Jobs Uptick Not the Whole Picture

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To understand the disconnect between California's governing system and its reality, consider two recent bits of news.

Recent jobs reports show that the state's economy, and hiring, are rebounding. And recent projections show that state tax revenues are coming up billions short of expectations.

Put those two things together, and the picture is dangerous.

Even a rebounding economy can't bring back state revenues. Which is evidence that the state's governing system, and particularly its tax system is broken.

Why? Because the tax system doesn't fit the economy particularly well.

This is especially true in sales. California is becoming more of a service sector economy, but there is no state sales tax on services -- even though services are, by many estimates, half the economy. The state sales tax is on goods.

This suggests the debate California should be having about taxes is about fixing the system. How do we capture more of the economic growth of the economy? How do we produce more revenues -- while keeping the state competitive on taxes? How do we make the system fairer?

But that's not the debate we're having. Instead, we're having an argument between two tax initiatives that keep the underlying tax structure in place -- and raise taxes temporarily, mostly on income (Gov. Brown measure also includes a small temporary hike in the sales tax).

That's too bad. California can't afford -- literally -- to wait to fix its tax system.

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Lead Prop Zero blogger Joe Mathews is California editor at Zocalo Public Square, a fellow at Arizona State University’s Center for Social Cohesion, and co-author of California Crackup: How Reform Broke the Golden State and How We Can Fix It (University of California, 2010).

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