It may be good that Gov. Arnold Schwarzenegger will call a special legislative session in September to consider revamping California's oppressive and volatile tax system. It could be bad news, too.
It's good to re-examine the state's conglomeration of tax laws that disproportionately rely on personal income and capital gains, whose volatile natures increase revenue during good economic times, but fall short of forecasts when the economy sours.
If merely stabilizing the flow of private money into the government by reducing some taxes and adding to others were the extent of this exercise, it still could be bad news. Any new tax burdens exhibit government's power to destroy.
We're skeptical that the tinkering can be limited to rearranging tax sources considering that the tinkerers are a panel of political appointees, tax-and-spend-minded legislators and a governor whose own views could be described as volatile. At the very first meeting in January of the appointed Commission on the 21st Century Economy, liberal members announced they didn't feel constrained to come up with "revenue neutral" ideas that result in no net tax increase.
This is treacherous ground. As virtuous as it may be to smooth out dips and surges of taxes flowing into Sacramento it must not be a pretense to increase tax burdens. That temptation will be great.
We prefer that before tax reform, Sacramento establish a spending ceiling, perhaps based on this year's $85 billion level, or perhaps based on a calculation of annual population, personal income growth and/or inflation. Top priority should be to limit an ever-expanding government, and its ever-growing debt and ever-increasing payroll.
This is the ideal time to rethink not only how to feed government's appetite, but how to force it onto a healthy diet. Government's size and scope must be reduced before adjusting tax laws. A less-costly and less-expansive government will need fewer tax sources and less tax revenue. Then, attention can be turned to fair and equitable ways to apportion tax responsibilities.
If tax reform is driven by appetite there will be insatiable hunger for more of Californians' money. In that case, there never will be enough. Every penny collected will be spent, and more will be sought. It's time to curb the spending appetite.