Although hundreds of election results remain to be decided across California, thanks to millions of vote-by-mail ballots still being counted, we can already project with reasonable accuracy the total amount voters approved in new taxes and borrowing. At the local level, new taxes nearly always are approved by voters. In 2016, out of 224 local tax proposals, voters approved 71 percent, adding $2.9 billion in new taxes. As shown on the table, if a similar percentage of November 6, 2018 local tax measures are approved by voters, California’s taxpayers will be providing local governments with another $1.6 billion per year.
Total Estimated New Annual Taxes Approved by California Voters
November 2018, $=Millions
While these new local taxes add billions – over time, tens of billions – of additional burden on California’s already beleaguered taxpayers, state ballot measures often offer even more significant tax increases. This November, voters turned down an opportunity, via Prop. 6, to eliminate an estimated five billion in new gasoline taxes. In all, California’s voters enabled another $6.1 billion in annual taxes, in a state that already has among the highest overall tax rates in the U.S.
California’s Total New Debt
The impact of new taxes is immediate. Rates go up, revenues increase, and government budgets swell. Compared to taxes, the impact of bonds is greater in the long run, but harder to recognize. In reality, bonds are just deferred taxes. From a financial perspective, it would almost be preferable to use taxes to fund many projects that currently rely on borrowing, because at least taxpayers would only be paying principal, and not interest. For example, if you assume 3 percent inflation, the present value of the payments on a $1.0 billion bond (5% interest, 30 year term) is $1.3 billion. That is, in real dollars, using a typical example, bond financing costs taxpayers 30 percent more than paying for services using operating funds. But the seduction of borrowing is hard to resist: big money today, while mortgaging tomorrow.
Total Estimated New Borrowing (incl. Annual Payments) Approved by California Voters
November 2018, $=Millions
As it is, this November, voters mortgaged a lot of tomorrows. And as always, the big money in the case of new bonds was almost all local. In 2016, of the 193 new local bond measures, voters approved a whopping 94 percent of them. This added $32 billion in new debt, equating to an estimated $2.1 billion in new annual principal and interest payments. As shown on the table, if a similar percentage of November 6, 2018 local bond measures are approved by voters, California’s taxpayers will owe another $15.5 billion. The principal and interest payments on this new debt will cost taxpayers another $1.0 billion per year.
At the statewide level, despite rejecting Prop. 1, the water bond, voters approved three new major state bond measures totaling $6.5 billion. Adding that to the likely $15.5 billion in local bonds, Californians this November will have added $23.0 billion in debt, costing $1.5 billion per year in annual payments of principal and interest.
California’s Total Accumulated Debt
Who was it that said, “a billion here, and a billion there, and pretty soon we’re talking about serious money”? That would describe California’s total state and local government debt. When you look at what constitutes California’s total debt, accumulated over decades, it puts the relentless drive for higher taxes into context. The next table summarizes California’s total debt, as estimated by California Policy Center researchers Marc Joffe and William Fletcher in a 2017 study entitled “California’s Total State and Local Debt Totals $1.3 Trillion.”
Added in column two of this table is the estimated annual payments on this debt. As can be seen, the conventional debt – bonds, loans, and other contractual debt – paid back over 30 years at an interest rate of 5 percent, is costing California’s taxpayers $27.7 billion per year. Add to that, of course, annual payments of another $1.5 billion on new debt approved by voters earlier this week. But it’s in the unfunded liabilities for public employee retirement benefits where truly serious money burdens California’s taxpayers.
California’s Total Estimated State and Local Government Debt
The story of how California’s taxpayers ended up on the hook for unfunded retirement pension liabilities easily in excess of a half-trillion dollars defies glib explanations. Anyone wanting to dig deep into California’s public sector pensions is encouraged to read the California Policy Center primer “Resources for Pension Reformers” and click on the many links for in-depth analyses of this complex topic. Simply put, an unfunded pension liability is the difference between the assets being managed by a pension fund at any time, and the present value of all promised future payments to retirees and active workers that have been earned up to that same point in time.
Over nearly three decades, some critical mistakes were made in California’s public employee pension fund management. Pension benefits were increased, again and again, by politicians eager to curry favor with public employee unions, but didn’t want to blow their current year budgets by granting salary concessions. Instead, they sweetened future pension benefits which did not incur significant immediate costs. Then the required annual costs to fund pensions were underestimated. Rates of return on invested pension fund assets were overestimated. Life expectancies were underestimated. And as the assets of California’s state and local pension systems began to fall well behind the value of their liabilities, creative accounting was employed to understate the amounts needed to reduce that debt.
Because of all these unknowns, there is a wide range of estimates of California’s total public sector pension debt. At the least it totals over a quarter trillion; at most, about triple that amount. This much is reasonably certain: if there is an economic downturn, and if pension benefits aren’t further reduced, it is likely that payments on pension debt will need to be in excess of $50 billion per year. In all, absent reforms and an epic continuation of the bull market, Californians are likely to be paying over $90 billion per year to service their state and local government debt. More than half of that will be to pay down unfunded pension liabilities.
The Public Sector’s Insatiable Desire for More Money
It is impossible to view California’s relentless pattern of tax increases apart from its public sector pension crisis, which is just beginning. Currently, the estimated annual payments on unfunded pension liabilities in California is estimated at $17 billion. Imagine the impact of that amount soaring to over $50 billion. And, of course, the taxpayer cost for pensions isn’t just to pay down the unfunded liability. The “normal cost,” that amount each year that has to be paid to fund the future pension benefits just earned in that year, is also rising. Based on modest adjustments to the assumptions governing projections of pension solvency, and based on official announcements already made by California’s largest pension fund, CalPERS, the normal costs for pension benefits plus the unfunded payments for pensions are estimated to rise from $31 billion in 2017 to $59 billion by 2024. No tax increase, anywhere so far, not even all of them added up, are sufficient to cover this shortfall.
If analysts find California’s looming pension funding crisis alarming, public employees who receive these pensions find it terrifying. That’s why, when a new local tax or bond measure is on the ballot, local governments use taxpayer funds to engage in “information campaigns” aimed at their voters that come very close to being political advocacy. Sometimes they cross that line. After such activities in support of a local sales tax increase in Los Angeles County, the California Fair Political Practices Commission found cause to charge the county, as well as the individual members of the Board of Supervisors, with 15 counts of campaign finance violations.
Californians had a chance to apply vigorous pressure to its elected officials by passing Prop. 6, which would have repealed the gasoline tax. That repeal would have cost state and local governments $5.0 billion per year. Why wouldn’t Californians seize an opportunity to lower what are the highest gas taxes in the U.S.? The answer reveals more about how far California’s public sector is willing to go in its desperate need for more revenue.
Earlier today and in the aftermath of the Nov. 6th election, Carl DeMaio, a former member of the San Diego City Council, who launched the Prop. 6 campaign, described the tactics of the opposition. California’s attorney general is responsible for reviewing ballot initiatives and approving the final wording of these initiatives as they appear on the ballot. According to DeMaio, rather than objectively describing the intent of Prop. 6, which was to repeal the new gasoline tax, the attorney general’s office used focus group research to compile a title and summary for the initiative that was worded in a manner more likely to get people to vote no. But it didn’t end there.
Not only is California’s attorney general alleged to have doctored the language of Prop. 6 to draw down voter support, California’s public sector unions spent millions on an opposition campaign. Overall, the opposition to Prop. 6 spent $50 million on their campaign, compared to only $2.6 million spent by its proponents.
Even in California, $50 million buys a lot of airtime. Lost on California voters, sadly, was the irony of a veteran firefighter who made $324,000 in 2017, serving as the main television spokesperson opposed to Prop. 6 which would have lowered taxes. California’s public sector unions collect and spend at least $800 million per year. They can, quite literally, spend as much as they need to spend to defeat candidates and propositions that do not favor their own interests.
Why don’t California’s voters and policymakers overcome high taxes and an unaffordable cost of living? Partly it’s due to the grip that public sector unions have on politicians, which prevents the state legislature from ever getting spending under control. Partly it’s the lack of any effective opposition, since the supposedly tax averse Republican party in California is a hollow shell, lacking on-the-ground infrastructure, strong candidates, or a shared and compelling political agenda. Saddest of all, it’s because the media in California is entirely unwilling to make the connection between public sector compensation, the power of public sector unions, and the punitive taxes and living costs that are its consequences.
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With the 2018 general election a few weeks away, it’s time to review just how many tax increases are on state and local ballots in California. And while media attention focuses on the statewide tax measures, even bigger money is represented by the sum of hundreds of proposed local tax increases.
Every election cycle, the California Taxpayers Association (CalTax) produces a list of local tax and bond proposals. After every election, they provide information as to how many were approved by voters and how many failed. Using CalTax data, it can be seen that in November 2016, California’s local voters approved 181 bonds, mostly for school construction, totalling an incredible $32.3 billion. Annual payments on these bonds will cost California’s taxpayers an estimated $2.1 billion per year. At the same time, local voters approved 159 new tax measures, mostly increases to local sales taxes and parcel taxes, adding another $2.9 billion in annual payments.
If you add up all the voter approved new taxes in November 2016, state and local, you have to include not only $5.0 billion in new local taxes and payments on local bonds per year, you also have to add the voter approved statewide measures. That would include Prop. 51, adding yet another $9.0 billion in school bonds (estimated payments $585 million per year), and Prop 55, the extension of the “temporary” increase to state income taxes on personal incomes over $250,000 per year (estimated collections, between $4.0 billion and $9.0 per year), and Prop. 56, the $2.00 tax increase per pack of cigarettes (estimated collections just over $1.0 billion per year).
Before turning to 2018, it’s important to also note that in 2016 the Democrats recovered their two-thirds majority in the state legislature, meaning they could pass new taxes without voter approval. And in 2017, that’s exactly what they did, adding twelve cents per gallon to the already high state taxes on gasoline and increasing vehicle registration fees. Voila, another $5.4 billion per year in taxes on Californians.
When considering how California’s proposed new taxes will fare with voters in November, history is a good indicator. In November 2016, ninety-four percent of local bond measures were passed by voters, and seventy-one percent of new local taxes were approved. Similarly, this past spring, in the primary elections of 2018, California’s voters approved eighty-three percent of local bond measures ($200 million per year in annual payments), and sixty-five percent of new local taxes ($228 million in new taxes per year). Statewide, Californians approved a $4.0 billion “water” bond (Prop. 68), which equates to another $260 million per year in annual payments.
Which brings us to November 2018. The table below shows 125 new local bonds are proposed. If they are all approved by voters, that will add another $1.2 billion in annual payments. In addition, 259 new local taxes are proposed, which if approved will total another $1.6 billion in annual payments. This time, along with the perennial hikes to sales taxes and parcel taxes, the other popular new mode of taxation is marijuana, with 73 of California’s cities and counties proposing to cash in on sales of recreational cannabis.
California’s Local Tax and Bond Proposals – November 2018
If historical trends apply this time, California’s voters will likely approve four-fifths (or more) of the local bond measures, and two-thirds (or more) of the local tax increases. This will equate to roughly $2.0 billion in new taxes and payments on bonds per year. And then there are the statewide initiatives.
On California’s November ballot there are four bond proposals, totaling $16.4 billion in additional borrowing. Prop. 1 issues $4.0 billion in bonds for housing programs and veterans’ home loans. Prop. 2 sells future revenue from the millionaire’s tax for $2 to guarantee $2.0 billion in bonds for homelessness prevention housing – that’s tax revenue that has to be made up somewhere else, so yes, it counts. Prop. 3 issues a whopping $8.9 billion in bonds for water-related infrastructure and environmental projects. And Prop. 4 issues $1.5 billion in bonds for children’s hospitals. Total payments on these bonds? Another $1.1 billion per year.
To summarize, in 2016, voters approved new taxes and payments on bonds (not including the $4.0 to $9.0 billion per year in “millionaire” taxes that were not new, but were continued by the passage of Prop. 56) totaling $6.5 billion per year. In the 2018 June primary, California’s voters approved another nearly $700 billion in new taxes and payments on bonds. And this November, voters have the opportunity to approve (or reject), $3.6 billion per year in new taxes and bond payments.
For the children. For education. For safety. For safe drinking water. The list goes on, and the stories are compelling. But here’s the problem: Even if all of the 2018 tax and bond payments are approved, and those payments are added to the payments on new taxes and bonds already approved in Nov. 2016 and June 2018, the total is “only” $10.0 billion. Why “only”? Because the estimated payments on public employee pensions in California are estimated to increase from $31 billion in 2018 to $59 billion in 2024, and that is the “normal” scenario, not one reflecting the impact of a major correction in the value of stocks, bonds, and real estate.
Money is fungible. When more tax revenues go to pension funds, vital publicly funded programs are either defunded or new taxes are imposed to keep them alive. Similarly, when more tax revenues go to pension funds, maintenance projects that might have been funded using operating budgets, suddenly become capital projects requiring debt financing.
Californians may expect a deluge of new tax and bond proposals for many years to come.
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Every two years, around this time, political mailers inundate the mailboxes of California’s registered voters. This week, many Sacramento residents received “Vote No on Prop 6″ mailer. Prop 6 is that pesky, subversive citizens ballot initiative that, if approved by voters, will roll back the gas tax.
But Prop. 6 isn’t the topic here. Rather, the topic is all taxes in California. Why is there relentless pressure to increase them? And what special interests are paying for these campaigns to increase (or preserve) taxes across California?
In that context, this No on Prop. 6 mailer is instructive. Because blazoned across the cover of this four page, 8.5″ x 11” glossy full color flyer, is Darrell Roberts, representing the California Professional Firefighters. Roberts is the president of IAFF Local 2180, the Chula Vista Firefighters Union. In addition to his duties as president of Local IAFF Local 2180, Roberts is a Fire Battalion Chief for the Chula Vista Fire Department. In that capacity, he earned $327,491 in 2017, including $99,887 of overtime.
Now let’s back up for just a moment and make something perfectly clear. This isn’t about disrespecting firefighters in general, or Mr. Roberts in particular. Quite the contrary. Firefighters perform dangerous, challenging jobs that require years of intense training. Every year in California, a few of them die in the line of duty. In some years, more than a few. Furthermore, firefighters constantly witness trauma, often horrific, every time they respond not only to fires, but medical emergencies and automobile accidents. Their jobs are tough.
For these reasons, critics of public sector compensation trends should always temper their observations with respect. It is far too easy to observe, accurately, that many other jobs carry higher risk of injury or death, while forgetting that first responders stand between citizens and mayhem not just in normal times, but also in extraordinary times. In a truly cataclysmic event, and 911 is a perfect example, firefighters are obligated to occupy the front lines. They are the ones who must stop whatever destructive storms afflict our society. They are the ones who must go in before safety is restored, and rescue the stranded victims.
With that necessary preamble, and without diminishing it in any way, a difficult conversation remains necessary regarding public sector compensation, and the political power of the public sector unions who push for continuous increases in compensation.
A California Policy Center analysis published nearly two years ago, using 2015 data, calculated the average pay and benefits for a California firefighter at $196,370 for those employed by cites, $198,959 for those working for counties, and $145,938 for those working for the state. Those averages have not fallen in the past three years, and they do not include the additional cost per firefighter, if and when their retirement pensions are adequately funded.
Mr. Robert’s own City of Chula Vista provides an example of these rising pension costs. In 2017 the average pay for a Chula Vista firefighter was $189,715. That included, on average, $41,112 for overtime and $31,381 for employer contributions to their defined benefit pensions. But as they say, you ain’t seen nothin’ yet.
Using CalPERS own projections for the City of Chula Vista, the average normal contribution by the city to fund police and firefighter pensions is expected to grow from 20 percent of payroll in FYE 6/30/2017 to 22 percent of payroll by FYE 6/30/2025. Nothing terribly dramatic there. But, get this, the so-called unfunded contribution – that additional amount necessary to pay down the city’s unfunded liability for police and firefighter pensions – is expected to grow from 13 percent of payroll in FYE 6/30/2017 to 32 percent of payroll in 6/30/2025.
Put another way, the City of Chula Vista’s employer payments for public safety pensions are going to go from 33 percent of payroll to 53 percent of payroll by 2025. And if the stock market decides to end its already record breaking bull run, harming the CalPERS investment portfolio, these payments will go much higher.
It’s also important to recognize the relationship between excess overtime expenses and the cost of pension and health benefits (including retirement health benefits). When public employers pay more than 50 percent above regular salary to fund pensions and benefits, and in the case of public safety, they do, then it makes financial sense to pay time-and-a-half to existing staff, since that will cost less. Lost in that equation is the stress this excessive overtime inflicts on overworked personnel, as well as the lost opportunity to bring benefit overhead back below fifty percent.
Collectively California’s state and local employers, based on projections already released from CalPERS, are going to have to increase their total contributions to public employee pension funds from approximately $31 billion in 2017 to an estimated $59 billion by 2025.
Maybe veteran firefighters truly believe they are entitled to annual pay and benefits packages in excess of $200,000 per year, or in Mr. Roberts case, in excess of $300,000 per year. But with all the political power these unions wield, they ought to be thinking of ways to help lower the cost-of-living in California. That would help everyone.
And perhaps it may disturb even the most respectful and appreciative among us, when a public servant who made $327,491 last year, asks us to support higher taxes.
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2017 Salaries for Chula Vista – Transparent California
California’s Public Sector Compensation Trends – California Policy Center, January 2017
Comprehensive Annual Financial Report, FYE 6/30/2017 – City of Chula Vista
Safety Plan of the City of Chula Vista, Annual Valuation Report as of 6/30/2017 – CalPERS
Miscellaneous Plan of the City of Chula Vista, Annual Valuation Report as of 6/30/2017 – CalPERS
2017 City Data, Government Compensation in California – California State Controller
California Government Pension Contributions Required to Double by 2024 – California Policy Center, January 2018
California has some of the highest gasoline taxes and transportation fees – including hidden cap and trade costs not accounted for in the taxes and fees – along with the lowest ranked roads in the nation. This year, the majority Democratic Party found new ways to spend the $6 billion to $9 billion in additional tax revenue, passing the largest state budget in California history.
Funding to fix our roads and bridges, however, was woefully inadequate.
Now the majority party has decided that California’s roads are a mess. The governor has called the Legislature into a special session, which has manufactured a sense of urgency. Statistics have been gathered; analyses have been performed; bills to address the problem have been put forward. What is the one common component? The majority wants more of your money to “fix” the situation.
In fact, the “transportation” special session appears to be an exercise designed to pressure legislators into supporting a tax hike on gasoline – even though Californians already pay the nation’s highest taxes.
Raising revenue is one option. However, cutting costs is a better one that should not be passed over. A great place to start is to review the agency charged with care and maintenance of your state’s transportation infrastructure – the California Department of Transportation.
An audit of Caltrans by the California State Auditor found that 62% of the completed projects had costs that “exceeded their respective budgets. ”The California State Auditor found that these overruns “totaled more than $305 million of the $1.4 billion in support cost expenditures for the projects.”
Consider these facts:
1. CA’s gas taxes are the 4th highest in the nation.
According to the American Petroleum Institute, California’s 61-cent-per-gallon gas taxes are the 4th highest in the nation, behind only Pennsylvania, New York and Hawaii. This does not include the recent addition of extra cap-and-trade taxes resulting from bringing fossil fuels under California’s AB 32 law.
2. CA’s gas prices are the nation’s highest.
According to AAA, the current national average price for a gallon of ‘regular’ gasoline is $2.63. California’s current average price is $3.69 per gallon (as of 8/5/15).
3. CA’s gas tax & transportation fees yield $10.6 billion annually.
According to the State of California, Department of Transportation, Division of Budgets, 2014/2015 Fiscal Year estimates, the State brings in at least $10.6 billion in taxes and fees “dedicated to transportation purposes.”
4. Caltrans spends just 20% of that revenue on state road repair & new construction.
Last year, Caltrans spent $1.2 billion in state road maintenance & repair, and $850 million in new construction. Similar amounts are planned for the 2015/2016 CA State budget.
5. Caltrans wastes half a billion $$ annually on extra staffing.
The Legislative Analyst’s Office (LAO) report on the review of the Caltrans’ Capital Outlay Support Program found that the agency is overstaffed by 3,500 positions at a cost of $500 million per year. That’s a half-billion tax dollars – for salaries, health care and pensions for extra staffing – that does nothing to improve our roads.
6. CA’s roads rank near the bottom in every category, including:
– 46th in rural interstate pavement condition
– 49th in urban interstate pavement condition
– 46th in urban interstate congestion
7. Poor road conditions cost Californians $17 billion yearly in vehicle repairs.
34% of CA’s major roads are rated to be in “poor” condition. Driving on roads in need of repair costs California motorists $17 billion a year in extra vehicle repairs and operating costs – $702.88 per motorist.
A report, titled “Transportation Strategies and Practices: Lessons for California,” which was issued on February 12, 2008 by Tom Warne and Associates, LLC, provides a couple of interesting charts.
The first shows that California lags in the use of outsourcing:
The second shows the lack of importance transportation funding has been in California, on a per capita basis, with other neighboring states:
Even though the report is a few years old, California still hasn’t improved or become more nimble to our changing economy.
Caltrans must become a lean and efficient agency with staff focused on projects and outside consultants utilized when workloads increase. It is much easier to reduce outside contractors than it is to reduce staff. Yet, early retirements are in order, and streamlining must be proven long before taxpayers are asked to contribute more.
During these special legislative sessions bills can be introduced. Consequently, I introduced Senate Bill X1-9, the Responsible Contracting for Caltrans Act. It addresses the glaring flaws at Caltrans.
First, SBX1-9 would prohibit the use of temporary funding sources, such as loan repayments, bond funds and grant funds, to hire permanent staff.
Second, SBX1-9 would increase the share of contract employees in the Caltrans’ COS program by 5 percent annually, beginning in 2016, until a 50/50 ratio of state staff and contract employees is reached in 2023.
Controlling the hiring of permanent staff with limited-term funds and increasing the requirement to contract out are simple, no-nonsense approaches to reining in a department that has lacked forward vision. Who could be opposed to such common sense? You guessed it – the public employee unions – whose primary role is to increase their membership at any cost.
Does California have an infrastructure maintenance deficit? Absolutely. Reducing Caltrans’ bloated size before proposing that California families pay even higher taxes to fix our roads is the right thing to do.
John Moorlach, R-Costa Mesa, represents the 37th state Senate district.
Jerry Brown, who as a candidate for governor in 2010 repeatedly pledged he wouldn’t raise taxes without a popular vote, has called for a special session of the Legislature for the purpose of raising taxes. This despite the fact that general fund revenues have outstripped estimates by almost $6 billion. So now we have the very real possibility of higher gas taxes, higher registration and vehicle license fees with proceeds promised for roads – all without a vote of the people.
That a politician would change his views on adding to the public’s tax burden is hardly a surprise. Those of a certain age will clearly remember presidential candidate George H.W. Bush proclaiming, “Read my lips, no new taxes,” before his later, as president, breaking his pledge.
In his effort to increase the tax burden on motorists, Brown is receiving support from the usual suspects including Democrats in the Legislature who have become the party of the public employee unions favoring more revenue for higher pay, and radical environmentalists for whom the price of fossil fuels can never be high enough. Even some in the business community are signaling that they, too, could support higher levies on California drivers if the result is improved roads. (By now you would think that these otherwise astute political players would realize that Faustian bargains with the tax-hikers always end badly).
The impediment to the grand scheme of those who want ever higher taxes is, of course, Proposition 13 which requires a two-thirds vote of each house of the Legislature. Deprived of their supermajorities in the last election cycle, Democrats would need help from Republicans. So the big question is will the Democrats be able to pick off a handful of Republican votes.
We sure hope not. Not only would this be bad policy but the California Republican Party has, in recent years, made progress in establishing a reputation as the only party to represent average working folks against multi-billion dollar tax increases. And voting for tax hikes as a Republican is a surefire way to end a political career.
Moreover, to their credit, Republicans have proposed credible transportation plans of their own to provide needed funding for road construction and maintenance, but without raising taxes.
Nonetheless, we’re hearing rumors that a couple of Republicans might acquiesce to a tax increase. They should know better as California already ranks second in the nation in gas tax rates, even without counting the hidden carbon tax. The new tax would make the state an outright number one and would add to the already highest gasoline prices.
Expect Republican legislators to be wined and dined and invited to dance by those lobbing for higher taxes. These favor seekers will be wearing their most benign looking sheep costumes but legislative Republicans should be aware that these are actually wolves who, once they have gotten the votes they want, will turn on them without provocation if it suits their interests.
Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.
Once again it is time for taxpayers to get a good grip on their wallets because Sacramento politicians are looking to extend the “temporary” taxes imposed by Proposition 30, approved by voters less than two years ago.
There is nothing more permanent than a temporary tax. They are as immortal as a vampire and nearly as hard to kill. Take the “temporary” tax imposed in 1898 to pay for the Spanish-American War. It remained on the books until 2006 when Congress discovered that the Spanish-American War ended a century earlier.
More recently and more relevant to Californians, two decades ago the political establishment — both Republicans and Democrats — backed a 1¼% increase in the state sales tax, a half cent of which was supposed to be temporary. (The tax increase was justified, in part, on the argument that the higher taxes were less pernicious than deficit spending. But this tax package just institutionalized even greater spending and debt.) At the time, to quell opposition, Sacramento politicians went out of their way to draw public attention to the temporary nature of the half cent increase. But within a year of its expiring, it was reinstated and made permanent through a ballot measure whose passage backers claimed was absolutely essential to maintain local public safety services.
In 2012, Gov. Jerry Brown and his government employee union allies backing Proposition 30 promised the tax increases would be temporary, that the sales tax increase would expire in 2016 and the income tax increase on upper-middle income earners, and above, would expire in 2018. But the politicians, who have been lying in the weeds waiting until closer to the expiration date to spring an extension of the tax increases on unwary taxpayers, are already tipping their hand.
In January, state schools chief Tom Torlakson called for an extension of Proposition 30 beyond its full expiration in 2018. “We need to renew Prop. 30,” the Superintendent of Public Instruction told a meeting of PTA leaders.
Now state Sen. Mark Leno has spoken up, telling an education rally at San Francisco City Hall it’s time to start thinking about the need to extend the Proposition 30 tax increases. One of the reasons Leno opposes the governor’s effort to establish a prudent budget reserve is that such a “rainy day fund” would make it harder to justify a continuation of higher taxes on sales and incomes.
While it is common to question the veracity of politicians, in this case, it would be wise to accept these Sacramento leaders’ comments as genuine expressions of their greed for ever greater amounts of taxpayer dollars
Gov. Brown, to his credit, has urged majority Democrats in the Legislature to make due with current revenues and keep faith with the voters by letting the taxes expire on schedule. But even this responsible approach, a reflection of his minimalist approach in his first two terms, may not help taxpayers much as we approach 2018, the year, that even if he is reelected, Brown will end his final term.
Meanwhile, the Sacramento politicians are salivating over the prospect of new and extended taxes. “Shoot for the moon,” Sen. Leno told a reporter. “We might not get there, but that’s where we have to start.”
However, Leno and his colleagues are not shooting for the moon, they are shooting for taxpayers’ wallets.
Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.