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D. Frank Norton: May 19 was a wake-up call for all Californians

It's Your Money

Posted: May 20, 2009 3:48 p.m.
Updated: May 21, 2009 4:55 a.m.
I’m afraid that Sacramento needed this. Politicians there have had their heads in the sand for too long. Their spendthrift policies had to stop. The five measures rejected in Tuesday’s vote — where spending would continue with tax raises being extended to future years — were defeated.

Now for the inevitable pain. Many government services will have to be curtailed. From my reading of the propositions, many services would be curtailed anyway. Their passing would just reduce, or perhaps postpone, the pain.

Even with this fiscal rejection by taxpayers, California finds itself as being the second-highest-taxing state in United States. We have one of the highest state income tax rates in our country, not to mention about the highest state sales-tax rate too. Where has this gotten us? 

We now have the biggest state deficit we have ever experienced. Why? Fiscal irresponsibility, and there is plenty of blame to go around.

Executive and legislative branches of government, as well as us, the voting constituency, have allowed ourselves to get into this deplorable fiscal quagmire. We now have to pay the piper. Right at that time in history when our homes are being foreclosed on, our jobs disappearing and our investment portfolios shrinking and we are being told that we will have to pay more taxes. No wonder we all voted “no” on Tuesday.

We will see core services be reduced: education, police/protection and health-care services, to name a few. How should we respond? For one, community involvement should be increased to supplement and replace the loss and reduction of many of these services where possible. We can’t afford the luxury of saying, “Let the state government do it.” I am concerned, however, that we have become too lazy, too reliant on government, to again become more “self-reliant,” — but that is what we need to do.

Secondly, we need to collectively demand from Sacramento that we make our state into one that welcomes and encourages business, instead of doing the opposite.

It was reported in the Wall Street Journal last Tuesday (“Soak the Rich, Lose the Rich” by Arthur Laffer and Stephen Moore) that the natural consequence of raising taxes primarily on the rich is to lose the rich. They will flee to low- or no-income-tax states. Where does this leave us if we don’t quickly change our ways?

Ultimately with fewer rich to soak, the ever-increasing tax burden will rest squarely on the shoulders of remaining middle and lower income taxpayers. This is not a pleasant prospect.

This column is called “It’s Your Money”. It may not stay that way for long, if we are forced to continue along this path of state fiscal irresponsibility. Here’s hoping.  

D. Frank Norton is a money manager and financial planner in Santa Clarita. “It’s Your Money” appears Thursdays and rotates between a handful of the Santa Clarita Valley’s financial professionals. His column represents his own views and not necessarily those of The Signal.


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