Outside the Beltway

TERMINATING HIGH TAXES

James Joyner · Wednesday, September 24, 2003 · 2 comments

Arnold Schwarzenegger outlines his economic policy in today’s WSJ. The piece was likely–almost certainly?–ghost written, but that’s par for the course.

I have often said that the two people who have most profoundly impacted my thinking on economics are Milton Friedman and Adam Smith. At Christmas I sometimes annoy some of my more liberal Hollywood friends by sending them a gift of Mr. Friedman’s classic economic primer, “Free to Choose.” What I learned from Messrs. Friedman and Smith is a lesson that every political leader should never forget: that when the heavy fist of government becomes too overbearing and intrusive, it stifles the unlimited wealth creation process of a free people operating under a free enterprise system.

And that is the essence of the economic and fiscal crisis that confronts the state of California today. Over the past five years our state budget has grown nearly three times the pace of inflation. Our debt burden has risen by more than the other 49 states combined. The matrix of onerous regulations we impose on property owners and businesses has made the cost of doing business in California almost twice as high as in neighboring states. Our tax rates have become among the highest in the nation.

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First, on taxes, I believe that not only should we not raise tax rates on anyone in California, but we have to reduce taxes that make our state uncompetitive. I married a Kennedy and I have always believed that President John F. Kennedy was absolutely right when he said in 1962 that “when taxes are too high, there will never be enough jobs or enough revenues to balance the budget.” Our California tax system, as Arthur Laffer recently told me, seems designed to make rich people in California poorer, not to make poor people richer. By restructuring our tax system, I am convinced we can create more businesses and jobs, and that is the best way to re-balance our budget.

Second, the California state budget should not grow faster than the California family budget. We need to put teeth into a spending limit law through a constitutional amendment that caps state budget growth. I have asked the Howard Jarvis Taxpayers Association to lead a task force to bring good spending limit ideas to me. If we had a strong spending limit in the 1990s, the state would have a budget surplus today. California does not have a taxing problem, it has a spending problem. I will also create savings from outmoded and inefficient government agencies. It’s time to live by the basic rule of good business behavior that you can’t spend money that you don’t have.

Next, the worker’s compensation system needs an overhaul. When I have asked business people around the state what is restraining their ability to expand here, they cite high taxes and unbearable workers’ compensation costs. Businesses in California pay workers’ compensation costs that are more than double other states.

Fourth, I am a fanatic about school reform. To attract world-class, 21st-century businesses, we need a world-class education system. I will maintain the state’s testing program and bring school authority and spending closer to students, parents and local taxpayers and take it away from Sacramento bureaucrats. If schools are systematically underperforming, we will expand choice options for parents with charter schools and enforce public school choice provisions in the federal No Child Left Behind Act.

Our state will prosper again when we commit ourselves in California to “Free to Choose” economics. This means removing, one by one, the innumerable impediments to growth–excessive taxes, regulations, and deficit-spending. If we do this we will bring California back as the untarnished Golden State.

While much of this is platitude, it at least amounts to a policy. Now, of course, it is fair to ask about the spending cuts. . . .

Steven Taylor has a take on this as well.