California is projected to have another budget surplus this year and is required by law to pass some of it on to residents.
This would likely mean another round of tax rebate checks like the ones that went out in 2021.
Some lawmakers have suggested the state should consider a more long-term fix, such as cutting taxes, instead of a mass rebate sent out every year.
Q: With a second year in a row of a projected budget surplus, should California consider cutting taxes?
Chris Van Gorder, Scripps Health:
YES: Perhaps the state should acknowledge that California has the highest income tax in the nation and consider at least a modest tax cut. If the tax rates were cut for only the lower brackets, it would benefit all taxpayers and counter any argument that tax cuts disproportionately benefit the wealthy. And if the state would consider using some of that surplus to help hospitals — which received no financial support from the State during COVID — that would, of course, be welcome.
Norm Miller, University of San Diego:
YES:Roughly 600,000 people and numerous businesses left California in the past 15 months to move to lower-cost locations, with state income taxes being a major consideration. We should utilize some funds to alleviate our next water crisis, including the only permanent remedies: desalination plants, water reuse and better storage. But we should also lower state income taxes before the politicians figure out how to spend the money on "temporary" projects that never go away.
Jamie Moraga, IntelliSolutions
YES: It's anticipated that California will again have a significant budget surplus in 2022, which is well over the state constitutional limit. Californians face some of the highest sales, income, and business taxes in the nation. Lowering taxes is a more efficient and cost-effective way for the state to allow taxpayers to retain more of their income to help stimulate the economy, pay down debt, and add to their savings. Voters should also approve any budget surplus money to be allocated to infrastructure, education, or health care costs.
David Ely, San Diego State University:
YES: As a state with a reputation for relatively high taxes, California should consider cutting taxes. However, policymakers should be cautious about using the current budget surplus to justify such a step. California tax revenues can vary widely from year to year. While tax collections have been high recently, they will surely fall if the state economy slows and capital gains diminish. Planned expenditures will need to be aligned with any permanent tax cut.
Ray Major, SANDAG:
YES: California is constitutionally limited to the amount of money the state can maintain as a surplus. Let's be clear, the state over-collected from the residents of California to the tune of $14,000,000,000. This money belongs to the residents, not the state, and should be returned as a rebate or reduced taxes. If you were overcharged for a meal, or car, or your insurance, wouldn't you expect a refund?
Reginald Jones, Jacobs Center for Neighborhood Innovation:
YES: Given that California's cost of living continues to escalate on several fronts — housing, gasoline, and other goods and services — both a cut in taxes and providing a rebate to residents would curb economic strain. Also, it could slow people from leaving the state. With several options for the surplus, some of the spending should flow to under-resourced schools in low- and moderate-income neighborhoods to enhance school quality where it is needed most.
Kelly Cunningham, San Diego Institute for Economic Research:
YES: If California has such a huge budget surplus, why is the state borrowing billions from Uncle Sam to pay unemployment benefits? Government does not tax to get money it needs, but always finds needs for the money it gets. As Assemblyman Vince Fong says, the surplus is a function of the fact Californians are overtaxed. Rather than the hugely inefficient process of rebating taxpayer's overpayment of taxes, it would be much better to lower taxes.
Phil Blair, Manpower:
YES: This will send a huge message that California is open for business. It is now viewed as the most anti-business state in the nation. Companies talk about their ABC expansion plans: Anywhere But California. The state cannot sustain itself from tourists and startup businesses, that once they are successful either move their business or production to a low cost, low tax state. Our high state income taxes are also encouraging our very wealthy citizens to leave.
Gary London, London Moeder Advisors:
YES: But for the next taxable year. Don't bother with the rebate. Rather, I would urge lawmakers to address critical issues that will require funding including water shortages, wildfires, homelessness and crime. It seems to me that taxpayers could be rewarded for their generosity by a reciprocal effort on the part of lawmakers to tackles these problems, as long as they have our money.
Alan Gin, University of San Diego:
NO: The current situation allows the flexibility to deal with the volatile fluctuations in the state's tax revenue. In the past, when revenues dropped severely, there were budget crises and big cuts in programs, including education. The policy in place provides enough resources to deal with those downturns but also has provisions for returning money to taxpayers when the economy is doing well. It would not likely work in reverse (cutting taxes and then trying to get more when revenue falls).
Bob Rauch, R.A. Rauch & Associates:
YES: We should cut taxes, begin to build our reserves up for the future and work on key infrastructure issues like water storage. It is clear that we are overtaxed when compared to other states, we know there will be a need for a robust emergency fund at some point and we have water challenges. Stop sending checks out to try and earn votes and start planning! Tax cuts are way more effective than one-time checks.
James Hamilton, UC San Diego:
NO: The cyclicality of California's revenue sources leads to huge shortfalls when the economy turns down and surpluses when the stock market picks up. When times are good, we should use the surplus for one-time items that will help us weather the next downturn. I would put some of the funds into state savings, some into high-priority infrastructure needs like water supplies and fire-fighting ability, and the rest into a one-time tax rebate.
Austin Neudecker, Weave Growth:
YES: We must ensure our state's finances are sustainable through downturns and disasters. I am glad some of the surplus will be deployed to bolster much-needed public schools and infrastructure budgets. That being said, Californians continue to be one of the most taxed populations. I am concerned about companies, especially tech, and wealthy residents migrating away. A permanent tax cut would need to be intelligently targeted and linked with some reduced spending.
