The Tax Man Speaketh

What Arnold said in his State of the State address

By Alisa Farenzena
From the February 2007 Print Edition

            Judging from Governor Arnold Schwarzenegger’s State of the State address on January 9, conservatives have nothing much to look forward to this year from the governor. In the speech, Schwarzenegger announced, among other things, his grandiose plans for socialized health care.  It now appears that his spend-happy address a year ago, in which he made a sharp turn to the left, was just the tip of the iceberg.

            Last month, Schwarzenegger continued last year’s call for a massive investment in the state’s infrastructure.  He spent a good deal of his speech explaining the need to spend on public safety, water supply, transportation, education, and disaster preparedness, and addressed public safety and education in more depth.

            In terms of public safety, Schwarzenegger is correct in saying that California’s prisons “are in crisis.”  Why then was prison construction not taken care of in the first round of bonds that voters were asked to approve?  Given the severity of the overcrowding in the state’s prisons, and the court order to fix the problem, it seems incomprehensible that this was not the governor’s top infrastructure priority last year. It instead took a backseat to things like the unnecessary housing bonds of Proposition 1C.  At least he has brought the prison issue to the forefront this year.

            In terms of education, however, the governor is proposing spending that is by no means urgent.  He asked us in his speech “to invest in 15,000 more classrooms and renovate 40,000 more” — despite the fact that he had just stated that the education bond already passed in November, Proposition 1D, “builds 10,000 new classrooms and renovates 38,000 more.”  This is a substantial amount of work, and could be even more helpful if the money to “renovate” the 38,000 classrooms had been slated for classroom construction instead, if the governor feels that more are needed.

            What the governor also fails to realize is that the $10.4 billion approved in Proposition 1D is a substantial amount of debt that we will have to pay off over the next 30 years, so it is irresponsible to ask us now to authorize more bonds for the same purpose the very next year.  What ever happened to cutting up the state’s credit card?

            Schwarzenegger next turned to greenhouse-gas emissions.  He talked about the need for a system of “trading credits” for the rights to release emissions to reduce total greenhouse-gas emissions.  He asked for “the funds to implement” this system in California, but did not explain why government spending is even needed to implement it.

            Also on the topic of the environment, the governor proposed that we adopt a low-carbon fuel standard “to free ourselves from oil and from OPEC.”  One of the only high points in the speech was that he also said, “let us use the freedom and the flexibility of the market to accomplish it.” Next came the most egregious portion of the address: the part about health care.  Schwarzenegger claimed that “nearly 6.5 million Californians have no insurance at all.”  This statement is misleading, since many of these people are illegal immigrants, so they should not even be referred to as “Californians.”  The governor only vaguely alluded to his proposal on health care, which he had released the day before.

            One of the most shocking aspects of the proposal is that it makes having health insurance mandatory.  Requiring individuals to purchase a service they do not want or cannot afford is contrary to both personal freedom and the free market, enabling insurance fees to continue to skyrocket.  It is also unenforceable:  Auto insurance is compulsory, but about “14.3 percent of Californians drive without insurance,” according to the Insurance Information Institute’s Web site.

            Schwarzenegger’s plan also seeks to extend coverage to the illegal immigrants living in California.  This is a surprising proposal indeed from a governor who got into office partially because of his pledge to make sure illegal immigrants would not be granted drivers’ licenses.  Health coverage is even more harmful than drivers’ licenses because it gives illegals not only legitimacy but also costly benefits.

            Another harmful aspect of the governor’s proposal is that it levies a new tax.  Of course, he calls it a “fee,” but it is actually a 4-percent payroll tax on businesses not already providing health coverage.  According to a January 10 FlashReport column by Jon Coupal, president of the Howard Jarvis Taxpayers Association, a fee would be “an exaction on a person or business in exchange for a direct benefit to the fee payer,” — no direct benefit here — “to mitigate a harm caused by the fee payer,” — that’s not happening here — “or to pay for a regulatory program directly related to the fee payer’s activities.”  There is no such regulatory program either.  Therefore, this is a tax.  What happened to the governor’s pledge not to raise taxes?  Schwarzenegger is beginning to resemble Phil Angelides.

            In the governor’s first term, he led as a true Republican for two years and as a big spender for the third.  His excessive spending last year did allow him to win re-election easily despite several months of political blindness.  This year, however, he does not face re-election, so there is no excuse for most of the spending, the mandates on individuals, or the new tax on small businesses.  Schwarzenegger needs to realize that he was elected as a Republican, not as a “tax man.”

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