Sunday, November 22, 2009

California Collapsing: What Would Reagan Do?

When he was in office, Ronald Reagan looked bad. Now, by today's standards, he looks like a progressive.

Reagan, Ronald. 1973. "On Spending and the Nature of Government." National Review (7 December).

"When I took office in 1967, we discovered that the promise of "no tax increases" could not be carried out. California was virtually insolvent, the precious administration having changed that state's system of budgetary bookkeeping in a way that allowed the spending of 15 months' revenue in twelve months' time, thus avoiding a major tax increase in election year 1966. The state government was spending $1 million a day more than it was collecting."

"California, unlike the Federal Government, cannot print more money or pile up deficits. The governor is required to submit a balanced budget, and if any additional taxes are needed to balance revenues with spending, the constitution requires the governor to propose higher taxes."

"So our first major lesson in government was painful: for the taxpayers and for us. We had to increase taxes by some $800 million to balance the unbalanced budget we inherited."

1 comment:

TheTrucker said...

It matters what and who is taxed. A very high rate of tax on very high ordinary incomes will not harm the economy. If capital gains taxes are one half of ordinary income taxes as was the case in the 40's, then much investment will take place.

The Senate thieves are not going to allow the tax on incomes in excess of one million bucks (for health care reform) and Harry Reid is shopping an increase in the Medicare tax rate on all WAGES above $250k. Whereas Medicare benefits are not based on wage taxes paid in (as is Social Security) then one wonders why the Medicare tax does not apply to all income as opposed to just wage income. My own quick and dirty estimate is that leaving the rate as is and applying it to AGI while doing away with the wage tax version would increase Medicare revenue by 40%. With the current system any wealthy person will have managed to pay the self the 40 quarters (10 years) at $4K per year to qualify for Medicare (sell some Tupperware). The rich get Medicare the same as the hired help right now and that has been the case since 10 years after enactment. If not, then the tax consultant would have been fired. An OFF BUDGET progressive Medicare tax/system is fine. That system can do essentially what the current "reform' is doing.