Charting a Different Course

Tuesday June 08, 2004

The City of Berkeley’s plan to reduce its $10 million budget deficit relies most heavily on cuts to city services while relying very little on fee and/or tax increases to generate new revenue. Balancing the budget in this way will exacerbate, at the local level, the tremendous economic inequality that exists in California and throughout this country as a result of unbridled military spending, unjust federal and state tax policies, and the erosion of the public sector. 

The United States ranks first in terms of wealth inequality among all industrialized nations. The richest one percent of Americans owns 40 percent of the wealth. In California, during the so-called “boom” of the 1990s, incomes of the poorest 40 percent of California’s families fell approximately five percent. In contrast, the average income of the wealthiest five percent of California’s families increased by 50 percent. This income gap widened despite the fact that the poorest 20 percent of Californians worked 378 hours more per year in the late 1990s than they worked in the late 1970s. Children, tragically, are not sheltered from the storm: Nearly one quarter of California children grow up in poverty. 

The Bush administration, of course, has contributed greatly to the problem of wealth inequality in this country. Bush is spending over one billion dollars each day on the military while ensuring that he bankrupts the country further by giving huge tax cuts to the wealthiest Americans. As a result of Bush’s tax cuts, people earning one million dollars a year have seen their incomes go up by $32 an hour, while the increase for those earning $20,000 a year is a meager 21 cents an hour. To make matters worse, a congressional investigation found that, for the years 1996-2000, approximately 60 percent of U.S. corporations paid no income taxes. The effect of Bush’s “tax relief” plan is to send the country spiraling into debt at a rate of one million dollars per minute. And with deficits surging out of control, Bush has the ammunition he needs to justify deep cuts into public services that serve the disabled and working poor, as well as significant cuts in federal funding to state and local governments. California will likely lose $4.5 billion in federal dollars linked to affordable housing, public education, community development, and environmental protection in the next year. 

And how has our governor responded to the budget deficit in California brought about, in part, by Bush’s voodoo economics? By slashing much needed public services, of course, and failing to raise revenues by keeping a highly regressive and unjust state tax system in place. In California, the poorest 20 percent (incomes less than $18,000 per year) pay 11.3 percent of their income in state and local taxes, while the richest one percent (incomes greater than $567,000) pay only 7.2 percent of their income in taxes. And like his counterpart in the White House, the governor tells Californians that we have no choice but to “tighten our belts” and make deep cuts in to public services, which means, among other things, taking money away from cities and counties throughout the state. 

And this brings us to the City of Berkeley, which has already cut $6 million from its budget over the last two years and still faces a $10 million deficit, in large part due to the aforementioned cuts in state funding. The city’s response to the current deficit has been to make 20 percent cuts to city departments and to propose salary reductions for city employees. Only three percent of the $10 million deficit is scheduled to come from fee and/or tax increases. 

As the city grapples with the budget deficit over the next couple months, we must ask ourselves whether we want to be part of the problem, or part of the solution. The problem is staggering wealth inequality that exists throughout this country and, in fact, right here in Berkeley. The solution is to maintain the quality of public services by initiating progressive tax and fee hikes so that wealthiest among us, who have benefited disproportionately from regressive federal and state tax policies, pay their rightful share. I encourage the mayor, the City Council, and the residents of Berkeley to work together to ensure that the city’s budget is balanced in a fair and just manner.  


Michael Marchant works for the City of Berkeley.