Posts

For Nov. 8th: $32B in Local Borrowing, $2.9B in Local Tax Increases

New local taxes and new local borrowing are a regular phenomenon in California elections, but this year our government union controlled politicians have outdone themselves. Let’s compare:

November 2014 – $11 billion in new borrowing proposed via 118 local bond measures, 81% passed. Of the 117 local proposals for new taxes, 68% passed.

June 2016 – $6.2 billion in new borrowing proposed via 48 local bond measures, an estimated 93% passed. Of the 42 local proposals for new taxes, an estimated 66% passed.

November 2016 – $32.2 billion in new borrowing via 193 local bond measures, and 224 local proposals for new taxes!

Not only do these general and primary and special election tax and bond measures accumulate year after year, but they nearly always pass! The primary source for this information is the California Tax Foundation, who have just produced another excellent guide “Local Tax and Bond Measures 2016.” This time, they have not only compiled a list of all of the proposed local taxes and bonds, but for each of the proposed new local taxes, they have compiled the projected annual collections. The result is stunning.

2016 California Local Tax and Bond Measures
20160927-uw-local-taxes

As this table reports, $32.2 billion in new borrowing is being proposed, nearly all of it for schools and colleges. At 5.0% annual interest with a 30 year repayment plan, this borrowing will cost property owners another $2.0 billion per year in increased property taxes. If over 90% of these bonds are approved by voters, as recent history indicates is likely, California’s taxpayers will suddenly have saddled themselves with nearly $30 billion in new government debt.

Also as reported on the above table, the 224 proposed tax increases are estimated to cost taxpayers at least $2.9 billion per year. “At least,” because CalTax was unable to find revenue projections for 29 of them. And while “sin taxes” on marijuana and soda promise to bring in $58 million and $18 million, respectively, it is sales tax, that everyone pays, that will bring in most of the revenue, over $2.3 billion.

Because local taxes are numerous and dispersed onto hundreds of differing ballots across the state, they don’t get the visibility that state tax increases generate. But collectively they are just as significant. California’s Prop. 30, passed by voters in 2012, generated about $6.0 billion per year. That same tax, which was supposed to be temporary, will be extended through 2030 if voters approve Prop. 55 this year. But if you compare this statewide tax to the proposed local taxes, $2.9 billion per year, along with required payments on the local bonds, $2.1 billion per year, you are adding another $5.0 billion annual burden to taxpayers.

Passing Prop. 30 was a major fight. Similarly, Prop. 55 has huge visibility with voters. But because nearly all of the local measures pass, and because dozens if not hundreds of them appear on the ballot every election, local taxes and bonds matter more. Invisible, ongoing, and ever expanding, they are silently elevating the cost-of-living for ordinary Californians as much or more than state taxes.

Where does this money really go? Why is there an insatiable thirst for more taxes and more borrowed funds?

One word:  Pensions. One cause:  Government unions and their allies in the financial community, who together comprise what is by far the most potent political lobby in California.

A May 2016 analysis by the California Policy Center, using the most recent data available from the U.S. Census Bureau, estimated that during 2014, California’s 80+ independent state/local government employee pension systems received $30.1 billion in contributions (ref. table 2-A). Later in that same report, on table 2-C which is displayed below, one can see how much these pension systems actually need to remain financially healthy. At a minimum, they are collecting $8.0 billion per year LESS than they need. And that is if the investments they’ve made yield an annual return of 7.5% per year for the next 30 years. At the modest reduction of that projection to 6.5% – which even CalPERS has announced they are going to phase in as their new projection for calculating required annual contributions, these pension systems are collecting $22.2 billion per year LESS than they need.

California State/Local Pension Funds Consolidated
2014 – Est. Funding Status and Required Contributions at Various ROI

20160516-CPC-Ring-pension-liabilities

If California’s state and local government workers participated in Social Security like the rest of California’s workers, instead of receiving guaranteed defined benefit pensions that on average pay FOUR TIMES what Social Security recipients can expect, there would be no insatiable need for more money for the pension systems. Even if California’s state and local government workers merely received defined benefits that paid, on average, TWICE what Social Security recipients can expect, these pension funds would currently have surpluses. Moreover, there would be money left over in local municipal and school district operating budgets to maintain facilities, instead of having to perpetually borrow.

Six billion per year ala Prop. 30 and Prop. 55. Another five billion per year thanks to new proposed local taxes and borrowing just this November. And it’s not even close to enough. California’s state and local government pension systems are going to need somewhere between $50 to $60 billion per year to stay afloat, and currently they’re collecting barely more than half that much.

No wonder there’s the perennial scramble for more. More. MORE.

 *   *   *

Ed Ring is the president of the California Policy Center.

How California’s Union Controlled Legislature Plans to Increase Property Taxes

In a bunker somewhere in Sacramento, a secret committee meeting of state power brokers is taking place. Let’s listen in as the chairman addresses the members:

“Welcome to this week’s meeting of the ‘Don’t Leave Them With Two Nickels to Rub Together Committee’ It is good to see that the public employee union bosses, who represent the highest paid government workers in all 50 states, are in attendance. They are the heart and soul of our movement. Then of course, we must acknowledge those newspaper editors from some major papers, who work so hard to help our cause of increasing the tax burden on average Californians. Special mention and thanks must go to the representatives of the Los Angeles Times, a publication whose institutionalized hostility to Proposition 13 is legendary — it hardly seems like it has been 35 years since Howard Jarvis labeled your paper ‘the enemy of the people.’ Also, I want to give a shout out to the several leftist professors from taxpayer-supported universities who have joined us today. And lest I forget, our special interest enablers in the private sector, most of whom profit directly from government spending, are here today to lend their support.”

“As you know, our number one target continues to be Proposition 13 and its protections for taxpayers. Although we have been successful in making California number one in state sales tax, gasoline tax, and in income tax rates, we rank only 15th in property taxes. This, I know you all agree, is an outrage. California, must always strive to be number one.”

“Of course, we are aware that Proposition 13, which limits annual increases in property tax bills, and requires that voters have the final say on new local taxes, is very popular with the public at large. Surveys show that it is at least as popular as it was when it received almost two-thirds of the vote in 1978.”

“However, we have a clever plan to increase the tax burden on all taxpayers, but especially homeowners, without ever having to admit that we support higher taxes. Our objective is to reduce the two-thirds vote needed to approve new per parcel taxes, taxes that can be used for any purpose and are imposed over and above the regular property tax. We also want to make it easier to raise sales taxes that everyone pays, to support our favorite projects.”

“Our strategy is to promote the lowering of the vote required to approve new taxes by saying we are just trying to make voting on tax increases more democratic. This way, we can appear to have clean hands, while making it much easier to increase the tax burden on average folks.”

“This week, a number of our favorite bills will be heard by our friends in the Senate Governance and Finance Committee. These bills would make it easier to approve new property taxes for school facilities, new bonds for libraries – paid for through higher property taxes — new sales taxes to fund community and economic development projects, and new sales taxes for transportation projects. And you will be pleased to learn that we have many more bills like these in the pipeline.”

“On a final note, as we move forward with our agenda, let’s remember, the best way to get more out of taxpayers is to make voters think someone else will be paying the higher taxes. Look at Proposition 30 as a template for further success. We were able to convince many voters that the burden would be borne by the wealthy, although it also increased sales taxes on everyone. So, let’s stay focused on divisive taxes, like parcel taxes, that appear to impact only property owners, even though renters, too, will pay through higher rents. And as we work to undermine Proposition 13, let’s remember to keep repeating our talking points.”

“When we attack the two-thirds vote, tell the folks that we are not trying to raise their taxes, ‘We are just making the process more democratic.’ And when new taxes appear on the ballot, focus on gaining the support of those who are unlikely, or who believe they are unlikely, to have to pay. Just say, ‘The tax burden will fall on someone else who should be paying their fair share.’ Finally, if voters remain unconvinced, say, ‘It’s for the children.’”

“This week’s meeting of the ‘Don’t Leave Them With Two Nickels to Rub Together Committee’ is adjourned. Let’s go out and redouble our efforts to undermine the taxpayer protections provided by Proposition 13.”

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.

California Lawmakers Seek to Make it Easier to Raise Parcel Taxes

There is no doubt that Americans owe a great deal to ancient Greek civilization that once dominated the Eastern Mediterranean, including the island of Cyprus.  It is to them and their experiment with democracy that we can trace the roots of our own democratic institutions.

Of course, a lot can change in 2,500 years and, today, we fear that our leaders may be tempted to follow the modern Greek example of governance and taxation.  Greece, itself has become the poster child for overpaying underperforming government workers and for creating an unsustainable entitlement-based society.  Sound familiar?

When the government attempted to rein in spending and limit benefits to remain solvent, the result was rioting in the streets.  Greece is classified as one of the PIIGS that constitute Portugal, Ireland, Italy, Greece and Spain, all mismanaged nations teetering on the brink of economic collapse and threatening to bring down the viability of the European Union.

The Republic of Cyprus has now joined the PIIGS.   The government – under pressure from the European Union – has proposed to immediately tax all bank deposits to qualify the nation for a bailout.  The tax collectors would seize 10% of all accounts over 100,000 euros and 6.75% of smaller accounts.  (Currently, a euro is worth about a buck thirty).

This proposal has something in common with California’s recent Proposition 30 in that government leaders can claim it is a tax on the rich but, in reality, virtually everyone is paying.   Because fearful Cypriots now want to withdraw their savings, banks have been forced to close and limit ATM withdrawals.  Not surprisingly, this has led to rioting in the streets.

So why should we in California take note?  Because Sacramento politicians are currently seeking to increase taxes on the primary savings vehicle for many Californians: Their homes.  The lawmakers’ goal is to undermine Proposition 13, which limits increases in property taxes to two percent annually, by making it much easier to approve new taxes on each parcel of property within a community.  Known as “parcel taxes,” these taxes impose a uniform levy — the young couple in a starter home, the elderly couple in a bungalow and a multimillionaire in a mansion, all pay the same amount.  There is no restriction on the dollar amount of these taxes that exceed Proposition 13’s limits, or on the number of such proposals that can be placed on the ballot.

Currently, parcel taxes can be approved with a two-thirds vote, and even with this super-majority requirement, some homeowners are seeing their tax bills increased by well over a thousand dollars.

Lawmakers want to lower the vote requirement so these measures can pass with 55% or less.  If they are successful, the number of parcel taxes proposed and passed would increase dramatically and diminish the primary asset of millions of Californians.  Homes, they believe, are an easy target.

So while Greek Cypriots are trying to salvage their savings, California homeowners should be aware they face a similar threat to their savings.  Let’s just hope the tax hungry Sacramento politicians don’t decide that our bank accounts are fair game, too.

Jon Coupal is President of the Howard Jarvis Taxpayers Association.