Don’t Blow It on Loopholes

Only in the fantasy land of Sacramento could closing a loophole that allows yacht buyers to escape the state sales and use tax be denounced as a tax increase. That was the reaction of the California Taxpayers Assn. as it issued a blanket indictment of a proposal by state Treasurer Phil Angelides and Democratic lawmakers to close eight loopholes to save the state an estimated $386 million a year.

That’s not chicken feed. It would at least offset some of the more serious budget-cutting that will have to be done. California faces a $14-billion budget shortfall this year.

It’s unfortunate that there are no Republicans in the group. Some may be shying away from Democrat Angelides, who is open about planning to run for governor. That makes it all the more worthwhile for Gov. Arnold Schwarzenegger to sign on to the anti-loophole effort, taking the wind out of Angelides’ sails while doing the right thing.

Govs. Pat Brown and Ronald Reagan budgeted by setting state priorities and then raising the money to finance them, usually assembling a coalition of Democrats and Republicans to pass a consensus budget. California government hummed, but taxpayers steamed. Proposition 13, passed in 1978 as property taxes soared and the state accumulated a huge surplus, made budgeting a tougher slog.

Proposition 13 aside, tax reductions over the last decade include the reduced car tax and lower personal income tax rates for the wealthiest Californians. Business bears less than half the percentage of the tax load that it carried in 1988, in part because of corporate tax breaks.

Angelides and company should be slashing spending, the taxpayers group said. Good idea, but there already is an Assembly task force under Budget Committee Chairman Darrell Steinberg (D-Sacramento) and the governor’s budget office doing that.

The Democratic-dominated Legislature was lax in recent years at ensuring that taxes paid off in effective, efficient state services. It’s one of the irritants that led to the gubernatorial recall last year, so Steinberg is making up for lost opportunities. The Schwarzenegger administration’s “performance audit” of state government is also due out in the coming weeks.

Unless the efforts to find budget flab are seen as bipartisan, they’re headed for failure. Schwarzenegger should be as happy about closing tax loopholes as about finding departments whose work overlaps. Steinberg’s committee, if it is to succeed, cannot be viewed as an attempt to undermine Schwarzenegger’s definition of waste.

Voters are on to the political tricks that paralyzed state government in the past. Schwarzenegger and the Legislature got off to a good start and must not blow it now.