Arnold Schwarzenegger Watch: Meathead Economics

California Governor Arnold Schwarzengger and Hollywood Producer and First 5 California Children and Families Commission Chairman, Rob Reiner.

The Wall Street Journal: Meathead Economics

Hollywood liberals drive productive Californians to leave the state.

It takes hard work to drive anyone away from California’s sunshine and scenic vistas, but politicians in Sacramento have been up to the task.

But the worst growth killer may well be California’s tax system. The business tax rate of 8.8% is the highest in the West, and its steeply “progressive” personal income tax has an effective top marginal rate of 10.3%, or second highest in the nation. CalTax, the state’s taxpayer advocacy group, reports that the richest 10% of earners pay almost 75% of the entire income-tax revenue in the state, and most of these are small0business owners, i.e., the people who create jobs.

And things may soon get worse, thanks to Rob Reiner, who played the liberal “Meathead” on the “All in the Family” sitcom in the 1970s and now plays the same part in real life. He and his rich Hollywood friends have put an initiative on the state’s June ballot that would add a 1.7-percentage-point income-tax surcharge on “millionaires” with income over $400,000, with the proceeds earmarked for universal pre-school.

Class warfare politics – don’t you love it. Soak the rich to pay for universal pre-school because President Bush and Governor Arnold Schwarzenegger will NOT enforce the immigration laws with Mexico and Central America. After all, who is the beneficiary of universal pre-school?

Meathead Rob Reiner has helped qualify Proposition 82 (Preschool Education. Tax on Incomes Over $400,000 for Individuals; $800,000 for Couples. Initiative Constitutional Amendment and Statute.) for the California June ballot. As Chairman of First 5 California Children and Families Commission Reiner used taxpayer money (from a tobacco tax surcharge) to air televison ads clearly in support of qualifying the initiative, Proposition 82 for the ballot. Hugh Hewitt has been all over the story.

The text of Proposition 82 is here (pdf file).

So, what will Proposition 82 do to California taxpayers?

All of this has contributed to the trend of wealthy taxpayers disappearing from the state. State finance office data indicate that the number of Californians reporting million-dollar incomes fell to 25,000 in 2003 from 44,000 in 2000. That decline has cost the state $9 billion a year in uncollected tax revenues. The dot-com implosion of 2000 and 2001 no doubt wiped out many paper millionaires, but migration out of the state to escape its hefty tax premium has also played a role. Republican Assemblyman Ray Haynes notes that the average high-income individual can buy a newly built house in neighboring Nevada and pay for it just from the money saved in a year of not paying California taxes.

The state has been here before, as a new report from economist Arthur Laffer reminds us. In the early 1990s under Republican Governor Pete Wilson, the state raised its top income-tax rate to 11%, triggering one of the worst fiscal crises in the state’s history. Tax revenue fell as high-income people fled the state, while public debt exploded. That tax surcharge was removed in 1995, but now the state’s politicians want to do it all over again.

Why, of course, high income earners will simply shift residency or their businesses to neighboring Nevada or Arizona. Some will just leave California as many of Flap’s patients and colleagues have done over the past decade. After all, why pay for illegal immigrant’s childrens pre-school? California taxpayers paid for OUR childrens pre-school with AFTER-TAX dollars and what help did we receive from the State of California?

But, you say, it is only the rich that will pay. Does the reader really believe this program will be any different than K-12 public education in California? Will the program expand with the growth of illegal immigration? Will the unions bid up the pay and benefits for the teachers and school workers? Once establsihed as an entitlement will it be hard to resist lowering the tax surcharge threshold or pay for it with California general fund monies?

You betcha on all counts…….

Some solutions and call to action…….

California Governor Arnold Schwarzenegger should immediately replace Rob Reiner as Chairman of First 5 California Children and Families Commission

California Controller Steve Westly should immediately call for an audit of First 5 California Children and Families Commission

California Attorney General Bill Lockyer should investigate and prosecute any malfeasance in the Proposition 82 television advertising FLAP

Campaign and VOTE against Proposition 82