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.
The 2015-16 Legislative Session is in the books but some high-profile commentators are questioning what appears to be a far leftward drift in the policy agenda of the liberal California Democrat Legislature that has forgotten about the state’s middle class and the need to grow our economy.
The dust has not even settled on the end of session battles, and there is a pile of hundreds of liberal bills on the Governor’s desk, but analysts appear to agree that the 2015-16 was perhaps the most liberal or far-left legislative session in recent history.
George Skelton, a prominent left-leaning LA Times Columnist, opined “The California Legislature capped its two-year session by passing a load of liberal bills to help poor people, including farmworkers. That’s good, but what about middle middle-class folks?” according to Skelton’s recent column.
“They were snubbed again. Ignoring the declining middle class has become the norm, both in Sacramento and Washington,” Skelton concludes.
Skelton cites a Public Policy Institute of California report noting that California “is primarily a middle-class electorate, something that seems to escape ruling Democrats in the Legislature as they push through bills lobbied by the labor unions representing the poor,” wrote Skelton.
Skelton goes on to provide countless examples including increased farmworker overtime, additional welfare benefits, increasing the minimum wage, and paid family leave. But Skelton says the problems that the Legislature does not seek to address are glaring and include almost nothing for the middle-class, small businesses, roads, and infrastructure, among other key issues. “If there was any gesture toward small business, we didn’t hear much about it,” Skelton states.
“It’s great to help the poor. But too often the Legislature overlooks everyone else—everyone, that is who doesn’t contribute to a reelection kitty,” Skelton concludes, taking a swipe at the state’s labor unions who control the Democrat Legislature.
The state’s public employee unions were ecstatic with the results of the 2015-16 Legislative session, with labor leaders saying they are proud partners of the California Legislature and glad the officials they elect share their values and agree to collaborate on a staunchly pro-labor agenda.
“The California Labor movement is proud to partner with the Speaker and Legislature to make the American Dream possible for all workers,” said Art Pulaski, executive Secretary-Treasurer of the California Labor Federation in a press release issued by Assembly Speaker Anthony Rendon(D).
“We’re lucky in California for the most part to have elected officials who espouse the values of the labor movement,” said California Labor Federation chief of staff Angie Wei, according to a Sacramento Bee report.
The far left Courage Campaign, was quoted as stating 2016 capped the most left wing or “progressive” legislative session in the state’s history, with a “sweep that should warm the hearts of most liberal constituencies,” according to the Bee.
“What we’ve accomplished collectively will go up there with any other legislative period in the history of California,” said Senate Pro Tem Kevin de Leon (D), according to the Sacramento Bee.
Most business and taxpayer groups, including those who back moderate Democrat candidates, suggest that the legislature has lost touch with economic realities and the best interests of the general electorate.
“If this state does not start seriously focusing on the business climate. Probably the only thing that is going to be left is high-tech, Pharma and the motion picture industry,” said Tom Scott, the California Director for the National Federation of Independent Business (NFIB) in a recent interview just prior to the end of session.
Scott said there are “about 1,000 things wrong with the state’s business climate” but things appear hopeless at the moment because the leadership of this state has lost touch with the economic realities of the state’s business climate continues to head in the wrong direction.
Scott says business in California has already taken a number of hits this year including the minimum wage increase, sick leave, paid family leave, multiple regulations, and increases in fees and taxes. “It is this piling on effect which is just killing small business. The big corporations can dodge a lot of this stuff,” Scott says.
Big business is also complaining about recent actions taken by the liberal Democrat Legislature.
Rob Lapsley, president of the California Business Roundtable, wrote a report released on Labor Day questioning the California Legislature’s commitment to improving the California economy and creating jobs, particularly in the less prosperous areas of the state.
Lapsley raised a series of questions about important economic issues in the state that are not being address, particularly those related to limited job creation and economic growth outside the Bay Area, and suggests that the California Legislature needs to place a bigger focus on the economy and economic growth.
Lapsley stated that the state’s economy “has been subjected to an unrelenting expansion of regulation, fees, and taxes since 2000.”
“We hope 2017 will bring a broader discussion on the economy we can offer to future generations,” Lapsley concluded.
“California is clearly becoming more hostile to business,” states Jon Coupal, president of the Howard Jarvis Taxpayers Association, adding that there has been an accelerated decline of the state’s business climate, due in large part to heavy taxation and onerous regulation.
Coupal said the state’s hostility to business should concern every Californian because the state’s future is closely tied to health of the California economy. Some recent media reports even found evidence pro-labor Democrat leaders, including Senate Pro Tem Kevin De Leon, were “punishing” the California business community during this session for objecting to the Legislature’s far left liberal agenda.
“From the perspective of fiscal sanity, it is a shame that every two year legislative session in California is an exercise in trying to prevent damage to taxpayers and the economy. Rarely is there anything remotely worthwhile in the hundreds of bills passed by our esteemed political leadership: No pension reform, no education reform, no civil justice reform or tax reform. While other states run clean, effective and efficient governments, the California Legislature resembles a three ring circus more times than not,” Coupal wrote in a recent column.
Coupal says California policymakers should be concerned about the impacts of the state’s poor business climate instead of asking “how high?” when public sector union bosses say “JUMP.”
About the Author: David Kersten is an expert in public policy research and analysis, particularly budget, tax, labor, and fiscal issues. He currently serves as the president of the Kersten Institute for Governance and Public Policy – a moderate non-partisan policy think tank and public policy consulting organization. The institute specializes in providing knowledge, evidence, and training to public agencies, elected officials, policy advocates, organization, and citizens who desire to enact public policy change.
Editor’s Note: This article by Jon Coupal provides an update on what has to be one of the biggest con jobs ever perpetrated on California’s voters – “High Speed Rail” that will never make a profit, will never move significant numbers of people, will not even be “high speed” in many sections of track, cannot integrate with other rail assets (different track gauge), and is going to cost at least $50 billion more than they said it would. So why are we still doing this project? One significant reason is the political support it gets from organized labor. Rather than fight for projects that would actually improve the lives of millions of Californians, such as better roads, refurbished bridges, upgraded ports, new power stations, and sorely needed water infrastructure, California’s labor movement backs high speed rail. And the reason they do that is because they don’t want to fight the powerful environmentalist lobby. This is a failure of vision and it is a failure of courage. And it is difficult to overstate how much this fails the ordinary working families that organized labor purports to support above all else. Read on.
High-speed rail continues to be an expensive, sick joke for California. Under the current plan, it is no longer “high-speed” and projected costs, which seem to change almost daily, appear to be doubling.
In the latest news, the nascent California high-speed rail system is running $50 million over budget for a two mile stretch in Fresno.
Let that sink in for a moment.
$50 million, over budget, for just a two mile stretch.
Let’s see, HSR has a $50,000,000 cost over run on 2 miles of a 32 mile job. Does that mean we can expect total cost overrun of $25 million per mile times 32 miles or $800,000,000?
Better yet, let’s extrapolate that to the entire project. You know, the one sold to voters. According to High Speed Rail Authority itself, over 800 miles of track are needed. So, at $25 million of cost overruns per mile, that works out to $20,000,000,000. That’s $20 billion in cost overruns!
In just 3 years, from the original passage of Proposition 1A authorizing about $10 billion in High Speed Rail bonds, the estimated cost for high-speed rail had gone from $40 billion to $98 billion, the amount that independent expert analysis had predicted prior to the bond’s being approved.
Responding to public outrage, the High-Speed Rail Authority came up with a plan costing “only” $68 billion. The new “blended” system would combine high and low speed rail, doubling the travel times as well as ticket prices.
Fearing a voter revolt, the High-Speed Rail Authority rushed to break ground, hoping that once they dug a hole, the pet project of Gov. Brown and the majority of Sacramento lawmakers, who receive backing from construction contractors and labor unions that expect to be the primary beneficiaries of billions of dollars of public spending, would be safe from outside interference.
By beginning a first segment between Merced and Fresno, the rail authority engaged in the classic Willie Brown strategy. The former Assembly Speaker, in a moment of candor, once told the San Francisco Chronicle, “In the world of civic projects, the first budget is really just a down payment. If people knew the real cost from the start, nothing would ever be approved. The idea is to get going. Start digging a hole and make it so big, there’s no alternative to coming up with the money to fill it in.”
Constant cost overruns and a lack of accountability plague California’s infrastructure projects. Perhaps, as a public service, it should be required that Brown’s words be reprinted in every ballot summary for every construction bond placed before the voters.
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.
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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.
A coalition of government employee unions has filed an initiative that would extend the temporary income tax hikes that were contained in Proposition 30 and approved by voters in 2012.
If this seems like, in the immortal words of Yogi Berra, “déjà vu all over again,” it’s not your imagination. This is just the tax raisers running their favorite play from “The Book of Dirty Tricks on Taxpayers.” First they persuade taxpayers to accept a tax by marketing it as temporary. Once taxpayers have become inured to paying it, the tax raisers move in to extend it or make it permanent.
Big spending politicians and their allied government employee unions count on taxpayers having short memories to make this scam work. For example, look at the 1.25% sales tax increase political elites pushed in 1991 to deal with a budget gap. A half-cent was supposed to be temporary but when it came time to expire the Legislature placed it on the ballot promoting it as necessary for “public safety.” Voters — by then used to paying the higher tax — swallowed the hook and we continue to pay the entire 1.25% increase initiated almost twenty-five years ago.
There is a saying in football that if a play works once, keep running it until the opposition shows they can stop it. In 2009, the Legislature achieved the two-thirds vote to impose two year increases in state sales and income taxes. Immediately they placed on the ballot, in a special election, an extension of these taxes for two additional years. Voters, still shocked by being hit with stiff tax increases, were having none of it and rejected the extension by almost two to one.
Realizing they had not waited long enough to allow taxpayers to become accustomed to higher taxes, government employee unions, working with Gov. Brown returned to the ballot in 2012 with another “temporary” increase in sales and income taxes in the form of Proposition 30. As the primary spokesman for the tax, the governor traveled the state repeating the mantra, “It’s for the schools, its temporary.” Voters were persuaded to approve another “temporary” tax increase. Now those who benefit the most from higher revenues – California has the highest-paid state and local public employees in all 50 states according to the Department of Labor – are back seeking to extend taxes, that were scheduled to expire in 2019, for another dozen years.
If the Proposition 30 extension, now being called the School Funding and Budget Stability Act, appears on the ballot, it has a good chance to pass. This is because the burden will fall on a minority, upper income taxpayers, and many voters will overlook that high taxes will cause some of our most successful residents to leave for more tax-friendly states, meaning that they will no longer pay any taxes to California.
The most important thing for voters to remember, however, is that if they agree to any temporary tax, it may as well be considered as permanent. As for the Proposition 30 temporary tax, it likely will join the ranks of other “temporary” taxes that seem never to disappear. Among those is the federal telephone tax established to pay for the Spanish American War, which remained in place for 108 years after the war ended.
“End of discussion!” is what those on the political left yell in your face when they know they are losing an argument. It is also the name of a compelling new book by Mary Katharine Ham and Guy Benson with the revealing subtitle of “How the Left’s Outrage Industry Shuts Down Debate, Manipulates Voters, and Makes America Less Free (and Fun).”
While it is true that attempts to marginalize political opponents isn’t the exclusive domain of progressives, in the last couple of decades it is the political left which has perfected these tactics to an art form. Perhaps it is because these latest efforts reflect a full manifestation of Saul Alinsky’s Rules for Radicals. An important strategy from this famous anarchist is to avoid at all costs an honest debate over whether socialist policies actually work.
And it’s not just conservatives who are sounding the alarm. Bill Maher, the left of center host of his own show on HBO has said that liberals are too easily offended and that an overly politically correct society actually breeds more hostility between the parties. Jerry Seinfeld, lifelong Democratic and famous comic, has said that he doesn’t play college campuses anymore because students have been brainwashed into being offended at almost anything.
While political correctness is a national problem, it is much worse in California. Indeed, for all the alleged “openness” of the California lifestyle, here are the three things about which you cannot possibly have a rational discussion with a liberal: Global warming, immigration and traditional marriage.
Let’s just look at global warming. How many times have you heard Al Gore, President Obama, Jerry Brown or Tom Steyer say “the debate is over?” As I have advised college students on both the right and left numerous times, when someone says “the debate is over” that usually means the debate is just beginning. While there is substantial evidence (mostly based on computer modeling) that man’s activities might have an impact on the earth’s climate, there are simply too many ancillary questions and unknowns for anyone to say the “debate is over.” Shockingly, even noted environmentalists including a co-founder of Greenpeace and Bjorn Lomberg, former head of the Environmental Assessment Institute in Copenhagen, have been savaged by the global warming alarmists for suggesting that the hype might be overstated.
On immigration, if one dares to raise the very legitimate issues of the costs to taxpayers that flow from unregulated immigration you are immediately branded as a racist. Despite being far more open to legal immigration than others in America, I have personally felt the wrath of this unfounded accusation.
The progressives are not interested in hearing anything that deviates one iota from their rigid orthodoxy. And they don’t want others to hear any contrary message either. Somalian Ayaan Hirsi Ali was disinvited to speak at Brandies University because she dared speak out against Islamic extremism. These are prime examples of the “heckler’s veto” even before a speech begins. Other luminaries “disinvited” from commencement speeches due to left leaning pressure include International Monetary Fund Director Christine LaGarge and Condoleezza Rice.
And our final California example of shutting off debate is an embarrassing incident in the California Capitol when Rodger Hernandez, Chairman of the Assembly Labor and Employment Committee would not even allow the Republican Vice Chair, Matthew Harper speak on one of the most contentious and dangerous bills emanating from the California Legislature – Senate Bill 3, a huge increase in the state’s minimum wage. Hernandez even went so far as to order the Sergeant at Arms to take away Harpers’ microphone. Talk about “end of discussion!”
So how should we respond to this wave of political correctness run amok and efforts to limit debate? First, realize it won’t be easy as the main stream media is rarely on our side. Second, it is entirely fair to call out these tactics for what they are and challenge our adversaries to debate the issues honestly. Third, appeal to the desire for truth. Scripture tells us veritas vos liberabit — the truth will set you free. Or, as Andrew Breitbart said, “The truth isn’t mean. The truth is the truth.”
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.
There’s a joke about public sector union bosses making the rounds in Sacramento lately: What happens when the California Legislature hands over a blank check to the California Teachers Association (CTA)? It’s returned the next day marked “insufficient.”
No matter that spending on schools is up 36 percent over the last four years, the state budget has increased 25 percent over the last three and the state is running a surplus of nearly $7 billion, it is never enough. The government employee unions are continuing to press for higher taxes and more spending from which they benefit both in terms of money and political power.
Since California already imposes the highest taxes in all 50 states in almost every category except taxes on property – where we rank 19th highest – the obvious target is Proposition 13 which limits annual increases in property taxes. To take on Proposition 13, public unions, including the two major teachers unions and the Service Employees International Union, have joined with some rag-tag groups of Bay Area radicals to create a front group, calling itself “Make It Fair.” The stated goal is to strip Proposition 13 protections away from businesses, including small mom-and-pop stores and residential rentals, thereby creating a “split roll” in order to seize another $9 billion in tax revenue annually.
To undermine support for Proposition 13 — which remains overwhelmingly popular in public opinion polls – Make It Fair attempts to make homeowners feel unjustly burdened. Backers of higher property taxes on business say that Proposition 13 provides commercial property special advantages, but it does not. California has always taxed all real property at the same rate whether residential or business.
The facts are unimportant to the government employee unions. They accuse owners of commercial property of not paying their fair share in property taxes. This ignores studies that show that business property is actually paying a higher percentage of the total property tax than when Proposition 13 passed and that business property is generally assessed at closer to market value than is residential property. This is due to the frequent improvements businesses make to property to remain competitive and these improvements are taxed at current market value.
But if the government employee unions are really only going after owners of commercial property, why should the average homeowner be concerned?
First, those who delude themselves into believing that the appetite of unions for tax dollars will be satiated if we just give in to their demands, should know that California state and local government employees are the highest paid in the nation. They did not become this way because the union leadership were shrinking violets. Once business property is taxed at a higher rate, there is no question that residential property – homeowners – will be the next target. Already union-backed legislation has been introduced in Sacramento to make it easier to increase taxes on homeowners.
Secondly, most homeowners rely on jobs in order to pay their mortgages. If taxes on commercial property, including those on small businesses and residential rental property, are jacked up, so prices and rents will go up as well. Business that can’t increase their prices because of competition from firms located in other states and countries are likely to join the exodus of companies that have already left California. And they will take those jobs with them.
A recent front page story in the Torrance Daily Breeze, “Tractor Firm Kubota Exits Torrance for Texas,” illustrates the point. The report says the firm, a 43-year resident of the community, will be departing along with 180 jobs, and reminds readers that Toyota made a similar announcement last year. This hemorrhaging of jobs is a direct consequence of California’s hostile business climate, and this is before any increase in the property tax.
It would be a mistake to underestimate the negative impact that changes to Proposition 13 would have on the California economy. A study from the Pepperdine University School for Public Policy reveals that a “split roll” would result in the loss of nearly 400,000 jobs and $72 billion in economic activity over five years.
If front groups were required to adhere to truth in labeling standards, the group “Make It Fair” would be compelled to call itself either “Take Our Jobs, Please” or “Make Us Poor.”
At the Howard Jarvis Taxpayers Association (HJTA), we have seen Proposition 13 blamed for just about everything. A national publication blamed the tax limiting measure for the not guilty verdict in the O.J. Simpson murder trial, while a high school physical education coach wrote in a community paper that the loss of shots by his track and field team was due to the lack of money to cut the grass, and this, of course, was due to Proposition 13.
Now we’re seeing attacks on HJTA sponsored Proposition 218, the Right to Vote on Taxes Act, which makes the taxing process more democratic by allowing voters to decide on local tax increases and to assure property owners that they would have a meaningful say on new assessments, fees and charges. One such attack was a recent opinion piece, calling for the repeal of Proposition 218, because it robs voters of their “democratic power.”
This critic argued that, because Proposition 218 guarantees the voters’ right to approve or reject new taxes, it prevents politicians from matching revenue to their spending, “…local officials can give big pensions to cops, but don’t have the power to raise taxes to pay for those pensions.”
But this begs the obvious question: if officials are going to provide benefits to government employees that are unsustainable, wouldn’t it make more sense to limit spending rather than having an open season on taxpayers who are already among the most taxed in all 50 states?
Pundits who call for the repeal of Prop 218 are naïve. They see the state of our political environment as if it were from a sanitized civics textbook or perhaps like Disneyland, a well ordered theme park where fantasies can be made to come true.
The Magic Kingdom may seem genteel, filled with reasonable and well behaved people, when viewed from a tower in the Sleeping Beauty Castle, but outside the park in Realville, a battle is raging between those who work hard to support themselves and their families and those who believe politics is an extension of a grand spoils system where taxes are the preferred weapon to extract ever more money from those who earn it.
California politics is a bare knuckles contest where, by far, the largest and most powerful competitors are the government employee unions. Because of their ability to turn out members to vote for the union label and their ability to use mandatory union dues for any political purpose, they are able to elect a majority to the Legislature, a majority that owes them allegiance. At the local level, they are just as influential, controlling a majority of votes on many city councils.
And the unions do not adhere to Marquis of Queensbury rules. In San Diego they sent out goon squads to intimidate signature gatherers for a reasonable ballot measure to reform pensions. And in Costa Mesa, they went so far as to hire private detectives to follow city council members, who refused to roll over under union pressure, in an effort to find incriminating information about them.
The result of this union power is evidenced by the recent bankruptcies of cities like Stockton and San Bernardino, where union-beholden council members voted increases in pay and benefits that were unsustainable.
Ironically, had officials been able to raise taxes without going to voters as required by Propositions 13 and 218, the communities would be worse off because California taxpayers and businesses have learned that they can vote with their feet by fleeing to more tax friendly communities or states. Jurisdictions which lose their tax payers and are left with nothing but tax receivers don’t do very well.
In the real world of California politics, Propositions 13 and 218 are important checks against a corrupt political establishment that is beholden to special interests. So let’s not pretend that this is Fantasyland. The only thing that California politics has in common with Disneyland is that most of the laws enacted that hurt taxpayers are downright goofy.
Editor’s Note: As documented in two recent California Policy Center studies, “Examining Public Pay in California: The Los Angeles Department of Water and Power, and “Alameda County Water District Rate Increase Driven by Labor Costs, Not Drought,” no crisis, including a drought, is missed when it comes to seizing opportunities to increase revenue in order to increase pay and benefits for a unionized government workforce. But even when you’re losing the war against the relentless and insatiable appetite of these government unions for taxpayer money, sometimes you still win a battle. Here’s a report on one such victory.
Last week the California Court of Appeal issued an important ruling interpreting Proposition 218, the Howard Jarvis Taxpayers Association sponsored initiative approved by voters in 1996. Proposition 218 is entitled “The Taxpayers Right to Vote Act” for a very good reason. It reflects the policy that those who pay the bills for public expenditures – taxpayers – should have the final say over how much is taken out of their wallets and pocketbooks. It subjects virtually all local taxes and fees, especially those related to property, to voter or ratepayer control.
Proposition 218 was necessary because the legislature and the courts had created loopholes in Proposition 13, the iconic California initiative that started the modern American tax revolt in 1978. While Proposition 13 was focused on property taxes, Proposition 218 was drafted to limit the explosion in other types of government exactions burdening homeowners including so-called “benefit assessments,” fees, charges and other sorts of property related levies.
What is important to note about Proposition 218, is that it did not ban property related fees but, rather, sought to return the imposition of fees like water, sewer and trash collection rates to the traditional concept of “cost of service.” Cost of service simply means what it says: The cost to a property owner for a service should not exceed government’s cost to provide that service.
In its ruling, the Court of Appeal concluded that “tiered” water rates, without being justified under “cost of service” principals, failed to comply with the constitutional mandates of Proposition 218. The lawsuit was brought by the Capistrano Taxpayers Association against the City of San Juan Capistrano for, among other transgressions, imposing water rates that were “tiered,” meaning those who used more water would be charged a higher amount per gallon.
The court ruling was immediately condemned by water agencies, state bureaucrats and even Governor Jerry Brown who decried the decision as putting a “straightjacket” on his policies to enforce water conservation. But the ruling did nothing of the sort. First, rather than saying all tiered water rates were automatically unconstitutional, the court merely stated that, whatever the methodology used to impose water rates, they must be based on cost of service.
The sin of San Juan Capistrano was its failure to justify its rate structure at all.
Second, local governments have an array of tools available to enforce conservation to deal with California’s current water shortage. Limiting landscape watering to once or twice a week; prohibitions against hosing down driveways or automobiles; rebates to homeowners and businesses to convert landscape to drought tolerate plants; water reclamation; desalinization, such as the massive new project in San Diego County; and the list goes on and on.
So if water agencies have sufficient – and legal – tools available to them to incentivize conservation and deter waste, what is the basis for the shrill, over-the-top reaction to the Court of Appeal decision? Simple. If these agencies are permitted to impose water rates divorced from “cost of service” principles, then they can generate taxpayer funds over their costs and make a “profit” from homeowners – something Proposition 218 was specifically drafted to prevent.
And in the case of Jerry Brown, he didn’t like the ruling because he is desperately searching for a revenue source for his ill-conceived “Twin Tunnels” project which, like his High Speed Rail debacle, simply isn’t ready for prime time.
There is an object lesson here. Droughts may be caused by Mother Nature, but water shortages are created by humans. California is now paying the price for not building new storage and conveyance infrastructure over the last several decades. Rather than complaining about “cost of service” requirements that are founded in common sense and rational policy, California should immediately correct the dereliction of prior political leaders and build what we need for a California in the 21st century.
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.
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.
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No matter how high taxes are increased, it’s never enough for public officials and bureaucrats who live off taxpayer funded paychecks. According to these people, there is always one more dollar that is needed to make government “whole.” And being made “whole” in California means maintaining the highest paid government employees in all 50 states.
So it should come as no surprise that the tax-and-spend interests have already begun banging the drum and shaking the tambourine on behalf of extending Proposition 30, the “temporary” tax increase approved by voters in 2012. Proposition 30 imposed the highest income tax rate in America. It also bumped up the sales tax – a tax that hits lower income families particularly hard — to tops in the nation.
The sales tax component of Proposition 30 is set to expire at the end of 2016 and the higher income tax rate will sunset in 2018, so those who feed off taxes are starting to panic.
During the last year, some lawmakers resisted putting Proposition 2 on the November ballot because it required the establishment of a rainy day fund to tide government over through lean times. These Sacramento politicians were concerned that if it passed, and the state had money in the bank, it would be more difficult to make the case that the Proposition 30 taxes should be made permanent.
State schools chief Tom Torlakson came out for the extension of Proposition 30 long ago, and we are now seeing the head of one of the state’s two major teachers unions, the California Federation of Teachers, calling for its continuation while maintaining it is not enough.
Of course, it’s never enough.
Writing in the Sacramento Bee, teachers union president Joshua Pechthalt attempts to make the case that the temporary tax hike should be extended. He justifies his position by claiming California is thriving and upper income individuals, unfazed by the higher taxes, are happy to stay and pay.
Not so fast.
While Pechthalt believes things are fine now that our economy is supposedly in a “recovery,” working families aren’t seeing it. Our unemployment rate is the third highest in the nation and the US Census puts our supplemental poverty ranking at worst in the country.
Pechthalt’s evidence that Proposition 30 has not impacted high income individuals seems to be that wealthier communities, like Beverly Hills, have not become ghost towns.
Objective real estate reports from Nevada and other low or no income tax states make it clear that California has indeed lost many upper income taxpayers because of Proposition 30. The Wall Street Journal reported that “many Californians have arrived [in Nevada] in the wake of Proposition 30. Passed at the end of 2012, the measure hiked personal income and sales taxes.” The San Francisco Chronicle published a piece in January of this year entitled “State leaders closely watch migrating millionaires” noting that “whether you sympathize or not, millionaires’ migrating out of California has serious consequences to the state’s bottom line and is something state leaders are watching closely.”
The other problem with the union leader’s thesis is that we simply don’t know how many of California’s high earners decided to absorb the confiscatory tax rates for a couple of years knowing that they would eventually expire. If made permanent, the existing millionaire out-migration could very well turn into a torrent.
So, instead of asking whether we should make Proposition 30’s temporary tax hikes permanent, a better question would be whether those tax hikes were needed at all or, better yet, did they inflict more harm than good? There is compelling evidence that California would today be grabbing a bigger slice of the national economic recovery had it not passed Proposition 30 at all.