COMMUNITY COMMENTARY:

Gov. Schwarzenegger recently hinted that his current budget proposal was intended to “rattle the cage.” What he meant by this is open to debate. However, judging from initial reactions, it’s safe to say that Californians are definitely rattled.

The governor’s proposed budget contains some unpopular suggestions — closing dozens of state parks and cutting state spending across the board — but it should be remembered that this is just the opening salvo in what is sure to be a difficult budget year.

There will be the inevitable push back from Democrats. Brace yourselves for the onslaught of cries for new taxes to balance the budget. The problem with a tax increase is Californians are already overtaxed. Any new tax increases will damage our already sputtering economy and will not solve California’s chronic budget deficits.

The weight of California’s tax burden is very clear when you compare the amount of taxes each Californian pays relative to residents of other states. According to the most recent data available from the U.S. Census Bureau, Californians pay an average of $2,392 in state taxes, the highest per person of the eight largest states.

This high tax burden affects not only individuals, but also businesses in California. This year California’s business tax climate ranks 47th in the nation, based on 113 factors analyzed by the Tax Foundation. You can be sure increasing the taxes businesses already pay will only make employers less likely to either remain in California or expand their operations in California.

Some will say, if that’s the inevitable price to be paid for refilling the state’s depleted coffers, then so be it. Here’s the rub — higher taxes don’t guarantee increased revenues over time. That’s because prohibitive tax rates tend to drive businesses away, limiting future revenues and taking jobs with them. Business tax savings are one of the primary reasons for large-scale job relocations from one state to another.

California’s revenue projections are also notoriously inflated and unpredictable, thereby setting the stage for even more severe budget shortfalls in the future. In 1991, Gov. Pete Wilson and lawmakers implemented numerous tax increases to deal with an unprecedented budget deficit. However, state tax revenues continued to decline despite these tax increases. An analysis by the nonpartisan Legislative Analyst’s Office concluded revenues from the three main components of the 1991 tax increase came in much lower than was forecast, resulting in an $800 million hole in the following year’s budget.

How could that happen? Easily, if you recognize higher taxes influence the behavior and spending patterns of citizens. It is unrealistic to assume the targets of tax increases — be they high income earners, businesses, smokers, or consumers in general — will just stand still and take it on the chin with a grumble of resignation. People do react to tax increases or the threat of one. They relocate their businesses to Arizona. They move to Nevada. They quit smoking. They reduce the amount of their consumer spending. We just recently learned Volvo’s U.S. headquarters located in Irvine has just pulled up stakes and is now moving back to Rockleigh, N.J.

State revenues are expected to grow 2.1% next year. In fact, state revenues have gone up more than $27 billion during the last five years. However, in spite of these huge revenue increases, we once again find ourselves in a budget mess because lawmakers keep approving budgets that spend more money than we have. Democrats may be content to raise taxes and call it a day. I am not. It is just plain wrong to punish California taxpayers for Sacramento’s out-of-control spending. It has to stop. That’s the only way we will ever solve the budget crisis.

Democrats need to get beyond passing the buck with tax increases. Instead, we need to implement tax incentives that promote long-term and sustainable economic growth and once and for all limit spending to the amount of our actual revenues.

SEN. TOM HARMAN represents the 35th District.