, and public works unions are the democrat plutocrats' power base, so nothing of that is going to happen until California will turn into third-world country with its economy ruined by huge taxes and ever-growing entitlements, and its high-tech industry migrating (together with brains behind the industry) to places like Hong Kong and Chenai.


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