In November, we will be asked to reject or approve “The California Children’s Education and Health Care Protection Act of 2016.” If approved by a majority of the voters, this ballot measure, Proposition 55, will extend to December 31, 2030 the “temporary” income tax surcharges on upper income Californians that were authorized in November of 2012 when 55% of the voters approved Proposition 30.
Prop 30 was designed to prevent “devastating” cuts to the State’s educational budget by establishing a seven year “soak the rich” income tax surcharge (2012 to 2018) and a four year quarter of a cent increase in our sales tax (2013 to 2016).
According to Legislative Analyst, this 12 year extension of the ‘temporary” income surcharges will increase state revenues by $4 billion to $9 billion a year from 2019 through 2030, depending on the economy and, importantly, the stock market. This year’s budget assumed $7 billion from these income tax surcharges.
But this is not the only “revenue enhancement” scheme that is being cooked up by our friends in Sacramento and the campaign funding leadership of the public sector unions.
State Senator Bob Hertzberg (D-Van Nuys) is pushing to extend the sales tax to include services. This so called “reform” would generate “roughly $10 billion in its first year and increasing amounts thereafter.” According to a chart prepared by the California Board of Equalization, the State has identified 15 industries and 487,000 firms that have the potential to generate $111 billion in sales tax revenue. This includes lawyers, accountants, and other value added service providers.
According to a report by State Controller Betty Yee and her Council of Economic Advisors on Tax Reform, another revenue enhancement is the “split roll” where commercial and industrial properties would be assessed at their fair market value. At a 1% property tax rate, annual “revenue gains would likely surpass $5 billion and may add up to more than $10.2 billion.” However, the split roll will require the approval of the voters since it involves amending Proposition 13, the third rail of California politics.
The folks in Sacramento and their cronies in the transportation lobby are also beating the drums for an increase our gas tax, already the highest in the nation when you factor in the impact of the “cap & trade” fees. This proposed increase is estimated to be in the range of $2 billion to $4 billion a year. This money would help fund efforts of the California Department of Transportation to repair the State’s highways, roads, bridges, and other related infrastructure.
At the same time, the State is swiping $1 billion a year from CalTrans, a bloated agency where 3,500 surplus employees are costing the State, its taxpayers, and our roads over $500 million a year.
Our good friend Hertzberg is also pushing a bill (SB 1298) that would allow stormwater / urban runoff to be considered as wastewater, thereby allowing the County of Los Angeles to levy $20 billion in fees without the approval of the voters. This would result in an increase in our real estate taxes of 8%.
Proposition 30 has done an admirable job of making up revenue shortfall over the last five years. Since 2012, the State’s General Fund revenues have increased by almost $34 billion (39%) while overall revenues, including special funds, has increased to almost $171 billion, a bump of more than 40%.
Now that income and sales tax revenues have rebounded to record levels, Proposition 55 and the 12 year extension of the “temporary” income tax surcharges represents just another revenue grab by the State, the California Teachers Association, the hospital lobby, and the SEIU (Service International Employees Union) that deserves to be rejected by the voters in November.
And while a “soak the rich” tax has a certain appeal, we need to be careful not to kill the golden goose. If only a small percentage of the upper income taxpayers and their profitable corporations and the small businesses they control decide to relocate or not invest in our economy, many of our fellow citizens will be without good manufacturing or value added service oriented jobs.
We need to send a message to the fiscally irresponsible scoundrels in Sacramento, their cronies, and the campaign funding leaders of the public sector unions that we are not their ATM. After all, we are doing more than our fair share as we have the highest income tax rate, the highest sales tax, and the highest gas prices in the country.
About the Author: Jack Humphreville is a LA Watchdog writer for CityWatch, President of the DWP Advocacy Committee, Ratepayer Advocate for the Greater Wilshire Neighborhood Council, and Publisher of the Recycler