June 6 marks the 40th anniversary of voters’ overwhelming approval of Proposition 13, which has been protecting all California taxpayers ever since.
Some people mistakenly think Prop. 13 protects only homeowners, because it cut the property tax rate statewide to 1 percent and put a stop to uncontrolled increases in assessed value. But it did something else, too. It required voter approval of local tax increases and set the threshold for approval of special taxes at a two-thirds vote.
For 40 years, big-spending politicians have been looking for loopholes.
Take parcel taxes, for example. A parcel tax sounds like a tax on UPS deliveries, but it isn’t. It’s a tax on real estate parcels. Under Prop. 13, politicians can’t raise property taxes that are based on the value of property, but they figured out that they could add a flat tax to property tax bills if it wasn’t based on value.
Under Prop. 13, two-thirds of voters have to be convinced to approve parcel taxes.
Politicians figured out that the two-thirds threshold would be easier to reach if they exempted a lot of people from having to pay the tax. Certainly people who won’t have to pay a tax are more likely to vote for it. And politicians who vote for the exemptions can say they voted for a tax break, even though they were raising taxes at the time.
An example of this was the Legislature’s action in 2008 to exempt people on Social Security Disability from paying education parcel taxes. HJTA opposed this bill because it undermined the two-thirds vote requirement for parcel taxes established under Prop. 13. The more classes of people who are exempted, the more the two-thirds vote will be watered down, and the easier it is to raise taxes.
Taxpayers are hit twice by the exemption trick. Taxes are raised more often, but the exemptions mean the government receives less revenue. So the likelihood of other taxes being raised to make up the difference in the future is that much greater.
But when something is working for the politicians, it tends to stick around.
Politicians love picking winners and losers. It means power over the lives of others and provides a great source of campaign contributions.
The “progressive” legislators who control California’s government favor government employee union organizations — the most powerful force in Sacramento. Every favor granted to public sector unions is a transfer of wealth from taxpayers and the private sector to government employees and the public sector.
Right now, the Legislature is considering a bill that would exempt teachers and education support staff from paying education parcel taxes. Senate Bill 958, which has passed the Senate and is now in the Assembly, was initially a statewide proposal but has been narrowed to target only the Davis Joint Unified School District in Yolo County.
If the politicians are able to pull this off, they’ll be able to do special favors for targeted groups of supporters while raising everybody else’s taxes and setting the stage for even more tax increases in the future.
Not surprisingly, SB958’s supporters include the California Teachers Association. For them, this bill is a win-win. Not only do they get to give their union members a free gift, but they also make it easier to pass taxes with a two-thirds vote.
This is a dangerous path. It’s divisive to award tax breaks based on political affiliation, and there will be no end to it. If the teachers get a tax break, what about the nurses? What about the police and firefighters? Where do the exemptions stop? If public employee unions can effectively raise their own salaries by lobbying for new taxes that their own members won’t have to pay, then our government has been converted into a slot machine. There will be more losers than winners.
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Jon Coupal is president of the Howard Jarvis Taxpayers Association.
With all the state and local taxes on the November ballot, one would think that government at all levels in California was starved for revenue. But even a cursory review of the Golden State’s “tax machine” reveals that the tax burden is already too heavy for many to bear. California has the highest income rate in America (likely to be extended for another 12 years) and the highest state sales tax rate. And despite Prop 13, our per capita property tax collections ranks no lower than 14th in the nation.
In the June primary, voters already passed 29 out of 40 local tax increases. But those taxes register as barely a blip compared to the earthquake confronting voters in less than three weeks. According to the California Taxpayers Association, there are 228 local tax measures representing a cumulative tax increase of more than $3 billion per year, along with 193 bonds (more than $30 billion’s worth) that would dramatically increase annual property taxes.
After the June primary, this column observed that the high rate of passage reflected not so much a love for higher taxes as it did the fact that the tax raisers have become experts at gaming the system to pass tax and bond measures. Highly paid political consultants tell local officials not to publicize tax elections to the entire community, but to target only their supporters. This means running stealth elections, communicating (in the case of school bonds) with only administrators and construction firms who are always more than willing to finance political campaigns and, of course, public employee unions who never met a tax they didn’t like.
The strategies that the pro-taxers employ to extract money from an unsuspecting citizenry are endless. For example, many school boards, cities and counties do all they can to time elections so that potential opponents have inadequate time to mobilize. The ultimate goal is to prevent an opposition argument from even appearing in the ballot pamphlet. On countless occasions, taxpayer advocates have been blindsided by proposed tax increases because they were only afforded a few precious days to submit an argument. And when it is too late, there are few legal remedies.
The ultimate insult to taxpayers, of course, is when local governments use public dollars to engage in political advocacy to influence an election. In theory, it is illegal for officials to use public resources (including public funds) to urge a vote for or against a political issue. But, in practice, it happens all the time. Two weeks ago, both the Howard Jarvis Taxpayers Association and the Central Coast Taxpayers Association filed a complaint with the Fair Political Practices Commission alleging campaign reporting violations of the Political Reform Act by the County of San Luis Obispo, the San Luis Obispo Council of Governments (SLOCOG) and the Yes on Measure J Committee, a group pushing a local transportation tax. These government entities have spent nearly a quarter of a million taxpayer dollars on promotional materials and government employee and contractor compensation supporting Measure J.
As the November election draws near, the complaints about government interference in elections have ramped up dramatically. In Sacramento, the Sacramento City Unified School District used “robocalls” to contact thousands of parents with “important information” about the benefits of a parcel tax as well as statewide Proposition 55. According to the Sacramento Bee, the district sent the scripted messages recorded by five district trustees through its automated telephone message distribution system, explaining how the two tax measures would raise money for school programs and services that otherwise could be slashed. (This despite the fact that education spending in California has exploded since 2010).
Such communications are neither information nor balanced. They are always one-sided puff pieces designed solely to extract yes votes from uninformed voters.
California voters need to be alert to the lies, distortions and illegal expenditures of taxpayer dollars when considering any request for higher taxes. Yes, government services require public dollars. But before voting yes on any tax increase, ask yourself why is it that other states have markedly better public services without the high price tag.
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.
Election month is rapidly approaching. That’s right, “election month” because, since 2002, California voters have been freed from casting ballots in person on the official Election Day, which this year is November 8. Voting by mail begins October 10.
Polls show that many voters are disenchanted with the coming election because the major candidates for president are held in such low esteem. However, whether you are a strong advocate for a candidate or are disillusioned, it would be a huge mistake to ignore the ballot measures. Besides candidates, voters must decide on 17 state propositions and hundreds of local tax and bond measures designed to dip into taxpayers’ wallets.
A number of the state measures will impact taxpayers. Proposition 55 is an extension of California’s highest state income tax rate in the nation, which was sold as “temporary” when approved by voters in 2012. Proposition 56 would increase tobacco taxes to fund ongoing programs that will demand funding, even when the number of smokers declines. Proposition 53 is also important as it would expand taxpayers’ right to vote on major state bonds for mega-projects costing more than $2 billion.
To help voters make informed decisions, the Howard Jarvis Taxpayers Association has created a special website, California Initiatives 2016, which has simple summaries of what the 17 initiatives will do and links to the websites of the sponsors and opponents of each measure. This helpful taxpayer tool can be found at http://cainitiatives2016.com.
However, for average citizens, the real pocket gougers will appear on local ballots. These include 184 school bonds with a face value of over $25 billion. The actual cost to taxpayers of these bonds, which place a lien on property to guarantee repayment, is more than double face value after interest is included.
Remember, whether or not voters think these local bonds are justified, taxpayers are entitled to good value for each hard earned tax dollar. This determination can best be made by researching the measure as well as the school district’s record of responding to the needs of students, parents and taxpayers. A complete list of these local school construction bonds can be found at http://www.bigbadbonds.com.
Taxpayer advocate Richard Michael, who maintains a bond tracking website, reminds us that promoters of these bonds are enamored with the following words to convince you to vote yes: “21st century;” “school improvement;” “college and career ready;” “technology;” “leaking roofs;” “asbestos;” “safety systems;” “aging facilities;” etc. To this list we would add “broken toilets,” a favorite with the Los Angeles Unified School District that managed to push through 5 bonds in a period of 13 years. The almost universal use of these words is unlikely a coincidence, since so many bond backers employ the same consultants who make recommendations on how to frame arguments to increase the chances of passage.
School bonds, of course are not the only tax measures that will appear on local ballots. There are other bonds, parcel taxes, sales taxes and utility user taxes to be voted on throughout California. For example, Bay Area voters are facing a $3.5 billion BART bond and Los Angeles County will decide on an additional half-cent sales tax to support the MTA that is suffering declining ridership. All of these local measures need careful scrutiny.
While voters can still wait until the traditional “first Tuesday after the first Monday” in November to vote in person, if you have done your homework and want to share what you have learned with family, friends, neighbors and contacts, don’t wait. In the November 2014 election, more than 60 percent of California voters cast votes by mail. Information on how to be a smart voter will not help anyone who has already cast their ballot.
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.
In Chicago, escalating property taxes are headline news. With the average property tax bill due to go up by 13 percent – and more increases in subsequent years virtually guaranteed – home ownership in the Windy City is in deep peril. No one seems happy except the moving companies.
This drastic tax increase is the result of bad decisions by corrupt officials who have caved to city employee pension demands that are unsustainable without massive borrowing. And that borrowing will be paid for by massive property tax hikes. But if homeowners are considering fleeing exorbitant taxation, they may have to travel a good distance. Illinois residents, even without the Chicago pension tax, are already paying the highest effective property tax rate in the nation at 2.67 percent, according to a recent study by CoreLogic, an Irvine, California-based provider of data to the financial and real estate industries.
Nationally, the study shows the median property tax rate is 1.31 percent of value.
In addition to Illinois, states with median property tax rates of greater than two percent include New York, New Hampshire, New Jersey, Texas (which some may find surprising considering its reputation as a low tax state), Connecticut and Pennsylvania. On the low end is Hawaii at 0.31 percent.
California, at 1.12 percent, ranks 30th compared to other states. Tax seeking politicians and their special interest allies will likely consider this a failure. After all, thanks to them, California has the highest state sales tax, highest marginal income tax rates and, due to carbon charges, the highest gas levies in the nation. “Why shouldn’t we be number one in every tax category?” they are, no doubt, asking themselves.
California property tax rates are reasonable for one reason and one reason only – Proposition 13. Arguably the most famous of all initiatives in the history of the United States, Prop. 13 was the brainchild of the late Howard Jarvis. He led the effort to put the tax limiting measure on the ballot where it was approved by nearly two-thirds of California voters in 1978. By limiting annual property tax hikes to two percent per year, it made tax bills moderate and predictable.
Still, California property taxes are not low. Because of high property values, the median priced home now costs nearly $519,000 according to the California Association of Realtors. Thus, while our effective tax rate ranks 30th of the 50 states, when measuring property tax revenues per capita, we rank 14th. This belies government complaints that California is starved for property tax revenues.
Proposition 13 protections should not be taken for granted. Consider the cities of Stockton, Vallejo and San Bernardino which were driven into bankruptcy by officials who, like Chicago’s aldermen and mayor, agreed to inflated and unsustainable pension benefits for government workers. The difference is that Proposition 13’s tax limiting provisions prevent California cities and counties from arbitrarily increasing property taxes. At least for now.
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.
Former Speaker Willie Brown once said, “In the world of civic projects, the first budget is really just a down payment.” The strategy, he noted, was to start construction of a project quickly so it would be hard to stop once people learned of the real cost which, in many cases, could be many multiples of the initial price represented to citizens.
Constant cost overruns and a lack of accountability plague California’s infrastructure projects. Politicians casually throw “millions” and “billions” around like a game of monopoly, leaving hard-working families and future generations to pay the debt they so flippantly create.
Over the last 20 years, $50 billion in revenue bond debt has been issued without voter approval. A loophole in state law allows politicians to commit taxpayers to repaying enormous revenue bond debt without voter oversight.
Clever politicians and special interests have discovered this deceptive voter avoidance scheme and are using this loophole to sign Californians up for multi-billion dollar projects with little accountability and zero voter oversight. This has become a very popular funding mechanism for politicians and Sacramento insiders who would prefer to leave voters out of the process.
The result is careless project planning and massive cost overruns beyond the “first budget.”
The good news is that an initiative on the November ballot will close this loophole, hold politicians accountable and ensure that Californians’ voice is heard before they get stuck footing the bill for these huge projects. The Stop Blank Checks initiative requires statewide voter approval for state revenue bond projects that borrow over $2 billion. These are the state’s biggest revenue bond projects that affect millions of Californians. If a project results in increased water rates, commute costs or other unavoidable fees, then voters should have a say.
Voter approval requirements for new debt date back to the earliest days of California’s history. And what was true 100 years ago is even more so today: Because long term financial obligations are paid by future generations, we should not allow politicians – who desire to placate special interests which stand to gain from megaprojects – to commit to massive debt without a direct check by those who will be on the hook.
But political elites hate voter approval and over the course of the last several decades, new esoteric debt instruments like “Certificates of Participation” and “revenue bonds” have been created for the purpose of avoiding voter approval. While “revenue bonds” are not inherently bad, especially for smaller projects, they are far more susceptible to abuse than are general obligation (GO) bonds. And that abuse is more likely as the size of the project gets bigger.
But we can stop this abuse by passing the Stop Blank Checks initiative appearing on the November ballot which will give voters a voice on the state’s largest projects. This will go a long way in holding politicians accountable and force them to be more responsible with California’s long-term debt spending. Moreover, it will help voters understand the full cost of future projects that they are expected to pay.
Californians would be wise to pass the Stop Blank Checks initiative as a needed first step in addressing California’s mountain of debt.
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.
RELATED ARTICLES FROM THE CALIFORNIA POLICY CENTER
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With the recent terror attacks against France, America’s oldest ally, most Americans are rightfully concerned for the welfare of our friends abroad as well as our own safety.
With the French, we share a common heritage of a dedication to liberty. The Statue of Liberty that stands proudly in the harbor of New York is a gift from the people of France.
Acknowledging the contributions of French officer the Marquis de Lafayette to the success of our revolution, Lieutenant Colonel Charles Stanton a commander of the American Expeditionary Force in WW I, told Parisians on arrival, “Lafayette, we are here!”
While Americans and the French are victims of terrorism because of our beliefs and way of life, both nations continue to value and be grateful for our republican form of government that allows citizens to elect their representatives. And we share a common conviction that we will prevail over adversity.
In California, there is a tendency for taxpayers to see the elected Sacramento political class as working against the interests of average citizens. Nonetheless, we are grateful for elections that allow us to rehire or fire our elected representatives. As Proposition 13 author Howard Jarvis said, “The people we elect are not the bosses, we are.” Howard did not believe that complaining would solve problems, we, the people, had to take responsibility. If we don’t like the service we are receiving from the politicians, he reminded us, it is up to us to fire them and hire a better class of representatives.
Taxpayers are also grateful that over the last year, despite an anti-taxpayer majority in the Legislature, a strong coalition of grassroots citizens led by the Howard Jarvis Taxpayers Association succeeded in defeating all the attacks on Proposition 13. Taxpayers are grateful to every one of these citizen activists as well as those lawmakers who stood firm in defense of the interests of taxpayers.
Although proposals to repeal or weaken Proposition 13 will return in January, the coalition to protect Proposition 13 remains intact, and for this, too, we are thankful.
Howard Jarvis liked to quote the last line of our national anthem, “The land of the free and the home of the brave.” “This means” he would say, “that people cannot be free if they are not brave.” This remains true in the face of international terror as well as when struggling over fundamental principles of government at home.
Finally, it has been said that America has the worst government in the world – except for all the others. And while complaining about government is an American birthright, we must remember that billions of souls around the world risk imprisonment or death for speaking out against their despotic governments or leaders. So, in keeping with the season, let us be thankful that we live in a country that, despite her faults, remains the last, best hope for mankind.
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.
Editor’s Note: Here’s another government pension horror story coming from Chicago. If you think it can’t happen here, think again. California’s political system, state and local, is just as dominated by government unions as Illinois. At least in Illinois, Governor Rauner is using every legal and political weapon he can possibly muster to fight these unions. California Governor Jerry Brown, who knows better, is hoping incremental reforms combined with incessant tax increases will save the pension system. As Jon Coupal points out here, California’s taxpayers have one advantage – Proposition 13. Without the limits Prop. 13 places on property tax increases, California’s urban residents could easily end up facing what Chicago’s residents currently face, or what has already happened in New Jersey, where people living in modest homes pay annual property taxes of $15,000 or more to support – just like in Illinois, pensions for unionized public employees. First Detroit, then Chicago. One sustained market downturn, and Los Angeles will be next.
Chicago, Carl Sandburg’s “City of the big shoulders,” is about to find out just how heavy a tax burden homeowners are able to bear. Mayor Rahm Emanuel has revealed his plan for a massive property tax increase to pay for unfunded pension obligations. And for taxpayers, it isn’t pretty. The mayor wants a $543 million increase in property taxes to cover police and fire pensions, as well as additional taxes and fees to close a projected $745 million budget shortfall.
How much this will cost the average homeowner is not yet clear. Emanuel is seeking approval from the Legislature to exempt those homes worth less than $250,000 from the increase, meaning more valuable properties would absorb the entire burden.
The uncertainty may also be contributing to a decline in home values in recent months, as shown by the Case-Shiller Home Price Index. Buyers may not be so ready to cut a deal that will see them inheriting a massive property tax hike.
In order to illustrate the seriousness of the city’s fiscal crisis, and perhaps to make it easier to extort more from property owners, Emanuel is claiming that without the additional revenue, public safety will be decimated. Twenty percent of the police force and forty percent of firefighters will lose their jobs, he threatens.
Still, two years ago, the mayor foreshadowed the coming tax increase when he warned that in order to pay the mounting bill for government employee pensions — a bill that would triple in 2015 when a balloon payment comes due — property taxes could be forced to go up 150%.
This is a frightening scenario for homeowners, but not so much for homeowners in California. For us, notwithstanding equally daunting pension problems, the good news is Proposition 13. Although city mismanagement is also common to California – a number of cities have been forced to file for bankruptcy in recent years, largely due to exploding government employee pension debt – officials are prohibited by Proposition 13 from soaking property owners to cover up their dereliction. While Chicago homeowners are sitting ducks for higher property taxes, in California, increases are limited to two percent annually.
Add to the property tax limitations that Proposition 13 gives voters the final say on new local taxes and requires a two-thirds vote of each house of the Legislature to increase state taxes, and it becomes easier to understand why it is a target of so many Sacramento politicians, most of whom owe their election to their government employee union allies. If they can eliminate the impediments to tax increases established by Proposition 13, the politicians will be in a much better position to repay and reward their political benefactors.
Without Proposition 13 Californians could soon experience what it is like to live in Chicago without ever having to leave their homes. And it could be even worse. Chicago’s budget director has already gone on record as saying Mayor Emanuel’s property tax increase is not enough.
It’s been a long year in the Capitol for those of us who advocate against higher taxes, crushing regulations and wasteful government spending. The good news is that California taxpayers have prevailed in virtually all the major tax fights this year. The bad news is that, because the legislature convenes for two-year sessions, this is only halftime. On January 4, 2016 – less than 4 months from now – the same cast of characters will reconvene and we will have to fight many of the same battles yet again. Still, it is helpful to assess how homeowners and working Californians fared in the legislative process this year.
For Howard Jarvis Taxpayers Association, there is no higher priority than defending Proposition 13 against attacks. As a constitutional amendment, Prop 13 cannot be amended by the Legislature directly. But that doesn’t mean the politicians can’t inflict harm. Indeed, with a two-thirds vote of each house, the California Legislature can place proposed constitutional amendments on the ballot. And if an anti-Prop 13 measure is sufficiently enticing or deceptive, voters might unwittingly take away some of their own rights as taxpayers.
This past year, there were three such proposals. Two were efforts to lower the two-thirds vote requirement at the local level as a condition for higher taxes. This is an important part of Prop 13 because the higher vote threshold was put in place to prevent local governments from taking away the benefits of Prop 13’s reduced property tax burden by simply imposing new or higher levels of other local taxes. The third attack on Prop 13 was an effort to take away the provision that limits annual increases in the taxable value of property to two percent. Although not affecting all property owners, this dangerous bill was simply “Step 1” for the complete repeal of Prop 13.
As noted above, the good news is that all three proposals were vigorously opposed by HJTA and each was stopped. But the bad news is that these proposals to repeal or weaken Prop 13 will be back come January.
Over and above our Prop 13 victories, taxpayers also stopped a myriad of other taxes including one proposal that would have slammed every California family that relies on their car for work, errands or pleasure. That proposal would have imposed big increases in the gas tax, the cost of getting a license and the annual vehicle registration fee. Stopping that awful tax hike was a very high priority for the more than 200,000 members of HJTA.
An equally dreadful proposal to extend the sales tax to services – a bill which would slam taxpayers with over $100 billion in higher consumer costs every year – was also derailed, at least for now.
Wars are not fought alone and taxpayers should be very grateful to those legislators who stood on the right side. Because taxes imposed by the Legislature require a two-thirds vote, our allies had the votes to stop the attacks even though a large majority in both the Assembly and Senate never met a tax they didn’t like.
A huge vote of thanks is due to the Republicans and their leaders who stood united against the assault. But we should also note that several moderate Democrats withstood the withering criticism of their colleagues and the left-leaning media to actually represent the interests of their taxpaying constituents. That sort of courage is a rare thing in politics.
Californians know them well. They are the Proposition 13 “blamers.” They blame Proposition 13 for everything they see or even imagine as negative in the state of California.
Some years ago, a newspaper editorial asked if Proposition 13 was responsible for a measles epidemic saying it may have limited the availability of vaccine. A national publication suggested that O.J. Simpson’s acquittal of murder charges was due to the tax limiting measure because prosecuting attorneys may not have been paid enough.
Most recently, a column by a West Coast writer published in the New York Times claimed that one of the reasons that Los Angeles is becoming a “third world” city is reduced funding for education caused by the tax revolt that passed Proposition 13. As is typical, the writer ignores the fact that California now spends 30 percent more per pupil, in inflation adjusted dollars, than the amount spent just prior to the passage of Proposition 13 — a time when both liberals and conservatives agree that California schools were among the best in the nation.
Most Californians know they are overtaxed and that’s bad news for the blamers. And the latest news about California tax revenue is even worse for 13’s detractors. According to a review by the California Taxpayers Association of counties that have so far released their assessment rolls — showing the value of property as of January 1, 2015 — there is dramatic increase in values and that’s driving property tax revenue up rapidly. For example, Santa Clara County has seen an increase of 8.67 percent over the previous year.
Rapidly rising property tax revenue is not only making the Prop 13 blamers look foolish, it is adding compelling evidence to the argument that California should be considering tax reductions, not increases. News reports abound in the Golden State about the California economic recovery and a $6 billion dollar budget surplus. The two big sources for state revenue — sales taxes and income taxes — have preceded property taxes in seeing big increases. The latest news from county assessors simply completes the tax revenue trifecta.
Here’s the rub. Interests groups that want tax hikes — mostly public sector labor organizations — are running out of time to make a decision on which tax hikes to pursue for the November 2016 ballot. (To qualify an initiative takes about a year of lead time). We at HJTA hear that there are disagreements within those interests as to which tax hikes to pursue. Californians will almost certainly see a tobacco tax increase on the ballot as well as a possible tax on oil production. But what about extending the Proposition 30 tax hikes on sales and income? The flush status of the state budget renders those proposals questionable.
More importantly, the significant increase in property tax revenues raises serious questions about the viability of a so-called “split roll” proposal which would deprive business property of Prop 13 protections. Split roll proposals have been defeated before in California and, of all the tax hikes being considered by the tax-and-spend lobby, hitting commercial property with a $9 billion tax hike is going to be next to impossible to justify to California voters.
The next few months will be very revealing as to the tax raisers strategies. But whatever tax or taxes they decide to target, those paying the bill should be prepared to push back with the argument that California does not need any more tax hikes at all. And we should push back very hard.
A union-led initiative wants to eliminate Prop. 13 benefits for businesses.
California’s Prop. 13, wildly popular on both sides of the political aisle, is under siege by unions. Using the Orwellian name “Make It Fair,” a coalition led by the California Teachers Association, California Federation of Teachers, SEIU and their friends has decided that they can milk businesses to the tune of $9 billion a year via a new ballot initiative.
As Dan Walters explains, “Proposition 13 limits property taxes on all forms of property to 1 percent of value, plus what’s needed to retire bonds and other debts, and limits increases in value to no more than 2 percent a year, except when properties change hands. Newly constructed homes and commercial buildings are placed on the tax roll at their initial values, but are protected by the limits thereafter.”
While it is true that there are a few loopholes which probably should be addressed on the commercial side of Prop. 13, the promoters of the so-called split roll initiative are using that as an excuse to essentially gut the tax protections for businesses. It is tantamount to owning a smooth-running automobile with an oil leak and being told you should ditch the car. To that end, Jon Coupal and Robert Lapsley joined together in 2014 to sponsor a reform bill that would have eliminated the loopholes. They explain,
AB 2371 was authored by the chair of the Assembly Revenue and Taxation Committee, Raul Bocanegra, and San Francisco-area Assemblyman Tom Ammiano and supported by a broad coalition of business and taxpayer organizations. Most importantly, we also had the support of the California Tax Reform Association (who is pursuing the split roll initiative) as it passed overwhelmingly off the Assembly floor.
But then a strange thing happened on the way to the Senate. The California Tax Reform Association suddenly flip-flopped and withdrew its support in the Senate, saying that AB 2371 was not real reform after all. Why? Because they realized that taking care of a potential problem would actually create a bigger problem for their political agenda to pass a split roll initiative next year. The California Tax Reform Association and other groups want to preserve the ‘loophole’ issue as one of their key messages in the 2016 campaign.
The unions would have us think that the state of California doesn’t receive its fair share of taxes. Of course nothing could be further from the truth, and most of us who pay them as residents and property owners in Taxifornia know it. As San Diego tax fighter Richard Rider informs us:
CA now has by far the nation’s highest state income tax rate. We are 21% higher than 2nd place Hawaii, 34% higher than Oregon, and a heck of a lot higher than all the rest – including 7 states with zero state income tax – and 2 more that tax only dividends and interest income.
CA is so bad, we also have the 2nd highest state income tax bracket. AND the 3rd. Plus the 5th and 8th.
CA has the highest state sales tax rate in the nation. 7.5% (does not include local sales taxes). Two new 2015 bills seek a combined $10 billion++ CA state and local sales tax increase. At least one will likely pass.
CA has the nation’s 2nd highest gas tax at 63.8 cents/gallon (Jan., 2015). Add in the new 10-15 cent CA “cap and trade” cost and CA is easily #1. National average is 48.3 cents. Yet CA has the 6th worst highways.
CA in 2014 ranked 17th highest in per capita property taxes (including commercial) – the only major tax where we are not in the worst ten states. But the median CA property tax per owner-occupied home was the 10th highest in the nation in 2009 (latest year available).
That the teachers unions are promoting another tax raise at this time is especially galling. Due at least in part to the union-orchestrated Prop. 30 in 2012, Governor Jerry Brown has just announced a revised budget which will see billions headed for schools over the next few years, including $3.1 billion for the current year and $2.7 billion for next year. K-12 education funding will increase $3,000 per pupil – a 45 percent boost – over 2011-12 levels.
But is it possible that the unions will be affected by their own proposition? As Mike Antonucci points out, it isn’t clear if they will be exempt from the provisions in the initiative. CTA’s building in Burlingame is assessed at $22 million and its 2014 tax liability was $265,000 or about the same 1.2 percent rate my wife and I pay for our home in Los Angeles. CTA’s and other unions’ tax bills could increase considerably if the prop flies. So it would hardly be a surprise if they tried to carve out an exemption for themselves. (Please keep in mind that that at the same time CTA is trying to stick it to tax-weary Californians, it brings in about $185 million a year in forced dues and pays not a penny in state and federal income tax.)
However, even if CTA and other public employee unions are not exempted, they may figure that they will still make out because that extra $9 billion will enable the state to hire busloads of new employees, all of whom will be forced to pay the unions if they want to work. In short, it will be an investment with a great ROI.
If successful, what are the ramifications of this initiative for California? The Orange County Register points to a March 2012 study from the Pepperdine University School of Public Policy’s Davenport Institute. It found that “adopting such a ‘split-roll’ property tax would result in a loss of nearly 400,000 jobs and $72 billion in economic activity in the first five years.”
Grim news for Californians. However, Texans are grinning ear-to-ear, baking cookies and ordering evermore welcome mats.
Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.
Even good drivers get an occasional ticket. But in the last several years, there has been a perverse incentive for eagle-eyed enforcement officers to issue even more citations. We are now discovering that California drivers are a goldmine for government by the imposition of traffic fines that are absurdly excessive.
As recently as 2005, a ticket for drivers going from one to 15 mph over the speed limit in California would cost $99. This would include a base fine of $25 and additional charges of $74 to be shared with the state, the county, the courts and other programs. Only nine years later the same ticket would include a base fine of $35 and another $203 to be divided among the usual suspects for a total of $238.
Currently, a ticket with a fine of $120 will cost the motorist about $627 by the time all the additional charges are added. These penalty assessments are running more than four times the base fine.
Years ago, the idea behind traffic fines was to encourage safe driving by penalizing those who put themselves and others in danger. In 1953, the first penalty assessment was established at the rate of one dollar for every $20 in base fine. In those days the proceeds of the additional charge went to fund driver education in schools. Today, the additional charges go to pay for state and local programs and to build and renovate courthouses.
No one seems to know exactly how much government rakes in from fines and the penalty assessments, but a study dating back to 2006, when the charges were much smaller, estimated the revenue at over a half billion dollars a year.
State Senator Robert Hertzberg has introduced legislation to help those who have lost drivers licenses due to failure to pay non-public safety related tickets. Concerned that local jurisdictions have piled on fees for minor traffic violations to make up for lost revenue during the recession, he wants to match these drivers up with an amnesty program proposed by Jerry Brown that would reduce fines by 50 percent for eligible participants.
The problem is that both Hertzberg and Brown, while trying to help low income drivers, are ignoring the elephant in the room. That is the millions of average folks for whom a traffic ticket can result in having to forgo almost a week’s pay. Those in public office do not want to stand up for the typical motorists because they are not about to give up the income these punitive fines provide.
There’s no reason for these grossly inflated fines — fines that far exceed what is needed to deter unsafe driving — other than to provide the politicians with more spending money.
Excessive traffic fines are yet another example of the war being waged against the middle class by the political elite who have already burdened California drivers with high gas taxes and registration fees. For the rich, a $500 traffic fine is no big deal. For a working family, it may mean skipping a few meals.
So while the majority party in California loves to talk about how much they look out for the middle class, the reality is that they really don’t care.
Because of Proposition 13, the unions representing California’s government employees — employees that are the highest paid in all 50 states according to the Bureau of Labor Statistics — have a huge stake in who is elected to the state Legislature.
While most Californians are aware that Proposition 13 limits increases in property taxes — they can be increased by two percent annually — they are less familiar with the requirement that new or increased state taxes receive a two-thirds vote of each house of the Legislature. Proposition 13 authors Howard Jarvis and Paul Gann included this provision because they feared that if they were successful in saving taxpayers money, lawmakers, no doubt with union support, would turn around and attempt to increase the tax burden in other areas.
So the government employee unions are constantly working hard to increase their support in the legislature, with the goal of achieving a super-majority of compliant lawmakers to increase taxes and make even more money available for payroll. This explains why the government unions have been making all-out efforts in special elections that are often overlooked by the general public.
For example, government union leaders have ramped up their efforts to influence the outcome in the upcoming May 17th special election for a vacant senate seat in the Bay Area. Although the race is between two Democrats, they fear the election of Orinda Mayor Steve Glazer, a self-described fiscal conservative and social progressive. His experience in city government has taught him the importance of responsible budgeting, and this, to the unions, is intolerable. To assure his defeat and the election of union compliant Assemblywoman Susan Bonilla, they are spending hundreds of thousands of dollars of union dues to finance a mailing from a group calling itself “Working families Opposing Glazer for Senate.”
The problem is that the unions apparently do not want those who receive the mailing to know who is paying for it. State law requires that the top two contributors of more than $50,000 be listed on the mailer, but the names of the State Council of Service Employees, which gave $185,000, and the California School Employees Association, which gave $75,000 are nowhere to be found. Glazer has filed a complaint with the Fair Political Practices Commission, but more voters will see the misleading mailers than are likely to hear of a FPPC decision, and the damage is done.
Government employee unions being shy about public exposure is not unusual. Unions back a number of organizations that at first glance appear to be looking after taxpayers’ interests. In San Diego, they have set up the Middle Class Taxpayers Association that has opposed pension reform.
And, of course, there is the California Tax Reform Association, whose president, a former ’60s Berkeley radical, is dedicated to the overturning of Proposition 13’s taxpayer protections. The group’s funding and board of directors come primarily from the government employee unions.
So when a group whose name makes it sound like a pro-taxpayer organization, or that it is representing average working folks, pushes policies that would raise taxes and the cost of government, it would be wise to look carefully for the union label.
* * *
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’s rights.
Last November’s election saw some of the most craven political tactics ever seen in California. Fearful that they would lose the two thirds supermajority in both houses, many anti-taxpayer candidates – usually Democrats – attempted to portray themselves as friendly to taxpayers and in favor of Proposition 13 when, in fact, the exact opposite was true. Perhaps the worst example of this was the race between Proposition 13 ally Janet Nguyen and Jose Solorio for a Senate seat in Orange County. Democrats were so fearful of losing this seat that Governor Brown unleashed radio advertising claiming that Solorio was the candidate who would protect Proposition 13. Thanks in large part to the Howard Jarvis Taxpayers Association Political Action Committee, voters were informed that Nguyen was by far the superior candidate over the proven tax-and-spend Solorio. Thankfully, she won the election handily receiving more than 58% of the vote.
Well, to paraphrase Ronald Reagan, here we go again.
Next week, on March 17th, voters in the East Bay area of Northern California will decide who will fill a state senate seat. Or, more likely, they will pick two candidates who will face one another in a runoff election. In this race, there are three viable candidates – all Democrats. The lone Republican candidate, Michaela Hertle, dropped out of the race and threw her support behind Steve Glazer, a moderate pro-business Democrat who appears to be a good fit for this fiscally conservative, socially moderate district.
The problem is that Glazer is hated by powerful public sector labor organizations. From their view, he had the audacity to oppose a BART strike – which inconvenienced tens of thousands of Bay Area commuters – and, even worse, he said he would not support a change in Proposition 13’s rules regarding property owned by businesses.
Labor organizations would like nothing more than to prevent Glazer from being one of the top two vote getters next week. If that occurs, then the only candidates appearing on the ballot in the May runoff election would be two tax-and-spend, labor compliant, left leaning Democrats. For Proposition 13 supporters, this is the worst case scenario.
So, rather than tell the truth about their anti-taxpayer agenda, the labor organizations have financed an expensive mail campaign in favor of the Republican who has dropped out of the race. This may seem crazy, but the goal here is to confuse Republican voters into voting their party as opposed to a moderate Democrat who actually has a chance to win.
This strategy reveals two things. First, powerful public sector labor organizations will stop at nothing to advance their narrow interests. Second, they recognize – as do most political observers – that Proposition 13 and the interests of taxpayers still resonate powerfully in California.
While the Howard Jarvis Taxpayers Association PAC has not endorsed a candidate in this special election, we reserve the right to do so in the runoff election. But one thing is certain. Of the candidates, Steve Glazer appears to be the most sympathetic to the issues of concern to California taxpayers – including the preservation of Proposition 13. At a minimum, he is the least beholden to unions. And in this state, that is saying something.
Public sector labor leaders in California would rather that the public remain relatively ignorant about how well their members are compensated. But they are fighting a losing battle.
Because of California’s massive unfunded pension liability and other scandals, the public is demanding answers. Interests as diverse as taxpayer groups, business organizations, the media and some elected officials have moved aggressively, not only to address these problems, but also to ensure that there is much greater transparency about public sector compensation than we have seen in the past.
For example, attorneys at Howard Jarvis Taxpayers Association won several Public Records Act lawsuits against government interests — mostly at the local level — who were attempting to shield their compensation data from the public. And PensionTsunami.com is a website which for years has been a clearinghouse for articles on pension abuses.
But it is not just conservative interests who are shining the light. Left-of-center newspapers like the Sacramento Bee and San Jose Mercury News, have fought very hard to expose the truth on employee compensation. Self-styled progressive John Chiang developed a powerful data base open to the public about state worker pay when he was California’s Controller. He is now the State Treasurer and we hope he continues his efforts.
Public sector labor is pushing back against all this disclosure asserting that compensation is not excessive in California. For example, they recently claimed that pension benefits are comparable to Social Security payouts. But a new study by Robert Fellner, Research Director for TransparentCalifornia.com, shows that some retired public employees are receiving five times as much in pension benefits — mostly at taxpayer expense — as comparable private sector retirees receive from Social Security. The objective here is transparency, not a war against public employment. We all know someone who works for government and many are extremely competent in their jobs and deserve the pay they get. But there are several aspects of public sector compensation that aggravate taxpayers.
First is the lack of accountability. Taxpayers would gladly pay the highly competent more if government managers were empowered to fire the incompetent, indolent and criminals. Taxpayers and parents chafe at the fact that school districts can’t even fire child molesters without jumping through bureaucratic hoops costing much in both time and money.
Second, citizens are very concerned about how much of public sector compensation will be assumed by future generations, especially pension benefits and guaranteed health care for life. This is not a legacy of which we should be proud to leave our children.
Third, the personnel practices in government are totally out of sync with the private sector. Just last week, the Center for Investigative Journalism reported that thousands of state workers are hoarding vacation time. Unlike the vast majority of workers in the real world, some state employees will be able to cash out their vacation time worth hundreds of thousands of dollars when they retire.
Fourth, generous compensation for public employees would be far more palatable if others were doing well. But they aren’t. California continues to have one of the highest unemployment rates in the nation and we rank number one in poverty. The economic recovery, trumpeted by political leaders in Sacramento, is shaky at best as many have simply given up looking for work. While so many Californians have seen a decrease in income and opportunity, businesses large and small continue to flee the state to escape high taxes and costly regulations.
Transparency and a more realistic perspective toward public sector compensation will be critical to California’s future. It is simply not healthy to have one segment of the citizenry treated as a protected class to the detriment of everyone else.
* * *
Humorist Will Rogers observed, “This country has come to feel the same when Congress is in session as when the baby gets hold of a hammer.” If Rogers were a Californian today, he would say the same thing about the state Legislature.
Fortunately, for average citizens, the Legislature adjourned a few weeks ago so its ability to inflict more harm on taxpayers, property owners and businesses is on hold until the first of the year.
Lawmakers are no longer in Sacramento listening to high-powered lobbyists for special interests that back more taxes and spending. Most have returned to their home districts to beg for votes. They are likely to be attending local events and some will actually be walking in neighborhoods to convince voters they deserve to be returned to the Capitol. And, of course, they will be invading your mail box, television and radio with their political ads.
The majority of candidates for reelection will be bragging that they and their colleagues have achieved a balanced, on time budget and the state is on the right track. Their accomplishments, they will claim, entitle them to continue in office.
However, here are some things that most will not mention. California continues to have one of the highest unemployment rates in all 50 states. Our state ranks first in marginal income tax rates, state sales tax and gasoline tax. Businesses, and the jobs they provide, continue to flee the state. Even firms like Tesla and SpaceX that have been provided massive tax subsidies by Sacramento, have chosen to expand their facilities outside of California – Tesla to Nevada and SpaceX to Texas. And the Legislature continues to support subsidies to GovernorBrown’s bullet train that may end up costing taxpayers nearly $100 billion.
Another topic that most incumbent lawmakers will not want to discuss is their efforts to pass ACA 8, an amendment to the California Constitution that would make it much easier to increase property taxes to pay for infrastructure bonds. Passage of this, and other proposals that fell just short of approval this year, could have resulted in increased property taxes totaling billions of dollars, once again putting homeownership in jeopardy as it was prior to Proposition 13, when there were no limits on annual increases in the tax bill.
It is also unlikely they will want to discuss their rejection of legislation that would have slowed the implementation of carbon fees, fees that are likely to add somewhere between 15 and 40 cents to the cost of a gallon of gas after the first of the year. This is no less than a war on the poor, who already can barely afford to put fuel in their cars due not only to high prices, but also to the highest gas tax in the nation. And California has plenty of poor. We lead all 50 states in the percentage of those living in poverty.
Voters who have the opportunity to meet candidates for office, whether they are incumbents or aspiring challengers, should be prepared to ask a few questions.
Here is a good question for all candidates, “Do you believe it is fair that Californians pay the highest tax rates in nearly every category?” An excellent follow-up question would be, “Where do you stand on an extension of the Proposition 30 income and sales tax increase, set to expire in the next several years?” And, of course it is always revealing to get answers to this question, “Do you support the governor’s bullet train that could cost taxpayers a hundred billion dollars or more?”
Honest answers to these questions would provide a good gauge of how well a candidate understands that their actions have real consequences for average Californians. Some may show that they genuinely respect those they serve, while others, who are likely to equivocate when responding, will reveal that they are motivated by self-interest.
* * *
On November 4th, along everything else on the ballot, California’s voters will be asked to approve local tax measures. A list compiled by the California Taxpayers Association, “2014 Local Elections,” shows that across California’s cities and counties, local tax increases proposed include the following:
– Tax increases requiring only a majority vote: 5 business taxes, 11 hotel taxes, 9 marijuana taxes, 2 “property transfer” taxes, 1 vehicle tax, 1 property “anti-speculation” tax in San Francisco, at least 10 “utility users taxes,” 38 proposals to either increase sales taxes or extend sales tax increases that were set to expire, and a soda tax.
– Tax increases requiring a 2/3rd vote: 1 “miscellaneous” tax, 11 sales taxes, and 39 proposals to either increase parcel taxes or extend parcel tax increases that were set to expire, and 1 soda tax.
We don’t know why the soda tax in Alameda only requires a majority vote, while the soda tax in San Francisco requires a 2/3rds majority. There’s a lot of things we don’t know, and neither do the voters. As Jon Coupal, head of the Howard Jarvis Taxpayers Association, recently said, “it is no accident that local ballots are often bereft of opposition arguments. City councils will authorize the tax to appear on the ballot but then have very short time frames for arguments. Sometimes, taxpayers have only 3 days to gear up.”
Statewide measures, such as Prop. 30, the tax increase approved by voters in 2012, garner a lot of attention. But in California, most tax revenue is collected at the local level. A study released last year by the California Policy Center “How Big Are California’s State and Local Governments Combined?,” showed that 85% of California’s total state and local government spending is at the local level. Programs directly administered by the state only account for 15% of spending. Local government spending in California now totals well over $300 billion per year.
Adding measures to increase local government taxes at the last possible moment before the filing deadline has the practical effect of preventing a balanced ballot discussion of the merits of these tax increases. And invariably, the proponents of these tax increases are the people who will benefit from them – the public employee unions whose coffers are filled via automatic payroll deductions from taxpayer funded public workers. They are consistent advocates for higher taxes, advocacy backed up by campaign funding that dwarfs any other special interest. Even if they have the means, local merchants and developers rarely dare to challenge the public employee unions who represent the people they have to go to for permits and inspections. You can’t fight unionized city hall.
To appreciate just how effective government unions are at what amounts to perpetual campaigns to raise local taxes, take another look at the “2014 Local Elections” list from the California Taxpayers Association, and review the final results of the local tax proposals that were on the June 3rd ballot. Of the 32 parcel taxes proposed, 25 passed with a 2/3rds majority. Of the 11 sales taxes proposed, 10 passed with a 2/3rds majority. Of the 4 new fire taxes proposed, 3 passed with a 2/3rds majority. Out of 8 proposed “miscellaneous” tax increases, 7 passed, requiring only majority votes. And so on. Almost all of them passed – along with scores of local proposals enabling billions in new bond debt.
And for those handful of measures that fail, there’s always the next election. Once taxes are increased, they are very hard to repeal.
None of this is to suggest that taxes should never be increased. But voters should be aware of where most of the money is going. Another California Policy Center study, “How Much Do California’s State, City and County Workers Really Make?,” released in February 2014, using data from the State Controller’s Office, calculated the average pay plus benefits for California’s state, city and county workers. The findings (ref. Table 2) show that during 2012, in California’s cities, the average total pay plus benefits was $124,058; counties, $102,312; state agencies, $100,668. This in a state where the median household income in 2012 was $58,328.
There’s one more big piece to this story.
As documented in our UnionWatch editorial last week, one of the recently passed local sales tax increases – passed by Watsonville voters on June 3rd – is projected to raise $2.8 million per year to “replace police cars, add another team of paramedics, and hire more police officers.” But the scheduled increase to the annual required pension contribution for Watsonville is estimated at $2.4 million – using up nearly all of the proceeds from this new tax. There’s nothing unique about Watsonville’s situation. CalPERS has announced a 50% increase to their required pension contributions. Other pension funds in California, including CalSTRS, are following suit.
To distill this phenomenon into the most stark and simple terms possible – California voters are currently being asked to pay higher taxes so state and local government workers can continue to collect pensions and retirement health benefits that average well over $60,000 per year for non-safety employees, and around $100,000 per year for safety employees, after only 30 years of full-time work. The average Social Security benefit, after 45 years of work, starting at age 67, is $15,000 per year. Taxpayers may determine for themselves whether or not this is an equitable situation, or something that should be challenged.
* * *
Estimating America’s Total Unfunded State/Local Government Pension Liability (includes downloadable spreadsheet)
September 9, 2014
The Case for Adjustable Defined Benefits
July 31, 2014
Evaluating Public Safety Pensions in California
April 15, 2014
How Much Do CalSTRS Retirees Really Make? (includes downloadable spreadsheet)
March 12, 2014
Comparing CalSTRS Pensions to Social Security Retirement Benefits
February 28, 2013
How Much Do CalPERS Retirees Really Make? (includes downloadable spreadsheet)
February 13, 2013
How Much Do California’s State, City and County Workers Really Make? (includes downloadable spreadsheets)
February 1, 2013
Are Annual Contributions Into CalSTRS Adequate? (includes downloadable spreadsheet)
November 8, 2013
Are Annual Contributions Into Orange County’s Employee Pension Plan Adequate? (includes downloadable spreadsheet)
August 30, 2013
A Method to Estimate the Pension Contribution and Pension Liability for Your City or County (includes downloadable spreadsheet)
July 24, 2013
City of Irvine 2012 Compensation Analysis (includes downloadable spreadsheet)
April 8, 2013
How Lower Earnings Impact California’s Total Unfunded Pension Liability (includes downloadable spreadsheet)
February 18, 2013
City of Costa Mesa 2011 Compensation Analysis (includes downloadable spreadsheet)
October 3, 2012
City of Anaheim 2011 Compensation Analysis (includes downloadable spreadsheet)
August 29, 2012
City of San Jose 2011 Compensation Analysis (includes downloadable spreadsheet)
August 10, 2012
A statewide survey commissioned by the Howard Jarvis Taxpayers Association shows Californians continue to support Proposition 13 and the two-thirds vote requirement to boost taxes on property owners. By nearly two to one, voters agree that reducing the two-thirds vote to 55% to pass local bonds would place an unfair burden on owners of property.
Tone-deaf legislators have introduced a number of bills in Sacramento that would lower the vote required to pass new special taxes, per parcel property taxes and local bonds. But don’t expect lawmakers to honestly tell the public that these end runs around Proposition 13 are intended to increase taxes. The politicians would have you believe that all they are doing is trying to provide more “local control” for taxpayers. “Local control” sounds great, but examination of these bills reveals they are just schemes to make it easier for politicians and special interests that benefit from greater spending, to take more from taxpayers
Especially menacing to taxpayers is ACA 8, a constitutional amendment being considered in the Senate after narrowly passing the Assembly last year. ACA 8 would lower the currently mandated two-thirds vote threshold for local bonds to 55%, resulting in billions of dollars of new taxes being placed on the backs of property owners.
The Jarvis survey, conducted by the respected polling firm Probolsky Research, showed that if ACA 8 reached the ballot, it would face rough sledding. By a 56% to 31% margin, likely voters in the November 2014 election thought that easing Proposition 13 limits by lowering the two-thirds vote for local bonds would place an unfair burden on property owners. The question posed to respondents was as follows:
“California law requires that local bonds for roads, water projects, transit systems and public buildings be approved by a two-thirds vote of local voters. Unlike state bonds, local bonds are repaid only by property owners with a property tax that is above the one percent cap imposed by Proposition 13. There is a proposal to reduce the vote requirement from two-thirds to 55%, making the bonds much more likely to pass. Which of the following statements most closely matches your view?”
1. “Making it easier to pass these bonds is important so California can rebuild its crumbling infrastructure.”
2. “Making it easier to pass these bonds places an unfair tax burden on property owners. Government needs to do a better job of using the revenue it already receives.”
These poll results are illuminating. Not only do they suggest that voters believe they are overtaxed generally but, when they find out that a proposal like ACA 8 is actually an attack on Proposition 13, they are even less likely to support lowering the two-thirds vote. Should ACA 8 make it to the ballot — something the Howard Jarvis Taxpayers Association is trying hard to prevent — we will make sure voters understand the damage it will inflict on Proposition 13 and property owners if it were to pass.
Average Californians want to see our state thrive and understand that making it much easier to impose higher taxes on homeowners and small business owners would be a move in the wrong direction, especially after taxes were increased by $7 billion annually last year.
The Sacramento lawmakers would be wise to take note that after 36 years, Proposition 13 still enjoys wide support among California voters irrespective of party affiliation.
One lingering success of the Right in California is the public’s continued association of taxpayers’ organizations with fiscal responsibility, lower taxes, and limited government. Statewide groups such as the Howard Jarvis Taxpayers Association and regional groups such as the San Diego County Taxpayers Association maintain credibility as leaders in resisting foolhardy tax increases and wasteful spending.
This reputation translates into political power. In 2000, various interest groups wanted California voters to approve what became Proposition 39, a ballot measure that reduced the threshold from 2/3 to 55% for voter approval of K-12 school districts and community college districts to borrow money for construction by selling bonds. To create the impression of responsible oversight for spending, Prop 39 required the establishment of a Citizens Bond Oversight Committee, with the requirement that “One member shall be active in a bona fide taxpayers’ organization.”
Not surprisingly, labor unions are cleverly trying to hide behind alleged taxpayers’ organizations as a way to advance their own political agenda, which typically entails higher taxes and more government spending. One example is the San Diego-based “Middle Class Taxpayers Association,” which succeeded in 2011 in getting the Southwest Community College District board to boot a representative of the San Diego County Taxpayers Association from the Citizens’ Bond Oversight Committee and replace her with their own representative.
The new “bona fide taxpayers’ organization” representative was the political director of the International Union of Painters and Allied Trades, District Council 36 and Local 831. As you have probably guessed by now, construction unions wanted to neutralize any internal resistance to their lobbying campaign for the college board of trustees to require their contractors to sign a union Project Labor Agreement. (That requirement is now in effect.)
Then there’s the Richmond-based “Contra Costa County Senior Taxpayers Group.” It issued a letter in 2012 critical of a study produced by the head of the National University System Institute for Policy Research, who was scheduled to speak at a meeting of the legitimate Contra Costa Taxpayers Association. Little information is available on the web about this group, but considering that it seems to pop up only when construction unions are lobbying for Project Labor Agreements, it’s obvious that this group serves union interests.
Another example is revealed in the January 29, 2014 column “Lack of Leadership a Big Obstacle in Updating Prop 13” by George Skelton in the Los Angeles Times. It asks “Are California voters ready yet to change Proposition 13 so that all corporations pay their fair share of property taxes?”
Corporations are not paying their “fair share” in taxes, according to the perspective of this column. A reader might wonder what “fair share” means, and think there’s a balanced, objective, data-based argument when reading this:
Lenny Goldberg, executive director of the California Tax Reform Assn., has been pushing for years to modify Prop. 13 and close the corporate loopholes.
“We’re trying to organize, educate and expose what’s really happening,” he says. “We’re developing data and looking at some of the largest landowners in the state. If it turns out people don’t care, they don’t care.”
“My modest goal is to get it out front and center so people can have a discussion and not avert their eyes.”
According to the columnist, this taxpayers’ organization has a “modest” goal for a public “discussion” about an injustice it has identified in the tax code. Sounds reasonable. Perhaps the group wants corporations to pay their “fair share,” so that ordinary taxpayers can get a tax cut.
Or perhaps not.
Mr. Skelton has written for the Los Angeles Times since 1974, and new challenges face newspaper columnists in 2014 that were not around 40 years ago. One of them is busybody readers and their access to a newfangled “series of tubes” called the Internet that can be filled with information, such as the real identity of taxpayer groups. Any gadfly who wonders why a taxpayer organization wants to increase taxes can research it and expose it through social media.
Done! The California Tax Reform Association – of course – is yet another union front group. In 2012, 60 percent of its revenue came from these unions:
Still not sure? Here is the 2012 board of directors for the California Tax Reform Association:
The group hasn’t posted on its web site since May 23, 2012. That’s one highly-credible source! But it’s a convenient one, and deceiving too.
A lesson for citizens: just because an organization calls itself a taxpayers’ group does not necessarily mean it doesn’t want to raise your taxes or control government spending. Plenty of union money and personnel are being used to undermine one of the last defenses of fiscal responsibility in California. Check every group carefully and expose the union control to the public when you find it.
Lack of Leadership a Big Obstacle in Updating Prop. 13 – column by George Skelton in the Los Angeles Times – January 29, 2014
Real Taxpayers’ Associations
Union-Backed Taxpayers’ Associations
Middle Class Taxpayers Association
Builder Decries Loss of Oversight Members: SWC Board Replaced Two on Prop. R Committee over the Summer – Southwestern College Sun newspaper – October 7, 2011
Breaking: Labor Corruption…SD Labor Council Seeks to Oust Taxpayer Advocate from Oversight Committee – posted on San Diego Rostra by Ryan Purdy – July 12, 2011
California Tax Reform Association
Kevin Dayton is the President & CEO of Labor Issues Solutions, LLC, and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com. Follow him on Twitter at @DaytonPubPolicy.
A handful of far-left, Bay Area activists think they have come up with a clever plan to chip away at Proposition 13. Specifically, they are attempting to persuade local school boards and city councils to pass resolutions in support of removing Prop 13 protections for business property. While “resolutions” are not laws, they nonetheless can lay the groundwork for future political action.
To bolster their argument in favor of higher taxes on businesses, these activists falsely claim that homeowners are paying a greater percentage of the total property tax today than they were when Proposition 13 passed 36 years ago. In fact, the percentage paid by non-homeowner occupied property accounted for 58.16 in 1978-79 and has increased to 60.26 percent of all assessments in 2011-12, which means the percentage paid by homeowners has declined. They further justify the increase in property taxes they advocate by saying that Proposition 13 has decimated education while ignoring that, after adjusting for inflation, California is spending 30 percent more per pupil than prior to the passage of the landmark taxpayer protection.
Apparently unimportant to the radical activists is that a system where business pays more (called a “split roll” property tax) would result in a loss of nearly 400,000 thousand jobs and a reduction of billions of dollars in economic activity, according to a recent Pepperdine University study. Of course, the hardest hit by this proposed change in our property tax system would be small businesses and owners of residential rental property — renters could be expected to see an escalation in their rents.
For homeowners, higher taxes on commercial property would also be bad news because if business no longer is invested in protecting Proposition 13, homeowners would have to stand alone against the attack. When it comes to protecting Prop 13, there is surely strength in numbers.
A massive tax increase on business property would be counterproductive. As Howard Jarvis used to say, business does not pay taxes, we pay their taxes through higher prices. The best way to generate more revenue in our already high tax state is to encourage the private sector to prosper, adding jobs and improving the quality of life for all Californians. Rather than tearing down Proposition 13, those concerned about our state’s future would do better to build on the foundation Proposition 13 represents. Proposition 13 not only protects property owners from unpredictable tax increases, but the certainty in taxation allows both home and business owners to spend and invest in ways that boost the economy. Even without the increased economic activity, a portion of which is captured by taxation, the Proposition 13 system provides local government with its most stable source of revenue.
Proposition 13 is like a goose that that lays golden eggs. The problem is not the goose, but the predators who want to eat it.
For sensible school boards, city councils, organizations and clubs who want to reassert their support for Proposition 13, the Howard Jarvis Taxpayers Association makes available, on its website www.hjta.org under “Taxpayer Action Tools” a resolution commending Proposition 13 for the benefit that it provides to individual homeowners, renters, local governments and to the state’s overall economy. All are welcome to use it.
Editor’s Note: As Jon Coupal explains in detail, Prop. 13’s “coattails” are alive and well in California. In a special election a few weeks ago in Southern California, Susan Shelley, a moderate Republican whose sole message was “protect Prop. 13” has lost by a margin of less than 1%, in a district where Democrats outnumber Republicans two-to-one. She was outspent primarily by public sector unions, using taxpayer’s money to back her Democratic opponent, by ten-to-one. As public sector unions become more desperate in their attempts to protect their pay and benefits – which are now more than twice what the average private sector worker earns – they will try to overturn Prop. 13 which keeps California’s property taxes relatively low (“relatively” since asset values are artificially inflated in California, meaning actual property taxes are still punitively high). Voters, and political candidates, take note: The enemy of the “middle class family” are public sector unions. Susan Shelley told the truth about property taxes, unionized government, and how they are trying to destroy the private sector middle class worker, and she nearly won against overwhelming odds.
This is a tale of coattails. The coattails of an 800 pound gorilla known as Proposition 13.
In 1978, support for Proposition 13 swept 17 new legislators – nicknamed “Prop 13 Babies” – into office. It was clear, at the time, that Proposition 13 had very long coattails.
Over the years, the professional political class has tried to downplay the influence of Proposition 13 on electoral politics, even though polls show that it would pass by the same two-thirds margin as it did in 1978. Political consultants have advised candidates, in all but the most left leaning districts, to pay lip service to Proposition 13 but then to move on to other issues. Few candidates have been willing to make the defense of Proposition 13 the centerpiece of their campaigns.
The thinking that Proposition 13 really doesn’t matter to today’s voters has been turned on its head by the recent results from the Special Election in the 45th Assembly district, located in the Los Angeles suburbs in the southwest San Fernando Valley.
When Representative Bob Blumenfield resigned in the middle of his term to take a seat on the Los Angeles City Council, voters chose as the top two candidates for a November 19th runoff a self-described pro-business Democrat and a Republican who pledged to defend Proposition 13 against efforts by majority Democrats in the Legislature to destroy its taxpayer protections.
Virtually no one gave Susan Shelley, a socially moderate, fiscally responsible Republican, a chance. (In the interest in full disclosure, she was supported by the Howard Jarvis taxpayers Association PAC.) The 45th Assembly District voter registration shows 49% Democrats and 25% Republicans. Last year, the district gave President Obama 63% of its votes and Senator Feinstein 67%. The California Target Book, which applies professional analysis to each contested legislative district, called it a “safe Democratic district,” and the big money flowed to the Democrat.
Shelley, an articulate, informed and energetic candidate, was not deterred. She understood and shared the concerns of her community, where homeowners feel threatened by efforts in the Legislature to make it much easier to increase property taxes and other charges and levies on taxpayers.
She adopted the slogan “Protect Proposition 13” and pushed that message – almost to the exclusion of other positions – in every speech and political advertisement. She alerted voters to the fact that the Democrats, who now have an overwhelming majority in the Legislature, are pushing bills that would severely undercut Proposition 13’s protections for taxpayers.
On Election Day, the political establishment was rocked by the result. Shelley trailed Democrat Matt Dababneh by less than 200 votes with nearly 3000 late arriving ballot still to be counted.
When asked by the Associated Press to comment on election results and voter concerns about Proposition 13, several spokesmen for legislative Democrats scoffed at the idea that Prop 13 is at risk because of their efforts. But this simply isn’t true. Seven bills backed by Democrats are designed to do one thing, and one thing only; to circumvent the protections contained in Proposition 13 so they can vacuum out the contents of taxpayers’ wallets. If they don’t intend to increase the burden on taxpayers, why would they introduce and support this legislation in the first place?
The latest ballot count shows that the Democrat pulled out a very narrow victory. Some will say that the close result of this David and Goliath contest has little meaning for other elections. After all, they will rationalize, it is typical in Special Elections for turnout to be low, and anything can happen. This overlooks the fact that Dababneh is an attractive candidate himself, he outraised Shelley by 10 to one, and was running in an overwhelmingly Democratic district. That he was barely able to squeak by in spite of having every advantage — the victory is so narrow, he may have earned the ironic nickname “Landslide” — is the direct result of a high quality, courageous candidate harnessing the power of Proposition 13. In next year’s regularly scheduled elections, candidates who refuse to fully and enthusiastically commit to preserving Proposition 13 better be looking over their shoulders.
DATELINE CHICAGO: Mayor warns property taxes could be going up 150%.
Suppose the mayor of your city announced a property tax hike of 150% or, stated another way, two-and-a-half times your current tax. A homeowner accustomed to paying $2,000, would see their next bill increase to $5,000, while a bill of $4,000 would jump to $10,000. Coincidentally, these amounts roughly approximate the average property tax rate in California just prior to Proposition 13’s passage in 1978 — a tax burden so high many homeowners were forced out of their homes.
An increase of this magnitude may sound farfetched, but not to Chicago Mayor Rahm Emanuel, who is seriously warning that in order to pay the mounting bill for government employee pensions — a bill that will triple in 2015 when a balloon payment comes due — property taxes could be forced to go up 150%. Needless to say, Chicago residents are not protected against the arbitrary increase in property taxes, a protection that Californians enjoy because of Proposition 13. Homeowners in the Windy City are entirely at the mercy of government officials.
Although the exodus from California continues unabated (net domestic out-migration of nearly 2 million residents over the last dozen years) it’s a good bet that not many looking for a better life are moving to Detroit, a city whose decline and now bankruptcy have made national headlines. But Chicago is not much better off.
Based on an index that considers problems like violent crime, unemployment, foreclosures, taxes (income and property) and home prices, Forbes magazine ranks Detroit as the most miserable city in America, while Chicago ranks number four. However, before Californians start feeling superior, it should be noted that three California cities — Modesto, Vallejo and Stockton — made the top 10 and there is a good bet that San Bernardino will be included next year.
For most of these troubled cities, government employee pension debt is a major problem that has either pushed them over the edge of bankruptcy, or has them approaching the abyss. And our state, as a whole, is not much better off.
A 2010 study of California’s pension obligations conducted by the Stanford Institute for Economic Research under the direction of Professor Joe Nation, a former Democratic member of the Assembly, showed California Taxpayers are on the hook for over $500 billion in unfunded pension liability.
This debt was created by public officials who promised more to their government employee union allies than they could reasonably deliver and they would prefer that the public remained in the dark about this looming crisis
As these bills are coming due, the Sacramento politicians, most of whom owe their election to the political activism of government employee unions, are already thrashing about trying to find ways to raise revenue. For many, the logical target is Proposition 13’s taxpayer protections.
For taxpayers, Proposition 13 continues to act like a lifeboat in stormy seas. Because of Proposition 13, annual property tax increases are limited and predictable, voters have the right to decide on new local taxes, and the Legislature must achieve a two-thirds consensus to increase state taxes.
Without Proposition 13, Californians could soon experience what it is like to live in Detroit or Chicago, without ever having to leave their homes.
Without a single public hearing, the California Assembly passed Assembly Constitutional Amendment No. 8 (ACA 8), the most egregious attack on Prop. 13 ever to come out of the Legislature. [Editor’s note: For a list of the California Senate’s many pending bills that undermine Prop. 13, refer to Coupal’s post of May 24th “The Public Employee Union Assault on Prop. 13 Begins,” .]
ACA 8 would repeal Prop. 13’s requirement that local “special taxes” (taxes intended for a specific purpose or purposes) be approved by a two-thirds vote. Instead, special taxes imposed for the repayment of local bonded indebtedness would be reduced to 55%. The ostensible justification for ACA 8 is to make it easier to finance local “infrastructure.”
There are several reasons why ACA 8 will inevitably inflict severe harm on California homeowners. First, while state bonds are repaid out of the state’s general fund — into which most Californians contribute through income or sales taxes — the same is not true for local bonds. Local bonds, usually referred to as “general obligation” bonds, are repaid exclusively by property owners. That means that voters who do not own property can vote to raise taxes on those who do.
Second, making it easier to pass local bonds will only add to California’s debt crisis. A recent study from the California Public Policy Center calculated total government debt in California as being $1.1 trillion. This figure dwarfs the $27.8 billion “wall of debt” Governor Brown himself has acknowledged as part of budgetary borrowing. Making it easier to incur local debt for “infrastructure financing” raises the obvious question: Does any sane person believe that California needs even more debt?
Third, while building local roads and libraries may be a worthy cause, the interests backing ACA 8 are hardly motivated by the goodness of their hearts. The usual cabal of unions, construction interests and the Wall Street bond industry all are chasing more tax dollars. The amount of money at stake — your money — is staggering. They care not a whit for the broader interests of California’s fiscal health or the interests of citizen taxpayers.
Is there any good news here? Yes. First, the passage of ACA 8 occurred in just one house of the Legislature. It must also pass in the Senate. There are a lot of reasons to believe that passage in the Senate is anything but automatic. The details of the politics here are too complex to go into at this time. But suffice it to say that liberal members of the California Senate might not be so quick to drink the anti-Prop. 13 KoolAid as did their colleagues in the Assembly.
Second, we are heartened by the fact that all Republican members of the California Assembly voted against repealing one of Prop. 13’s most important protections. We say this as non-partisans as more than a third of HJTA’s members are registered Democrats. However, it has usually been the Republicans who have stood up to defend Prop. 13.
While Republican support for homeowners can’t be taken for granted, on Saturday the Republicans in the Assembly forcefully defended Prop. 13 on the floor of that chamber. We couldn’t be more pleased for their courage for standing up to the special interests.
Finally, because Prop 13. defenders — in this case, Republicans — spoke as one voice, this forced Democrats who portray themselves as “moderates” to either stand up to their ultra-liberal leadership and vote “no” on ACA 8 or cave to the pressure of Speaker Perez and the special interests and vote “yes.” This time, the so-called “moderate” Democrats failed — miserably. ACA 8 passed with zero votes to spare.
While passage of ACA 8 is a horrible insult and injury to homeowners, at least now we know who our friends are. Come election time, when some “moderate” Assembly Democrat tells you how much he or she represents citizen taxpayers and homeowners, you will now be armed with the truth. After all, legislative votes should have consequences. Especially, at the next election.
Last week we alerted California taxpayers as to the immediate threats to Proposition 13 being heard by a California legislative committee. As fully anticipated, the Senate Committee on Governance and Finance approved all six of the anti-Prop 13 proposals.
All of the bills in question would gut one of the most important provisions of Proposition 13 — the two thirds vote requirement for additional “add on” parcel taxes. These “add on” parcel and bond taxes are on top of the property tax homeowners already pay under current law.
The six bills are designated as “SCAs” standing for “Senate Constitutional Amendments.” The Legislature itself cannot change the constitution without voter approval so the issue for each of these “SCAs” was whether they should proceed through the legislative process and appear on the ballot as partial repeals of Prop 13 which itself is part of the constitution.
The bills are as follows:
Senate Constitutional Amendment 3 (SCA 3), Mark Leno (D—San Francisco): Lowers the threshold for school district per-parcel property taxes from two-thirds to 55%. This is a direct assault on Proposition 13 because it makes it easier to increase property taxes above Proposition 13′s one percent cap.
Senate Constitutional Amendment 4 (SCA 4), Carol Liu (D—La Canada) and Senate Constitutional Amendment 8 (SCA 8), Ellen Corbett (D—San Leandro): These two bills lower the threshold for the imposition, extension or increase of local transportation special taxes from the Proposition 13-mandated two-thirds vote to 55%. While most transportation special tax increases consist of very regressive sales tax hikes, the language of these bills could be used to impose new parcel taxes.
Senate Constitutional Amendment 7 (SCA 7), Lois Wolk (D—Davis): Lowers the threshold from two-thirds to 55% in order to approve a bond to fund public library facilities. Lowering the threshold for school facilities to 55% has already resulted in billions of dollars of additional property tax payments that otherwise would not have been approved by voters and the lower threshold has done nothing to improve education in California. Bond “add on” taxes are like parcel taxes because only property owners have to pay.
Senate Constitutional Amendment 9 (SCA 9), Ellen Corbett (D—San Leandro): Lowers the threshold from two-thirds to 55% to increase special taxes – including parcel taxes – to fund community and economic development projects.
Senate Constitutional Amendment 11 (SCA 11), Loni Hancock (D—Berkeley): Lowers the threshold to 55% to allow for voters representing ANY local government entity to approve a special tax for ANY purpose. This is far and away the broadest application, and thus the most egregious, of these constitutional amendments.
We at HJTA have warned about the dangers of one party rule in Sacramento and our predictions are now coming true. Despite now having the highest state income tax rate in America, the highest state sales tax rate in America and, come June, the highest gas tax in America, the majority party is launching a full scale assault on Prop 13 to grab even more tax dollars from property owners.
To stop them, we must employ all our resources. First, the battle in the Legislature is far from over. Last week’s hearing was before only one policy committee. In the Senate itself, these measures will go through at least one more committee and, should they pass, go to the floor of the full Senate for a vote of the entire house. Even if they pass there, the bills must then go to the Assembly and its committee process.
During the next several months, HJTA will take every opportunity to remind all California legislators that, before they cast their votes, they must understand that these bills attack the very core of Prop 13. Some legislators from California’s most liberal areas don’t care. But most are fully aware of how popular Prop 13 remains and many in the majority party come from districts where Prop 13 is much more popular than in the districts of some of their left wing colleagues.
These legislators also know that the voters will have the final say and current polling strong suggests that Californians are very negative toward higher property taxes. They must therefore ask themselves if casting a vote against homeowners might not result in a shortened political career.
Thus, while homeowners may have lost round one, this is going to be a long fight. Victory will belong to those with the strength and resolve to prevail.