Governor Schwarzenegger is proposing to raise the state sales tax by 1% on a “temporary” basis (don’t make me laugh). This is to raise revenues to close the $15 billion budget shortfall that California is facing, and will make the sales tax in some counties, which can add voter-approved surcharges, as high as 9.75%.

Government spending in California is completely out of control. Compensation of public employees is ludicrously high as powerful unions have extorted higher and higher settlements from compliant politicians, and non-union employees have ridden on their coat-tails. Gerrymandering has made elections a non-event, and the incumbent Democrats have thwarted all attempts at reducing expenditures.

Californians have revolted before, passing the now-legendary Proposition 13 to limit the increases in property taxes. The politicians then tried raising the state income tax on higher incomes, which actually resulted in a revenue decline the last time they tried it, as the affected taxpayers then worked harder at avoiding taxes. Failing that route, they then turned to borrowing. Past abuse and the credit crunch are closing that off also (The only state with a lower credit rating than California is Louisiana), so they’re back to the well for a higher sales tax. The outcome is predictable - people will move heaven and earth to avoid spending money on taxable items in California. Look for a big battle on sales tax collection with the out-of-state e-retailers, like Amazon, as well as more retailer bankruptcies.

The tax grab is getting bigger and bigger, even the little things like $4 to cross the state bridges, soon to be $5. A fleabite, you say? Not if you commute to work every day. Any move to cut expenses brings out the sob stories from the public sector unions, of course, with massive advertising. But the people are already hurting, the median house price was down 38% y-o-y as of last month and the foreclosure rate was at a 20-year high, up 260% from a year ago. At some point, the people are going to find the exactions of the bureaucrats intolerable and there will be another tax revolt.

Alexis de Tocqueville said that “in a democracy, people get the government that they deserve.” So true.