As a Spending Limit, Proposition 1A Does Not Cut It

Tuesday, April 7, 2009

Page 7

IN MY OPINION (Column)

As a Spending Limit, Proposition 1A Does Not Cut It

By JON COUPAL

Speaking before a meeting of over a thousand members of the Howard Jarvis Taxpayers Association in 1992, former President Ronald Reagan told the audience, “We tax reformers bear our scars proudly.” The recipient of the Howard Jarvis Lifetime Tax Fighter award was referring to his own effort to control spending, Proposition 1, which was rejected by voters in 1973.

Among the key elements of the Reagan limit was that spending from “proceeds of taxes” would have been limited to the then current percentage of state personal income, less .01 percent annually for seven years and would then stabilize at that level. “I think taxpayers are fed up with big government continually digging into their pockets for more and more,” Governor Reagan said at the time.

After Proposition 1 was defeated at the polls, pundits speculated that the result was due to its “complexity.” And of course it didn’t help that the California Teachers Association and public employee unions dug deep into their wallets to assure the defeat of a measure that would retard the growth of government.

But five years later, Sacramento’s continued emphasis on spending rather than the burden this was placing on struggling taxpayers, resulted in the overwhelming passage of Proposition 13, with enthusiastic support from Ronald Reagan — he voiced radio spots supporting the measure — and, one year later in 1979, the Gann spending limit.

The Gann measure, known as the “Spirit of 13” initiative, limited government spending to the percentage change in inflation and population growth or the change in per capita personal income, whichever was lower. That the Gann limit was substantive was proven in 1987 when taxpayers received a rebate check after revenues surpassed the spending cap.

However, the success of the Gann limit proved to be its undoing. In 1990, transportation interests placed Proposition 111 on the ballot, a gas tax increase that was accompanied by extravagant promises that it would end freeway congestion. But Prop. 111 was just one more bait and switch scheme. Because the new tax revenues would be so substantial that they would run afoul of the Gann limit, backers of the new tax buried in the measure a reconfiguration of the way the limit was calculated. Unknown to many at the time, passage of the 111 transportation “panacea” made the Gann limit nothing more than an archaic curiosity.

Without enforced spending discipline, the state ran up a $38 billion deficit under Gov. Gray Davis, and now another $42 billion under Gov. Schwarzenegger.

Now we are being told by those who created these astounding deficits — the governor and the majority of the Legislature — that we must approve their version of a “spending limit,” Proposition 1A on the May 19 special election ballot, to compel them to behave responsibly. One is reminded of the serial murderer who leaves a message for police saying, “Stop me before I kill again!” While they admit that they have no control over their spending impulses, the solution they offer would actually allow continued increases in spending without any connection to the taxpayer’s ability to provide revenue.

Proposition 1A ties spending to income, income which can be increased under the measure through new taxes. The State Constitution already requires a balanced budget, so the only effect would be a reiterate the same requirement, one that is already being ignored with impunity.

It is ironic to note that many of the same entities, who objected to Ronald Reagan’s firm spending cap in 1973, including the California Teachers Association, are now backing Proposition 1A. This is a clear indication that the 1A spending limit is a phony.

So just why are the governor and most legislators pushing so hard for Proposition 1A and its ineffectual spending cap? Well, in addition to allowing them to claim that they are dealing with the spending issue, it includes a very real $16 billion tax increase.

The tax increases approved in February, which will begin appropriately on April 1, are scheduled to sunset in two years. If Proposition 1A passes, the taxes will remain in effect for an additional two years, costing Californians another $16 billion according to the non-partisan Legislative Analyst Office.

Gov. Schwarzenegger, we know spending limits and your Proposition 1A is no spending limit. Proposition 1A is just another grab for the taxpayer’s wallet.

(Jon Coupal is president of the Howard Jarvis Taxpayers Association.