Plans to deal with homeowners' and the state's budget shortfalls

On the one hand, today's Business section has the story "A plan to slow home losses," Gov. Arnold Schwarzenegger's proposed 90-day freeze on pending home foreclosures.

The governor unveiled a foreclosure relief and long-term mortgage reform initiative as part of an economic stimulus package that he plans to put before lawmakers in a special session of the Legislature scheduled to begin today.

"The single most powerful action our state can take to shore up its economy is to help Californians stay in their homes," Schwarzenegger said. "Curtailing foreclosures will stop the downward spiral of home prices, free up needed cash for homeowners, help save jobs and make an immediate positive impact on our economy."

The governor's effort is meant to slow the pace of foreclosures that hit a record high of nearly 80,000 during the third quarter, according to research firm MDA DataQuick.

Then on the other hand, we have "Schwarzenegger calls for sales tax hike, cuts in services" at latimes.com.

Gov. Arnold Schwarzenegger unveiled a plan today for a steep sales tax increase, new levies on alcoholic drinks and the oil industry, and deep cuts in services to wipe out a budget shortfall that is expected to swell to more than $24 billion by the middle of 2010.

The linchpin of the plan is the sales tax increase of 1 1/2 cents on the dollar. ...

Schwarzenegger also proposed extending the sales tax to appliance and furniture repair, vehicle repair, golf fees, veterinarian services, amusement parks and sporting events. He proposed a 9.9% tax on the extraction of oil from California ground, the expansion of sales tax to some services, and a 5-cent-per-drink tax on alcohol. His plan also includes a $12 increase in annual vehicle registration fees.

The governor also wants a number of significant spending reductions, including cuts of $2.5 billion from schools and community colleges. He called for requiring state workers to take a mandatory day off without pay each month and would eliminate two of their state holidays.

One hand giveth, the other taketh away.

--Lauren Beale

Thoughts? Comments?

Credit:  Rich Pedroncelli / Associated Press

Comments

[Nick]

Cliched metaphors aside, this is really a case of both hands taketh away. On the one hand, taxes are going to get jacked up tremendously to partially compensate for this round of out-of-control spending based on ridiculously optimistic assumptions. On the other hand, we're going to also hurt the real estate industry businesses, prolong the housing market correction, stall getting houses into possession of people who can/will pay property taxes, and push off any eventual recovery.

Actually, this is more like a case of one hand taketh away, while the other hand smasheth you in the face while the mouth berateth you silly outdated notions of fairness and not rewarding housing speculators.

[Johann Wagener]

Maybe ARNE should consider selling the HUMMER?

[CompaJD]

He's going to terminate us.

[Ken]

My wife and I both work full time and make under $100,000. When/if our taxes go up again, we are leaving for a more worker friendly state. That should help California, you think? I'm done with this CA nonsense.

Ken

[Nancy]

Wow. So much for Arnold being a Republican. He's going to prolong this crisis - making it worse with this foreclosure freeze. Then he's going to kick us while we are down by taxing us more.

I'm so ready to terminate this governorship.

[Nick]

As much as I agree with Ken's sentiment (and will likely leave California in the next few years), just leaving the state may not be enough to salvage a reasonable income. Every working family is likely to suffer somewhat under the Obama administration, especially if you have any level of actual savings; remember, the new mantra is "redistribute the wealth". As someone with positive net worth, I'm well above the national average; and consequently I expect to suffer dramatically, both in income and reduced value of my savings. My hard-earned wealth is practically begging to be redistributed to people who are now suffering due to overindulgence, gambling, speculating, lack of education, poor work ethic, ineptitude, or any number of other circumstances beyond their control. Welcome to the Obamanation.

[Carracticus]

Where do you think taxpayers money is going...?

37 MILLION illegal aliens--that we support for parasite employers, according to the Tucson sector Border Patrol union local 2544, not the propaganda brought forth by the Liberal national press and special interest lobby of only 13 million. An additional half-million coming every year.

A massive financial impact on our economy by importing the worlds poor.

Go to www.numbersusa.com for immigration facts not lies.

Learn about many positive legal cases won at www.judicialwatch.org We are beginning to stop the open border zealots and immigration special interest lobby.

[WEJ]

I just checked and the sales tax in NewYork City is 8.38%. If Arnie gets his way sales tax in LA County will be 9.75%, plus the extra 0.50% for mass transit (the "subway to the ocean"). So, we'll be paying 10.25% sales tax!

Just think of it...New York City could become a haven for tax weary Angelenos.

President Obama better implement that middle class tax cut PRONTO.

[mucker]

Nick

sometimes you make sense and sometimes your just full of it. But if you indeed are up for redistributing your wealth I'll take my cut - just put me down for the circumstances beyond my control and thanks for caring man.

[problemwithcaring]

Nick the Bitter? How about I comfort you an old RushBo line. If you don't like the new world order, STFU & leave. That's right- ''Earth,'' 'cause every free country in the modern world has a progressive tax system.

God I hate this blog now.

[Doug in Toronto]

Sounds like Ahnold is proposing a consumption tax. In England it's called VAT (Value Added Tax) and in Canada it's the GST (Goods and Services Tax). In some eastern Canadian provinces, GST is blended with provincial sales taxes to form a single Harmonized Sales Tax. What's important is: here in Canada, it applies to a wide range of things, from haircuts to restaurant meals over $4.00, to customs duties. The name says it all: Goods and Services. Tax.

[TakeFive]

1. Open up the coast for limited drilling. Will provide income and help America.

2. Identify and deport incarcerated illegal aliens. Some estimates are the 30% of the jail population is illegal.

3. Eliminate state agencies and boards, like Accupunture Board, with its 5 board members and office staffs. Do we need an Office of Aids? Doesn’t the federal gov already spend billions on this disease?

Just look at the list:

http://www.ca.gov/About/Government/agencyindex.html

[Dave]

Nick, with all due respect, don't you think that waaaayy too much is being made of Obama's "spread the wealth around" quote?
I consider myself an independent but closely associate with traditional Republican ideals where the economy is concerned with the exception of complete deregulation. Now believe it can never work due to the fact that it relies too heavily on human nature to function properly - and we all know how that always turns out.
But, the reality is that our country is not, has never been and will never be a true Democracy. Our scaled income tax code has "spread the wealth around" from day one. And my parents, both proud, card carrying Republicans now participate in the socialized health care system known as Medicaid.

I just don't thnk it's as big a deal as it is being blown up to be. But then again, maybe I have a tendancy to think that way given I'm a product of the socialized public school system.

Look, if we are a socialist country in four years than drinks are on me for everyone on the blog, even Pete if we can track him down (Stolis of course) ;-)

[TC]

This all sounds like Indentured Servitude to me.

Ok, so you help out some fool who bought a really big house they can't afford to keep them in California then you tax the crap out of him after strapping them with 100k of negative equity for the life of the loan on a home that will take 15 years to recover.

Well done sir!!

But they still have that nice house........that costs more to heat and cool than a reasonable mortgage. And hopefully there are still jobs for these people so they don't go belly up in a couple years anyway.

[mucker]

In my post above the word it at the end of the first sentence had the letters sh in front of it as in sh it. That message was flagged as possibly spam. There is nothing spam about it. I was simply snared in a net of the thought and speech police. Goodbye blog (it is not LA Land any more without Peter) and I hate humans controlling the ideas of other humans for whatever foolish rationale.

[DAve]

ha ha Carracticus
Betcha didn't even notice that even with all these illegals taking jobs from the finite pool available our friends the Dems are committed to EXTENDING UNEMPLOYMENT BENEFITS. Watch Arnie do the same thing.
Ha ha Yankee you're so screwed
I'm so glad my WWII combat veteran father isn't here anymore to see what we did with what he and his buddies sacrificed so much to provide us-

[dclogang]

I'm going to buy everything I need (not want) that I can on Amazon.com (no sales tax).

Groceries are not taxed either.

If this goes through we'll have to cut back in a major way.

We've been saving like mad to save up for a house. We make under $100,000/year so I'm looking forward to tax cuts if Obama can deliver that promise that is.

I'm disappointed with arnold. I voted for him. I hope he has a different plan up his sleeve. I think he should let those folks lose their houses and go after the lenders and if the banks fail.. so be it. I also think CEO's of all the financial institutions should get nailed to the wall for letting this !$!@$ happen.

I'm really depressed.

[Gregory]

Progressive taxes:

Not true, Estonia, which is a EU member has a flat 22% tax.

[Enlightenment]

Both Californians and Illegals are the cause of their own problems. Suck it up losers!

[Nick]

Do I think too much is being made out of Obama's "spread the wealth around" quote?

Well, see, this is the problem with politicians in general, especially those as eloquent and careful not to say anything too precise as Obama has been. If you want to figure out what they are actually thinking and/or planning, you need to look at their statements when they are not carefully prepared and vetted.

In Obama's case, as far as I can tell, the quote exemplifies his personal take on what needs to change in the country. Let's look at some specifics:
- He's proposing a $500 billion followup "stimulus" wealth redistribution package (unless you think rich people will get an equal check relative to their taxes, which didn't even happen with Bush's package)
- His tax plan makes the tax scale more lopsided ("progressive", in the common misnomer)
- Raising the cap gains tax rate hurts the people who save/invest, and takes more of their money
- Creating inflation takes more money away from people who try to save it, and it's redistributed as the government spends

So, no, I don't think too much is being made out of the quote... I think it exemplifies the goal of the Obama administration, for better or worse (obviously for better for the majority of Obama's supporters). Unfortunately, I happen to both have a high paying job which I sacrificed to obtain (in education and industry), and savings I worked hard for, so naturally I'm on the worse side of Obama's plan. It sucks to be Hank Reardon when the Looters come calling, as inevitable as the end-result may be.

As for Arnold's "tax more" plan, I think it is equally dumb. As I've said before (on my blog if not here), there should be a limit on the amount any government is allowed to tax, since they always spend more than they collect. At least with a hard limit on the amount they take, we wouldn't have to deal with the constant "just a little more" nonsense every year.

[amir]

All these tax increases to avoid the obvious problem in the California tax code: prop 13.

This state is too dependent on income taxes. Instead, they should cancel prop 13 and adjust property taxes to the value of the house today. People who live in the same street should pay equal taxes for equal services. The situation right now is ridiculous.

Of course, no one will want to anger the home-owning baby boomers, so instead California infrastructure and education system will be obliterated, while millions of working gen-X and gen Y will leave the state.

It's true that canceling prop. 13 will cause a further reduction in home prices, but the government is lying to you when it says that stopping the decline of home prices will help the economy. Actually, the reverse is true. A quick and painful return to economically viable prices will attract working families to the state and will cause a recovery in the construction business. A very slow decline - engineered by the government and paid by tax payers - will destroy workers in the construction business will long term hurt the economy.

[Luka]

Maybe I'm being too simplistic but with the surge in home prices over the past 5 years shouldn't the state have had a a massive unexpected windfall to save or use to pay down debt? Did they take all of that windfall and view it as an annual expected income source? Stupid, stupid, stupid

We are Angeleno natives but between the stupid prop R (year we're in the valley so what does it do for us) and now this we are contemplating leaving as well.

I'm proud to say I didn't vote for Arnold or Bush... either time

[Ace]

Arnie may want to fix prop 13 today. It is a simple fix. Adjust everyone's property taxes to the current schedule. Those people who cannot afford to pay the new property taxes can defer the taxes until the sale of their home. Once the house sells, the taxes are taken from the profits. Arnie sells more bonds in the meantime while waiting for the new revenues to catch up.

I am tired of seeing people in million dollar homes paying $1000 a year in property taxes while their neighbors pay more than 10 times that.