THE BLOG
07/23/2009 05:12 am ET Updated May 25, 2011

California Tax Strategy -- An Open Letter to Governor Schwarzenegger

Dear Governor Schwarzenegger:

California is faced with economic catastrophe. Only new sources of untapped revenue (with corresponding reduction in expenses) can save our great state.

Please consider:

1. Immediate imposition of a 10% State License Fee to sell addictive products: alcohol (not beer or wine), tobacco, guns, junk food, pornography, gambling.

These new license revenues may support new bonds, restore our State's credit ratings, and finance deficits. If tobacco costs California $15 billion per year (as estimated in a 2005 Los Angeles Times article), what is the total cost of all these addictive products? Consumers get ill, multi-national corporations profit, taxpayers pay for the expense, while California goes broke.

2. Legalize and tax marijuana (the State's biggest cash crop).

3. Transfer inmates incarcerated for drug possession out of jail, into rehabilitation (exchange jail time for needed community services, e.g. California infrastructure projects).

4. Encourage international investment in California by promoting a $500,000 State investment (in an approved CIS Regional Center) as a route to a "green card" under the Federal EB-5 Visa Program.

5. Establish a joint Federal-State task (IRS/Franchise Tax Board) to collect income tax on unreported income (e.g. UBS clients).

6. Institute telecommuting twice a week for State employees (i.e., reduce commute traffic, decrease oil demand, lower gas prices, minimize pollution, accidents, injuries).

7. Privatize State owned real estate, shift tax benefits to the private sector (i.e., depreciation, interest) -- eliminating State costs for improvements, capital expenses, repairs, depreciation, labor, in exchange for favorable long-term property leases (for State buildings, only).

8. Open up to the public, former military bases, to be run as State parks, run by private companies who pay fees to California.

9. Institute a 1% State license fee on all internet sales in California (withheld at the source of sale).

Publicly, as Governor, you have stated that State income taxes cannot fund California's revenue needs. You address part of the problem but offer no solution.

The problem is twofold:

1. In 2004, your ill-fated decision to reduce California's vehicle license fees (by 2/3) has created a $30 billion State revenue shortfall ($6 billion per year over 5 years), nearly 75% of the State's current budget deficit of $42 billion.

2. Inexplicably, California continues to tax productivity (income tax) and investment (capital gain tax) while financing addictive consumption. In California, multi-national corporations make billions of dollars selling addictive products to consumers. Addicted California consumers get ill, have recurrent health and family problems while California taxpayers "pay the bill."

Unless you want your legacy as Governor to be the economic devastation of California (and the physical destruction of Californians) you immediately need a new tax policy (and new tax advisors).

Your advisors have failed you. Your economic policies both do not work and have no public support. The State is bankrupt. Isn't it time you tried new ideas? Thank you.