California’s budget crisis has continued to deepen and there does not seem to be any easy solutions in sight. The budget deficit has grown to about $21 billion.  There is a critical need to close the deficit on one side and to promote economic growth through spending on the other.  One proposal to help resolve this issue is to increase taxes.

However, increasing taxes is not the right answer for California’s budgetary ills. Raising taxes is the easiest answer to a difficult problem, but it is not necessarily the right answer. In fact, most of the time it is the wrong answer that eventually leads to a worsening economic condition.

Instead of raising taxes as a quick-fix solution to a deep problem, a positive way to deal with the problem is to create new jobs and promote growth through tax cuts and less regulation. Instead of trying to extract more money from existing taxpayers, focus must be placed on expanding taxable incomes and adding new people into the mix.

A simplistic solution like raising taxes may work in certain situations, but not in a situation where the budgetary deficit has already run into several billions of dollars and the economy is practically at a standstill. High taxes in such a scenario discourage investment in the economy and reduce consumer spending. Reduction in spending power and consumption levels will in turn affect business and investment. The California economy must be stimulated with business spending and with the right economic policies that encourage sustainable job growth.

Additionally, before increases in taxes are looked at, California must look at itself and see what it can do to cut down on wasteful government spending. Emphasis must be placed on improving the work efficiency of state employees, even if it may require re-training and upgrading their skills. Pay cuts and furloughs are other solid options instead of a tax hike.

Such committed efforts from the state can eventually pull the economy out of its current crisis without having to over-burden the people of California with higher taxes!