California’s Budget Woes

California’s state budget is now facing a $16 billion shortfall, much larger than it appeared in a January forecast. In a recent post I compared California’s recent budget growth with Florida’s, and noted that while California’s budget has grown by 5.6% since 2006, Florida’s state budget shrank by 5.3%. If California’s budget shrank during the recession like Florida’s did, it would be $14.2 billion lower today, or just $1.8 billion out of balance.

The article I linked to mentions spending cuts without saying what spending would be cut, but also specifically mentions higher income tax rates and a higher sales tax rate as ways to address the cuts. Comparing California’s budget with Florida’s, where taxes have not been increased, shows that California’s problem is not too little revenue coming in, but too much spending.

Over the long haul, higher taxes in California will just chase California taxpayers to other states—like Florida. California is already a high-tax state, and even higher taxes will further hurt California’s long-term economic prospects.