State Controller John Chiang announced today that his office would suspend tax refunds, welfare checks, student grants and other payments owed to Californians starting Feb. 1, as a result of the state's cash crisis.
Chiang said he had no choice but to stop making some $3.7 billion in payments in the absence of action by the governor and lawmakers to close the state's nearly $42-billion budget deficit. More than half of those payments are tax refunds.
The controller said the suspended payments could be rolled into IOUs if California still lacked sufficient cash to pay its bills come March or April.
I have to pay my taxes on time, or people with firearms come take me to jail. But if the state owes me money, an IOU is considered acceptable.
There are somewhat over 30 million people in California. The deficit the controller is talking about amounts to about $1400 for every person in the state. That's egregious.
It's not that we're not taking in enough money, it's that we're spending far more than we're taking in. And the governor is proposing a "temporary" 1.5 cent sales tax increase, and the CTA is going to put an additional 1 cent sales tax increase on the ballot (with the money supposedly being earmarked for education).
And the nation is heading where California already is. From whence comes this belief that socialism works?
Update, 1/25/09: Here's more.
Maryland used to be in the middle of the pack of states with business-friendly environments. No more. The Tax Foundation now ranks Maryland as the sixth worst state in the nation in which to do business. Only Rhode Island, Ohio, California, New York, and New Jersey are more hostile to job- and revenue-producing enterprises. Maryland’s “remarkable drop” - from 24th in 2008 to 45th place this year – is attributed to last year’s passage of the largest tax hike in state history, coupled with other major tax policy changes that also put the Free State dead last in the personal income tax category.
Christopher Summers, president of the Maryland Public Policy Institute, summed up the real problem facing formerly free-spending states now suddenly face-to-face with billion-dollar deficits: “The debate has always been revenue, revenue, revenue – not spending priorities,” he told The Examiner. “We continue to promise more than we bring in. It’s a dereliction of fiduciary responsibility. Meanwhile, families and businesses are struggling to swim and the state throws them a cinder block.”American companies already pay some of the highest federal corporate taxes in the industrialized world. When states like Maryland and California pile on even more taxes on top of that, business owners start looking at other states that are competing for their presence.