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Republican gubernatorial hopeful Tom Campbell on Thursday called for budget cuts and a temporary gas tax to close California’s $26.3 billion budget gap.
Campbell, the state’s finance director in 2004-2005, said $16 billion in savings could be achieved if automatic increases in social-welfare benefits and state employee pay were slowed and brought into line with the national average.
Another $4 billion could be carved out with an “expenditure freeze,” he said. The final $6 billion should come from new revenue — a one-year gasoline tax that would raise the price of gas from roughly $3 per gallon to $3.32 per gallon, he said.
The former Stanford Law School professor and five-term GOP congressman made his budget proposals to the business-oriented Association for Corporate Growth in a dinner meeting at Fremont Hills Country Club in Los Altos Hills.
California’s current fiscal emergency results from an unprecedented drop in revenue caused by the national recession combined with the state’s penchant for spending beyond its means, Campbell said.
Noting that the state’s operating budget relies heavily on revenue from the notoriously cyclical personal-income tax, he also called for long-term reforms in state finance.
“If we don’t have systemic improvement in how we conduct our state finances we will drive businesses to other states” such as Nevada, Arizona and Texas, he warned.
To control overspending, Campbell advocated restoration of the “Gann limit,” a constitutional amendment in effect from 1979 to 1989 that limited annual spending to a formula based on inflation and population growth.
Had the Gann limit been operating for the past decade, California would have a $2 billion surplus today despite the recession, he said.
Campbell also called for an automatic five-year sunset on state regulations, at which point they would require re-evaluation before they could continue. He expressed skepticism that cap-and-trade rules, a market system for controlling pollution, could be implemented well in California.
He also advocated litigation reforms to place a greater burden on losing parties for the cost of “frivolous lawsuits.”
Eventually, he said, California should move to a budget cycle in which the state would accumulate revenues one year that would not be spent until the following year, clarifying for all parties exactly how much is available.
Saying that just 3 percent of Californians are responsible for 50 percent of personal-income tax revenues, he argued that adding taxes will drive business from the state.
“It is widely believed we can solve our problem if only the wealthy would pay their fair share. When I was a state senator and finance director I heard this on a daily basis,” Campbell said, adding that it is a misconception.
Campbell predicted the current budget emergency would be solved through some combination of a fire sale of state assets, possibly with the involvement of a judicial master; a “plug” in the budget calling for elimination of unspecified waste; and the possibility of Gov. Arnold Schwarzenegger employing the line-item veto.
He raised the possibility of an “Obama ex machina” scenario, in which the federal government bails out the state while imposing tough reforms, allowing the president to solve the crisis while establishing a record of fiscal responsibility.
The professorial Campbell, currently on leave from the Haas School of Business at the University of California at Berkeley for a term as visiting professor at Chapman University in Orange, handed out charts on the federal budget, GDP (gross domestic product) rates, trends in housing and oil prices and taxes.
“Republicans in Berkeley are a little bit more rare than Republicans in Orange County,” he joked.
Campbell, who took a leave from the Stanford Law School faculty to represent Silicon Valley in Congress for most of the 1990s, joins a Republican field of gubernatorial candidates with strong ties to the Palo Alto area.
Former eBay CEO and Atherton resident Meg Whitman announced her candidacy in February. Silicon Valley entrepreneur, cybersecurity expert and current state Insurance Commissioner Steve Poizner also is seeking the 2010 GOP nomination for governor.
Democratic contenders are San Francisco Mayor Gavin Newsom and former governor and current State Attorney General Jerry Brown, who served as mayor of Oakland from 1998 to 2006. Another Democrat who was considered likely, Los Angeles Mayor Antonio Villaraigosa, has bowed out of the race.
Taxing gas more makes so much sense. It makes up for the smog and green houses gases produced by cars, reduces dependence on foreign oil, lessens the need to spend billions on sending the military to the Middle East. A gas tax encourages efficiency and keeps more money in California. It will encourage greater use of bus and train which will help balance budgets for VTA and CalTrain and make sure our over crowded roads are used for the most important trips. As long as we need to pay more to make up the shortfalls, this is the best way to do it. Taxing to make of for the externalities not counted in the supply and demand equation for gas is fair to all of us.
Taxing Gas is OK with me, but it will reduce consumption, which will reduce the tax income when times get tough. How about reinstating or increasing the vehicle fee (tax)? This is a more stable tax as most people will not rush out and sell their car(s) and the wealthy are able to keep paying the fee.
How about a 50% tax on yachts or private jets? This gas tax and the suggested raise in the vehicle fee tax hits those that can least afford it the hardest. Cigar taxes should be raised in proportion to cigarette taxes. Increase the tax on wine. A progressive property tax would work quite nicely.
oh, come on USA— high gas prices didnt last long enough to have a permanent effect. Hybrid sales were showing signs of improving before everything hit the fan. You must know this
USA,
You’re always on the soapbox. Happily, you’re not usually quoting horrible song lyrics.
I have to respond to your comment about $4-a-gallon gas, which was a revelation for me back when those prices hit. “Did public transportation really take off in a big way?” My God did it. Throughout the work week I both drive and take Caltrain, depending on circumstance, and at a certain point as the gas prices climbed, the highways emptied. Caltrains, meanwhile, were standing-room-only. It was incredible. There even appeared (to me) to be a specific cutoff: $4/gal seemed like the magic number.
As Eric noted, it was too brief a spell to get people to switch cars, but I recall news stories at the time showing that new SUVs were no longer leaving the lots — it was cited as another nail in the Big Three’s coffin, in fact.
From an environmentalist perspective, a gas tax would work. And if it was a variable tax, which held the price per gallon steady by going up or down as the untaxed price went down down or up, it could even hold prices steady so consumers knew better what to expect.
Don Frances,
Increasing gas tax will expand social injustice. Only the rich people will be able to afford commuting by car and living in suburbs. Poor folks will be forced to cram into city apartments or wherever close to train stations.
What do you want to achieve? Leaving our highways to the BMWs of CEOs and CFOs, and let everyone else suffer? I’m sure the riches will enthusiastically support the proposal. But that is not right, and is against social equality.
The gas price as it stands now, harms those blue collar workers most, since they cannot afford to live close to workplace, and hence have to commute longer distance to work.
It’s not strange that a Republican proposed such an idea. Let’s not fall into the trap.
Mr. Hoosac,
As you noted, currently only those with means can afford a suburban home anywhere close to our city centers. A normal-sized, no-big-deal home anywhere on the Peninsula is off limits to everyone except the rich. The middle class, then, go farther and farther out until they hit a region they can afford — usually a poorly and hastily developed area like Tracy — and buy there. Then they drive (or rather sit in traffic) for hours a day to get to their jobs in, say, San Jose.
You want to preserve this arrangement in the name of social equality. But where’s the social equality here, exactly? And what’s so unfair about middle class people (or, for that matter, upper class people) taking, say, the ACE train from Tracy to San Jose? Or BART? How are they suffering while they slip past the BMWs on 580?
Now, it’s true that some working class people rely on their cars because their work takes them to various locations. The house cleaner, handyman, delivery man, etc. all need their vehicles to do their work, and a higher gas price cuts into their bottom line. But, to make it more progressive, revenue from a gas tax can be reapplied as a subsidy or tax break for people like this. These things can easily be worked around.
Meanwhile, if you’re a believer in the merits of limiting carbon emissions, it is clear that the current arrangement needs to be fundamentally altered. In the old days (like the 1950s and before) everybody took the trains. Today they do too — if there is an external monetary pressure on them to do so.
I disagree with your characterization of Republicans and what they want. They don’t want the highways all to themselves in their fancy cars. Republicans typically want cheaper gas because it’s better for the economy (as things now stand) and that takes priority. Also, these days they are usually against taxes of any kind. Campbell’s proposal is not only strange, it could possibly even doom his campaign.
Around here, most capitalists are big boosters of public transportation, like the way the Silicon Valley Leadership Group has supported all those measures to extend BART to San Jose. This is because they want workers to have a cheaper, better option for getting to work than being stuck on 580 (behind a BMW?).
Mr. Frances,
We should separate the issue of mass transit and gas tax. The sole purpose of Campbell’s proposal is to use higher gas tax to fix the budget, not to fix mass transit.
I don’t understand why you can’t see that higher gas tax increases social inequality. It’s so simple. For instance, a janitor who can drive to work and along the way drop off her kids to school won’t be able to do so if gas price is too high. She will be forced to take train and probably incur extra cost in time and money to take care of her kids.
As for mass transit, it has not been proven successful in California. VTA, BART and Caltrain are all money holes. They all contributed to the budget crisis by running up huge deficits. For example, BART is not in anyway “cheap and better”. Every year tax payers fund the hundreds of millions of deficits it generates.
I agree that we should reduce carbon emission. But I’m not sure public transportation, in this country, is the way to go to solve the problem.
Yikes, Supertramp. I think “Goodbye Stranger” might be more appropriate…
Howzmabout cutting the state legislature’s compensation in half?
They are the highest paid state legislators in the country, at something like $165K peryear plus about $165 per day tax-free perdiem while in session. THEY ACCOMPLISH NOTHING, and only represent lobbyists.
Sorry, USA, but not entirely true. The gas crisis of my youth changed the car buying habits of Americans for 15+ years– hardly short term. Gas prices from the mid 70s to 2007 didnt come close to keeping up with inflation, so real gas cost went down over time, but behavoirs did not revert for a LONG time. Even the worst of the gas guzzling SUV’s (like, um, mine…) get better mileage than their close cousin American Boats of the 60’s, so some changes to behavior remain.
Mr. Math is correct in his factual analysis, but Dr. Realworld says that perception is reality, and consumer activity IS driven by things like gas prices, whether this is a good measure of actual cost or not.
Hmmm, listens to Supertramp, drives a muscle car … you’re starting to sound like an extra from “Dazed and Confused.”
USA, my SUV gets 21 OVERALL, and is a low emission rig. Like I said, gas prices have gone DOWN in real terms (until the last 16 months or so), so my arguement is right. I love it when you make my points for me…
Plus, chicks dig SUV’s over the old big blocks today (Until my wife pulls up in the mini)– but your 8-track player is definitely cooler than my ipod connector.
“a temporary gas tax” Wow. Anybody think that the 9+% sales tax will be dropping back down anytime soon?
The real problem is out of control spending. If we just rollback to the spending levels of just a few years ago, we would be fine or at least close enough to not have to deal with draconian cuts in core areas or “temporary” taxes/fees that will be renewed endlessly.
Everywhere is freaks and hairies
Dykes and fairies, tell me where is sanity
Tax the rich, feed the poor
Till there are no rich no more
— Ten Years After
Old Ben, your suggestions, like many other liberal taxation attempts, have been tried and failed miserably. The core problem is that government thinks it knows what is best for us and thinks it can run the economy.
Example: Under Clinton, the Feds raised the tax on yachts to grab more money and stick it to those “evil” rich types. The result, which was obvious to the rest of us, was the the rich simply bought yachts overseas and sailed them here. This devastated the ship builder unions in the US as generations-old companies shut down. The end result was the tax revenue actually dropped and hundred of good union jobs were lost.
Well, thanks for noting that downside of the gas tax. Most green types gloss over that.
While I am on the soapbox … For the green types — Remember when gas was well over four dollars? There was some chatter about green-cars, but did people really change their cars? Did public transportation really take off in a big way? A gas tax certainly won’t help the environment.
eric — On the contrary, whenever there has been a big spike in prices since the 1970s, there has been a short-term interest in higher mileage cars and public transportation. As we acclimate to the new prices, the interest fades.
The problem is that although gas prices and changes in gas prices are very visible and emotional, the cost of gas is only a fraction of the total cost of ownership. (Depreciation is the biggest cost.)
The cost of a new, basic car that will get you where you are going is around $15,000, yet there are plenty of people driving $20-30,000 cars. These people yelp about a gas price spikes and talk big about changing, but the cost of gas does not really affect them substantially which they realize over time and quietly continue as they have.
As my friend, Mr. Math, explains, a typical 20 MPG car driven 12,000 per year will cost only $600 per year more for every dollar increase in the cost of gas. If we were to slap a $2 tax on the cost of gas making $5 (which would never fly politically), the ownership cost would go up $1,200 per year. Would really get people in their $30,000 cars to change their lifestyles? Oh, they would talk big and maybe even show up on BART for a while, but …
Here you go Don, just for you, lyrics from “A Soapbox Opera” by Supertramp http://www.lyricsfreak.com/s/supertramp/a+soapbox+opera_20133865.html
While I am on the soapbox …
We already pay a substantial tax on gas which is supposed to be used to build and maintain our roads and bridges, but the usual suspects in Sacramento and Washington have been raiding those funds to pay for subsidizes for abortions for transgendered illegals or whatever else they can think of this week.
Don — Ouch.
Old Ben — I would argue the opposite because, well, that’s just what I do.
Legislators spend millions to get elected for jobs that pay thousands. Their government paycheck is clearly not the reason that they run. Cutting their salaries would be an empty gesture that would have little actual effect.
I say we should raise the salaries to attract professional managers who are willing to run and server for the paycheck instead of the quasi-legal benefits of office.
Eric — I have an early 70s big block that gets 18 MPG on the freeway. As such, the CO2 produced is actually less than modern SUVs and trucks and withing the neighborhood of modern cars. Of course, the cat-less exhaust produces far more hydrocarbons, but that is a different issue …
“Goodbye Stranger”!
The gantlet has been through down, sir.
Prepare for a broadside of “Muskrat Love”.
You need to throw in an 8-track player to complete the stereotype.
“chicks dig SUV’s over the old big blocks”
Dr. Realworld called. He said it time to come in for a checkup.