Californians Wary of Tax Hikes to Fund Earthquake Recovery as Damage Assessments for Last Week's Northridge Temblor Come in, Officials at Both the Federal and State Levels Begin Sorting out Who Will Pay Costs of Rebuilding

By Laurent Belsie, writer of The Christian Science Monitor | The Christian Science Monitor, January 24, 1994 | Go to article overview

Californians Wary of Tax Hikes to Fund Earthquake Recovery as Damage Assessments for Last Week's Northridge Temblor Come in, Officials at Both the Federal and State Levels Begin Sorting out Who Will Pay Costs of Rebuilding


Laurent Belsie, writer of The Christian Science Monitor, The Christian Science Monitor


HAVING weathered the jolt from last week's earthquake, southern California - and the nation - are now confronting the financial aftershock. They do not like what they're feeling.

The quake will be costly - and may be especially costly for California taxpayers.

Already, state officials and politicians are proposing raising sales and gasoline taxes to pay for the damage. Many Californians - from business leaders to citizens - say they are already taxed enough.

"We have all kinds of businesses already leaving because of all our taxes," groused one Ontario, Calif., resident on an electronic bulletin board the day after the quake. "Now another tax hike! NO NO NO NO NO!! We can't afford it."

Even if the federal government ends up paying more than the state to rebuild the Los Angeles area, it's the California taxpayer who is likely to bear the biggest financial burden, according to a Tax Foundation analysis done for the Monitor.

Just raising the state sales tax by a quarter-cent would cost California households an extra $25.43 to $2,162.07 a year in taxes, depending on their income, estimates Arthur Hall, a senior economist at the foundation. The average tax increase: $70.30.

That figure is far higher than the average $43.98 increase the federal tax filer would pay if the United States decided to raise income taxes to pay $5 billion for southern California's recovery (an estimate that is considered high.)

If the state sales-tax hike is approved, "anybody who buys anything in California is going to end up paying more," Mr. Hall says.

It is too early to tell how much last week's quake is going to cost. California Gov. Pete Wilson (R) has estimated damage at up to $30 billion. But such early disaster estimates are notoriously unreliable.

"They're always overstated for the obvious reasons," says George Horwich, professor of economics at Purdue University. "It's a natural human tendency to overstate the degree of your loss in the hope that compensation will be forthcoming."

Historically, the gap between estimated and actual costs of a disaster has yawned wide. When Douglas Dacy of the University of Texas at Austin researched natural-disaster costs in a 1969 book, he found that early estimates grossly exaggerated the final cost - sometimes by three times or more. …

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