In fact, despite Brown’s reserves, the state may be less prepared for a future economic downturn than it was when he became governor for the second time in 2011.
While higher spending is largely locked in place, the revenue stream is now even more unreliable because it is even more dependent on the rich. Their taxable incomes, particularly from investments, are highly volatile and they might be enticed to flee California now that federal tax law nearly erases their ability to write off their high state taxes.
Instead of relying on an inadequate “rainy-day” reserve, Brown could—and should—have championed a much-needed overhaul of the state’s tax system to reduce both the volatility and the impact of a new recession. But he refused to take on that difficult task. It could haunt his successors.
View Article