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How Blue States Can Save Themselves

Actually, Red and Purple states could do this as well, although I doubt they will!

In the forthcoming Trump administration, combined with GOP majorities in both houses of Congress, it is reasonable to expect that we’ll be seeing massive tax cuts along with funding cuts to many services that support the lower ends of our income distribution curve. How can we counteract this locally?

I had this idea two days ago. I’m sure that, from the point of view of many, it will seem quite radical. I want to get this written down – at least the outlines of it – to both gauge reactions to it and to prepare to meet with my representatives in both the Assembly and the Senate (I’m in California). So here goes:

Could California (and perhaps other states) capture this tax reduction in a way that benefits our state?

My answer is: Yes! How? By raising our state taxes by exactly the amount that federal taxes are lowered!

If enabled, this will result in zero net change to taxes paid in California – at least for personal and corporate income taxes and the Estate tax.

California is a “giving” state – i.e. For every dollar we “send” to the Federal government through our taxes, we receive less than a dollar back from the Federal government through subsidies, grants, Federal services, employment of Federal employees, and use of Federal contractors. So if we take the money that is no longer being sent to the Federal government and use it for our own purposes, California will have more money to spend than we do right now!

Why I’m inclined to hope that this can be done in California:

  • We currently have Democratic supermajorities in both the Senate and the Assembly, as well as a Democratic Governor. This should allows us to raise state taxes if we can have our Democratic state representatives vote as a bloc. (For those who don’t know, we need a 2/3 majority to raise general revenue taxes in California.)
  • California has, in my mind, proven that raising taxes thoughtfully (if managed well) improves the economy, reduces inequality, and increases employment.
  • Californians, as a group (with many exceptions), support the idea of good government that has a duty to care for all of our people.

In the interests of brevity (at least as it applies to me), I’m not going to flesh this out any farther. Instead, I’ll just throw it out there, waiting for your reactions!

What do you think? Is is possible? Or at least has enough of a chance to be worth further development? Do you imagine details that would make it easier (or harder) to sell to the California public? What political obstacles to you envision?

Let the brainstorming begin in comments!

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Categories: Politics
  1. 03 Dec 2016 at 10:54

    That seems like a really smart idea. I think California can do lots of semi-resistance things and this would fall right in with that, plus it’d be smart financially. Let’s think about how we want to publicize it whenever you’re ready. Also, the new legislature gets sworn in this week. We should think about how to push for it with them.

  2. David Dempster
    03 Dec 2016 at 11:43

    This is a good idea, although I wouldn’t characterize it as radical. It is a logical reaction to the idea of cutting federal taxes which is often viewed as radical but has become part of the mainstream conservative political thought in the last 50-60 years.

    If California’s “progressive” political leadership is really interested in re-invigorating the progressive movement, this would be a good place to start. But they also must be willing to become very serious about the budget priorities and putting the appropriate emphasis on issues that need it: education, infrastructure, water, and the environment. Those issues should inform and shape our state’s trajectory and priorities for the next 20-30 years. Keep the focus on those four priorities and everything else will, in time, take of itself.

    • 03 Dec 2016 at 11:55

      I think it’s also time for our state to consider a guaranteed basic income. As automation increases, jobs will disappear while overall productivity/worker will increase. There will come a time (soon, I fear) where we have to question many of our cultural assumptions about work and either move to a far shorter work week or guaranteeing a minimal existence without working.

      • 03 Dec 2016 at 13:06

        I think a basic income is the only sane answer but how in the world do we fund it? I think we need a deep dive on how California brings in and spends money. I’ve read that California gives away billions in subsidies to fossil fuel industries, which seems pretty clearly antithetical to a progressive clean-energy California. We’d also need to reform Prop 13 because that’s strangling our true source of value. We need to capture more of our property value, but we’d need to do it in a humane way. It’d be bitterly fought in any case and it’ll be hella expensive to run a ballot measure across the state. But to my mind, those items are necessary and probably not sufficient.

  3. 05 Dec 2016 at 13:39

    With permission, I’m going to show the response of a friend who prefers to remain anonymous:

    “I like your idea. However, I did think that the tax cuts would be going to the richest people. If that is so, the poor and middle class would have nothing more to give to our state. No?”

    To which I replied:

    “My idea is not aimed at benefitting any particular group (or level of income), but at preserving the status quo for the tax burden of all Californian when tax rates across the board are reduced by the feds.

    In a way, my idea IS according to the idea of using progressive tax rates. As the richest people will have the largest reduction from the feds, so shall they have the largest tax increase from the state. I’d like to leave the NET burden unchanged – as I think it will be easier to sell to our state legislators.

    One problem I’ve found though. I’ve been creating a “What If” spreadsheet based on 2016 tax brackets, both Federal and State. And I’m assuming that the “current” Ryan plan is used for a forthcoming tax cut. Here’s the problem: Ryan’s plan INCREASES the tax rate for our lowest income earners! For single filers (the only one I’m playing with – just to see how complex the solution might be), the Federal rate is 10% for incomes 0-$9,275. Under Ryan’s “plan” it goes up to 12% for those same filers! California could lower it’s rate by the same 2% to achieve zero net income tax burden, but for California’s brackets, the lowest one is $0-$7,850 at only 1% – so California would end up giving back 1% to these people – admittedly it would likely be fully funded by the increases on higher tax brackets.”

  4. Patrick
    18 Jan 2017 at 12:10

    Sounds like a decent idea to me! Big question is, what would the money go to? How is it parceled out, who gets it? Specifically cover the programs that are dropped by the new administration, or for whatever we feel?

    • 03 Feb 2017 at 18:28

      Patrick,

      Initially, I would direct that the additional state funds be used to offset the federal funding decreases that are coming. In other words, to preserve the status quo ante at the program level.

      This would give us Californians “breathing room” to consider how the money is best spent. For instance, is subsidizing fossil fuels in California really the best way to spend that money? I suspect that a significant majority of our taxpayers would say “No”. But rather than figure out the spending in advance, which would vastly complicate the basic “capture the Federal tax deductions” legislation, we can defer it.

      Even if we were to take the simplest path (replace Federal funding with State funds, regardless of societal benefits or harms) we would still need to make spending decisions! Why! Because California taxpayers currently pay more in Federal taxes than the state receives from the Federal government. That’s what I meant by describing California as a “giving state” in my original post.

  1. 12 Dec 2016 at 11:38

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