It’s election season, so every California Democrat politician is out there on the campaign trail, precinct walking with their “friends” in labor, and speaking to labor organizations and anyone else who will listen. They are speaking with one voice–that ” we are proud to stand up for working families.”
This may sound like a great tag line, and is surely based on recommendations by campaign consultants, polling and focus groups, and perhaps most importantly resonates strongly with their organized-labor base, who is primarily responsible for funding all California Democrat campaigns.
But the truth is that California Democrat politicians and the California Democratic Party is the “party of organized labor” not of “working families.” This distinction may not be all together clear, or even relevant, at first glance to someone not familiar with the inner workings of California politics and campaigns.
There is a big difference between a “pro-labor agenda,” and a “truly progressive” agenda that seeks to bolster the middle-class and truly lift up “working families,” not just those on welfare. If you look at everything California Democrats politicians are advocating for, and what they consider to be major policy successes, it becomes painfully clear that California Democrat politicians are primarily out to benefit “organized labor,” which comes at the expense of almost everyone else. Of course there are some exceptions with the moderate and pro-business Democrats, but here we are primarily talking about the California Democratic leadership and solidly “pro-labor” state Democrat politicians.
By and large, California Democrat state politicians are preoccupied with pursuing a narrow, pro-labor agenda that is focused on providing the greatest amount of public subsidies, wage and benefit enhancements, and welfare benefits to a very narrow class of people–the poor, organized labor, and public employees–which represents their “core constituencies.” Everyone else suffers as a result, including “working families” who are not on welfare, lower and middle-class families above the poverty line, small business, and big business. California’s biggest policy problems such as pensions, housing costs, taxes, and lack of infrastructure spending do not even appear to be on Sacramento’s radar.
In other words, the California Democrat “pro-labor agenda” is neglecting the state’s middle-class and the state’s business climate, and making it much harder for the “true working families” who do not collect state welfare checks to prosper. Moreover, this “pro-labor agenda” conflicts with a “truly progressive agenda,” but most Democrats and progressives have no idea exactly how. Robert Reich, the state’s most prominent left-leaning economist is right–the system and its policies are “rigged” in California–but not in the way that most people think.
CA Democrat Agenda Primarily Involves Spending as Much Taxpayer Dollars as Possible, Not Spending Reform
If you look at the priorities of the California Democratic leadership they talk about being proud to stand up for “working families” and a desire to “alleviate poverty,” and improve education. Many of their stated goals are noble, but their means of achieving them and the policies they utilize to advance these goals only serve to benefit their “core constituencies” listed above, not the rest of us and California as a whole.
Their primary policy instrument is spending as much taxpayer dollars as possible on government programs, primarily welfare, health care, and education. But the problem is that they do so almost indiscriminately and do not try to spending taxpayer dollars wiser or more effectively. California Democrat politicians have all but given up on asking California state agencies to spend tax dollars more effectively, and rarely consider any program changes that would upset the state’s hugely inefficient and unwieldy bureaucracy.
Spending taxpayer dollars on welfare programs helps the poor but not anyone else, and does little to actually lift the poor out of poverty over the long-term–welfare spending begets more welfare spending. Spending more money on education in itself, does not improve education. As a Dan Walters Sacramento Bee column reported earlier this year, the state is spending billions of dollars more on education now compared to a few years ago, with little or no noticeable improvement in the actual quality of education.
In short, most California Democrat policy priorities boil down to one simple end–indiscriminately increasing the size, cost and scope of California government as much as possible–to the primary benefit of the poor and state’s public sector unions. Their policy toward government spending and public employee compensation is essentially giving them as much money as is available in the government budget, no questions asked.
What is most telling about the “pro-labor agenda” and perhaps its greatest departure from the public interest and a “truly progressive agenda” is what California Democrat politicians are not doing. California Democrats and the Democratic leadership have all but given up on trying to solve the biggest problems that ail California, particularly working families, the middle-class and California businesses. But before we get to that, let’s take a quick look at the recent “crowning achievements” of California Democrat politicians.
A Brief Look at the “Crowning Achievements” of CA Democrats
The centerpiece of the “pro-labor” agenda is environmental regulation, and the “crown jewel” is AB 32. California Democrats love to tout their desire to enact never ending layers of increased “environmental protections” and “environmental regulations.” Environmental policy is extremely important to California voters and does represent a “truly progressive” policy stance–perhaps the last remaining shred of integrity the California Democratic Party and its candidates have left in support of a “truly progressive” policy agenda. But even here they are taking environmental regulation too far, to the primary detriment of “working families” and the middle classes, who will bear the brunt of the excessive regulatory burden in increased costs of goods and services that are regulated, particularly energy costs.
AB 32 was a legitimate policy victory for the state and should be celebrated as such. But how much further should the state take environmental regulation before the rest of the state and the world show at least some willingness to follow. California is responsible for emitting less than 0.5% of the world’s total carbon emissions, yes less than half of a single a percentage point. So even if California totally eliminated its consumption and production of CO2 emissions, that would represent but a blip in the grand scheme of things worldwide.
We do get benefits from improved air quality and health considerations, particularly around stationary pollution sources. But California alone cannot save the world from “climate change” even if we totally eliminated CO2 emissions within our borders. So why are California Democrats in a race to enact the strongest and most costly environmental regulations when there is little indication that the rest of the world and nation will follow anytime soon? My view is that it is because this represents action on their strongest policy position, however, beyond a certain point, further regulation will only serve to undercut our global competitiveness, while providing marginal benefits to California residents. “Working families” will be hit the hardest because they pay the greatest portion of their discretionary income in energy costs.
The biggest recent success that California Democratic leaders are pointing to this campaign season is their “victory” in increasing the statewide minimum wage in California from $10 to $15 dollars per hour–a 50% increase. Economists say that increases in the minimum wage do modestly raise the take home pay of low-wage workers, but in return lead to about a 10% reduction in employment, according recent discussions with economists. So is this really the great policy victory that it is being billed as by Democratic politicians? Effectively, trading a very modest increase in wages for those who keep their jobs, while putting other workers out of work. Touting this increase as genuine social progress may work on the campaign trail, where few people question the results, but the reality is that this was not the great policy victory that it is being billed as. After all, shouldn’t the end goal be to lift workers out of poverty entirely, not have them making more in their existing minimum wage jobs.
Another recent “success” touted by California Democrats as a victory for “working families” is the expansion of the state’s paid family leave program. Prior to the expansion, California law already allowed workers to take up to six weeks off from work to bond with anew child or care for sick family members and receive 55% of their wages. The new measure increases the pay to 60% of wages, starting in 2018, and creates a new classification for low-income workers who make about $20,000 or less annually to receive 70% of their regular pay, according to a Wall Street Journal Report.
The program is funded by worker contributions and estimated to cost about $350 million in 2018, and $587 million annually by 2021, according to a legislative analysis obtained by the Wall Street Journal. This policy does represent an improvement for primarily low-wage workers but its paid for by higher wage workers. It is a marginal improvement at best, and will surely be followed up with future legislation to increase length of time allowed and percentages claimed by workers.
As one can see, the recent list of true policy victories for “working families” is pretty short. And as will be seen is clearly outweighed by all the negative aspects of the “pro-labor agenda,” which is perhaps better defined by the policy solutions that it does not include–namely the state’s most pressing policy problems. Or put another way, the “pro-labor agenda” comes with a great cost to California, and that cost is a long list of policy problems that are off limits and not subject to negotiation, or even substantive discussion.
“Pro-Labor” Politicians Silent on Mounting Pension Problem
The best example of one such issue is the refusal of the California Democratic Party and California Democrat politicians to even acknowledge the magnitude and implications of the state’s pension crisis. The public position of almost every California Democrat lawmaker is to first not even discuss the “problem,” let alone any solutions. Yet every financial expert I have talked to, including a consensus of top economists and government professors at Stanford University, say this is the biggest public policy problem in the state.
The pension problem is eating state, and particularly local balance sheets alive, and leaving no additional money to pay for other pressing spending priorities such as infrastructure, roads and education. Total statewide pension and retiree health care debt is estimated to top $1.3 trillion, according to the Stanford Institute for Economic Policy Research (SIEPR). Would a “truly progressive” politician allow all government revenues to go to pensions, as opposed to policy programs and priorities that truly benefit California and its citizens?
To further illustrate, the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) lost a combined $25 billion in 2015, the deficit between what they said they will earn and what they actually earned. Both funds are on pace to lose another $25 billion in 2016, potentially more according to early return estimates analyzed by the Bond Buyer. That’s roughly $50 billion of taxpayer dollars lost in just two years, or almost half of total annual California General Fund spending. To be clear, this is $50 billion debt that will grow at 7.5% annually and need to be funded by future tax revenues. This represents a growing expenditure of public dollars that is not available to be spent on truly progressive priorities at both the state and local levels of government. Perhaps worse, California state and local taxpayers, including “working families,” are on the hook for all loses incurred by both funds. Why even bother running a 6-month budget process at the Capitol if nobody will so much as lift a finger to stop the state’s pension funds from driving state and local governments off a fiscal cliff?
Of course, these same politicians have likely already come up with some internal justification for not doing anything about this issue, such as “o’well” that is what the unions want, their members apparently know more about what is good for the State of California than every other independent expert who has examined the issue.
California Democrats Refuse to Address the True Causes of CA Housing Crisis
Another major departure from a “truly progressive” agenda, is the unwillingness of California Democrat politicians to address the California housing crisis. This was clearly demonstrated last week when California Assembly leaders, including Assembly Speaker Anthony Rendon, touted a package of $1.3 billion in new government spending that was intended to address the housing crisis–but it all involved new government subsidies and spending on existing programs for California Democrat “core constituencies” that have clearly failed to address the problem to begin with.
California’s housing crisis holds the greatest potential to further reduce the standard of living of the poor and middle-classes in California–perhaps more than any other policy area except the pension issue. As has been discussed in a previous column, the state’s housing crisis is market-driven. It was created over a number of years, decades even, where the state’s heavily regulated and fee-burdened housing market has failed to build new housing units to meet surging demand, particularly in coastal areas, the Bay Area and Los Angeles.
California Democrats are silent on the causes of what is driving the crisis, appear to have no intention of investigating the true causes of the state’s housing problem, and have given no indication that they are willing to consider any policy changes that would actually address the root causes of state’s housing crisis–beyond providing more taxpayer dollars to the poor to pay for “unsustainable” increases in market-based rents.
Government has essentially created the problem, and the private sector is the only force that can generate the 100,000 units that need to be built on an annual basis to build our way out of the problem. But no California Democrat, or very few, are talking about the need to address onerous government regulation, crushing development fees, and generally about what the building industry needs to “jump start” the California housing market.
CA Democrats Don’t Support Enough Infrastructure Spending
Perhaps the only kind of spending a California Democrat politician does not like is infrastructure spending. This is largely because the state’s public employee unions shun infrastructure spending because the vast majority of these dollars do not end up in their pockets.
Yet infrastructure spending is critical to building and sustaining a thriving economy and business climate. All business leaders will tell you that infrastructure spending is needed to improve the state’s business climate. This is why Silicon Valley leaders are backing transportation sales taxes to pay for roads, which business needs to transport goods. But infrastructure does not stop there, we need state highways, water storage, state parks, schools, universities, waste water plants, and maintenance of existing facilities that state and local governments all but neglect every year.
What most people don’t realize, and even fewer will admit, is that the state’s infrastructure problem is closely related to the state’s pension problem and public employee compensation issues. Public employee compensation costs are consuming all new tax dollars and preventing state and local governments from funding infrastructure projects. And local sales tax measures to increase infrastructure funding hurt “working families,” assuming they can pass with the “albatross” of the pension issue hanging over them.
Governor Jerry Brown’s January budget proposal only allocated $500 million for the most critical infrastructure maintenance costs (less than 0.5% of General Fund spending), noting that the state needs to start funding massive mounting public employee compensation debts. Sonoma, Marin, and Mendocino counties have some of the worst road conditions in the state, but are all hamstrung by unsustainable increases in public employee compensation costs and mounting debt from these same issues.
Infrastructure benefits all Californians. It truly is a public good. Apart from support for some school bonds, why doesn’t increased infrastructure spending fit into the “pro-labor” agenda? Simple, it does not benefit the state’s public employee unions, as much as salary and benefits which consume 80% of state and local government spending. And these same governments can’t afford to pay for it, given unsustainable spending in these same budget categories.
CA Democrats Fail to Address Tax Reform
Tax reform is perhaps the toughest issue of all, but holds the greatest potential to lift up the California working families and the middle-classes. California Forward released a series of reports on the issue and Controller Betty Yee’s Council is scheduled to release a report on tax reform soon. But you don’t see many California Democrats, or the Democratic leadership out there discussing the need to tackle tax reform. One exception is Sen. Hertzberg, who has introduced a major tax reform bill to expand the state’s sales tax to services, but again this expands the state’s most regressive tax and would be passed onto consumers.
California Democrats are just as guilty as Republicans in proposing a series of new tax expenditures and exemptions every year that help a select special interest (i.e. the movie industry), but are paid for by everyone else.
The state’s tax system holds the greatest potential to transfer wealth from the rich to the lower classes–which is perhaps the single greatest defining policy of what I thought it meant to be a “progressive.” But nearly all Democrats shy away from this issue because it upsets business, and is not seen as fitting into their long-term career path of climbing up the ladder in state and/or local politics. It’s too tough of an issue to attract the Democratic mainstream, and holds little potential for a short-term political payoff, beyond very narrow proposals that benefit special interests.
What needs to be done on tax reform? Simple, you broaden the base and lower the rates, as any expert on tax policy will tell you. California has the highest tax rates in the county on the sales tax and the income tax, up to 9.5% for the sales tax and 13.3% for the income tax. The sales tax is regressive and hits the poor the hardest, particularly working families who don’t collect any state welfare payments. The income tax also hits the lower and middle-classes the hardest, as well as small business, in terms of proportion of income and they don’t have the same exemptions and deductions afforded to the rich.
By failing to address the state’s unsustainable spending issues, California Democrats are essentially advocating for future tax increases, that will hit working families and the middle-classes the hardest. They should be working to ease the tax burden on “working families,” not increase it–that would be “truly progressive.” Local governments are constantly enacting a series of local fees, mitigations and exactions that negatively impact “working families” and the business community.
To be fair, most California Democrats are hoping for the Prop. 30 extensions to pass which raise $7.5 billion annually, primarily from the wealthy and small business (about $5.5 bil.), but this also includes a 1/4 sales tax increase that will hit the poor and working families (about $1.7 bil.).
This is not tax reform, it’s a general tax increase that lets big business off the hook and hits the average taxpayer and small business the hardest (Note: data from The Economist shows that U.S. corporations are generating the lion’s share of business profits, record profits in fact, higher than any other nation, but not necessarily passing them through to workers). The reason is that many small businesses (S Corps and sole proprietors) pay taxes through the state’s income tax, while corporations pay through the state’s corporation tax which is so littered with special loopholes and exemptions that some experts say it is “voluntary.”
In short, California’s current tax system contains some progressive elements, namely the income tax, but as a whole the state’s tax system is is not “truly progressive.” It is loophole-ridden and serves to primarily benefit the rich and big corporations who can take advantage of all its loopholes to the detriment of everyone else (i.e. working families, small business) who pays full boat. It is largely in conformity with the federal tax code which is even worse as is being discussed at length on the national campaign trail.
Significant Policy Change is Difficult But Not Impossible
As one can see, the California Legislature has clearly been marginalized to proposing small, almost insignificant solutions, to address big problems. And as for the biggest policy problem in California, the state’s unsustainable pension system, California politicians are remarkably silent because any discussion of this issue offends their “friends” in labor. This is completely ridiculous, and unconscionable to any one who understands the facts of this policy issue, which almost certainly includes Gov. Jerry Brown.
A review of major policy changes enacted over the past 40 years beginning with Prop. 13, shows that significant policy change does happen but it requires bold leadership and a willingness to commit to taking on tough issues over the long-haul, according to a study published by the Kersten Institute. Most major policy changes do not happen overnight, but the important thing is to at least try.
The critical ingredients of policy changes enacted in the California Legislature are strong leadership from both Legislative leaders and the Governor. Unfortunately the California Democratic leadership is silent on many of the major policy issues facing California. Gov. Jerry Brown has perhaps the greatest capacity to take on the tough issues, but even he has recently shirked from his initial willingness to think and act big on the tough issues. Gov. Brown has since decided to just follow the lead of the California Legislature on all but a few pet “legacy issues.”
Gov. Brown did make public employee compensation debt issues the major focus of his January State of the Union Address and is likely to drive a hard bargain in the budget process for increased state payments for retiree health care. But that’s about it. The Governor has tried to get CalPER’s to accept some reasonable reforms, but they have refused and he has not made a major issue out of it.
Gov. Brown has been mostly focused on his criminal justice initiative and his two “legacy infrastructure projects,” the delta tunnels and high-speed rail. The sad reality is that the State of California cannot even pay for its most basic infrastructure needs, particularly in the absence of additional pension and retiree health care reform. Who needs the delta tunnels and high-speed rail if the infrastructure we have is currently falling into disrepair?
The Governor made road spending a key issue last year, in response to requests by California business leaders and the counties, but has not chosen to connect this to the pension problem, which is the real cause of the “roads crisis.” The Governor can, and should do more to address these major issues.
So what we really have in California politics is a leadership crisis. A leadership crisis characterized by the unwillingness of California leaders to address the state’s most pressing policy problems in a substantive way. Discussion of such issues, if even raised at all, is largely confined to a cursory review, and often followed by proposing a narrow or very piecemeal solution, which may not even represent a step in the right direction. Other major problems such as pension reform, infrastructure, and tax reform are hardly discussed at all, it’s almost as if they are not even on the radar of Sacramento politicians, even though they loom large in almost every other venue in California, particularly with local governments, the business community and the average citizen.
Another problem is that California has become a “one party state” for all practical purposes which prevents many of their policy positions from being challenged in a competitive election. The state would benefit by returning to a true two party state as reported by a recent Kersten Institute report.
It’s Fine to Be “Progressive,” But Please Be “Truly Progressive”
So the next time you hear a California Democrat politician say “I’m proud to stand with organized labor for working families.” Please question what that actually means, and clarify if that is for the “working families” that are paying California’s taxes, or just those who are partially or fully subsidized from state taxpayers because they are a “core Democrat constituency”?
California has a series of major public policy issues that are going unaddressed and undiscussed in the circles of power in California, all of which have huge implications for “working families” and California’s future as a state.
It is time for California Democrat politicians to start standing up for the “public’s interest,” which includes the lower and middle-classes and what is going to help the state as a whole, not just organized labor. There is a big difference. It’s fine to be “progressive,” but please be “truly progressive,” not just “pro-labor.”
And next time you hear a California Democrat politician say they are “fighting organized labor” in Sacramento, take my word for it, “organized labor” already has the keys to the kingdom–so there is really no need to fight for them in Sacramento–it’s really just an exercise of preaching to the choir.
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: 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.
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.
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.
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: When asking whether or not California is a low property tax state – it’s not, as taxpayer advocate Jon Coupal explains in this article – the parallel question is WHY, if property taxes are already high enough in California, are legislators trying to raise property taxes? Here is a list, courtesy of the Howard Jarvis Taxpayer’s Association, of the many imminent threats to Prop. 13’s limits on property tax increases. And the reason for these attacks on Prop. 13 is the same as the reason for all proposed tax increases in California – state and local – to pay for inflated pay and out-of-control pensions for California’s unionized government workforce.
During Arnold Schwarzenegger’s first campaign for governor, one of his biggest backers, super wealthy Warren Buffet, famously said his property taxes on his Laguna Beach home were not high enough. The comment caused California homeowners to question Arnold’s bona fides as a conservative so he threatened to make Buffet do 500 sit-ups for his transgression. While the controversy blew over, there seems to be no record of Buffet making a voluntary additional payment to the county tax collector to assuage his conscience.
Most California homeowners don’t have Buffet’s wealth and rightfully believe they are already paying enough to finance local services. But still, the question of just how California property taxes measure up against other states is the source of a lot of angst and disinformation. (Rumors have it that some on the far left are preoccupied with this subject as they look for opportunities to force the “evil landowning elite” to pay their “fair share.”)
For years, the curious could consult information made available by the Tax Foundation, a Washington, D.C.-based think tank whose mission is to educate taxpayers about sound tax policy and the size of the tax burden borne by Americans at all levels of government.
If one consulted the Foundation earlier this year they would have been informed that California ranks 19th out of all 50 states in property tax burden. However, if one were to check today, they would find that our state now ranks 34th.
Have California property taxes suddenly been reduced or is it possible that more than a dozen states have recently increased their tax rates? No, none of the above. Looking more closely, the explanation is simple. The ranking of 19 is based on the per capita property tax burden, while the 34 rank is based on taxes as a percentage of property value.
This is like the ancient story about the six blind men who examine an elephant, and each comes to a different conclusion about its appearance. The first touches a leg and says that it is like a pillar, the second the tail and says it is like rope, and so on. None of the blind gentlemen are wrong, but then none are correct; their views must be integrated to understand the whole elephant.
In fact, measuring tax burden based on taxes as a percentage of value is probably the least informative. The reason is that, according the California Legislative Analyst, an average California home costs $440,000, about two–and–a–half times the average national home price of $180,000. Only homes in Hawaii are more expensive.
So does this mean that all California homeowners are rich? Absolutely not. It means that they are paying much more for homes and as a result, the taxes they pay to government are much higher than what residents in many other states are paying for similar homes. For example, $250,000 doesn’t even buy closet space in San Francisco but, in many parts of the country, that kind of money buys a very nice house.
This, of course, brings up the importance of Proposition 13, which limits the increase in a property’s taxable value to no more than two percent annually. Proposition 13 assures property owners they will not be taxed out of their homes by the mercurial and unpredictable housing market in which double digit increases in home values are not unusual. And even when housing values decline, because of Proposition 13, local government receives a reliable and stable source of tax revenue. For both property owners and government it is a win, win situation.
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.
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.
Two years ago, when 2013-14 legislative session began, things looked very dark for California homeowners. Democrats, many hostile to Proposition 13, achieved a super-majority in both the Assembly and Senate. Many publicly expressed their hostility to the landmark property tax initiative and one even said he would like to “nuke” Prop 13. Others were a bit more subtle, saying only that it was time to “examine” it. Of course, in this context, “examine” is a euphemism for “dismantle.”
However, for a variety of reasons, it now appears that Prop 13 has survived unscathed and, in fact, emerged stronger than ever. This is great news for all California taxpayers who rely on Proposition 13’s protections.
But it wasn’t easy. Here are some examples of what Proposition 13 had to endure.
Without a doubt, the biggest threat this session was Assembly Constitutional Amendment 8, a measure that would have lowered the two-thirds vote to approve local bonds. ACA 8 passed out of the Assembly on a pure party-line vote, with all Democrats voting in favor. Notably, this was the first attack in Proposition 13’s 36 year history to clear a house of the Legislature. Passage of ACA 8 would have meant billions of dollars of additional debt placed solely on the backs of property owners. However, due the diligent work of taxpayer advocates and the shocking criminal indictments of three Democratic State Senators – taking them out of the action – meant that the Senate lost its supermajority status and thus Proposition 13’s enemies were denied the ability to put ACA 8 on the ballot.
There were other threats to taxpayers that were successfully repelled. Senate Bill 1021 would have resulted in an explosion of so-called “parcel taxes” – property levies above Prop 13’s one percent cap. This bill would have allowed these taxes to be imposed, not on a uniform basis as currently required, but based on various classifications depending on how the property was used. Had SB 1021 passed, these dreaded parcel taxes would have been much easier to pass.
Sadly, some of the traditional taxpayer allies in the legislature have turned into “summer soldiers and sunshine patriots” making it difficult for those of us who advocate for taxpayers to determine upon whom we can rely. Double-digit numbers of once proud pro-taxpayer Republicans have succumbed to the demands of their liberal colleagues and big government advocates. As a result, a timber tax, mattress tax and massive car tax – cumulatively totaling billions of dollars – were passed.
But in the good news column, a recording tax on various property related documents, a tax on carbon emissions and a fireworks tax that would have slammed numerous local non-profit organizations all failed to gain approval this year.
It is not just tax issues that threaten ordinary Californians. Because direct democracy rights – the right of initiative, referendum and recall – are powerful tools in the hands of voting citizens, taxpayer advocates work hard to preserve them. Collectively, these rights represent one of the few ways to deal with an indolent, incompetent or corrupt legislature.
But few elected legislators see it that way. Even some of those who had been counted as taxpayers allies have been eager to undermine the initiative process in order to reassert control by the very politicians against whom the initiative process was designed to protect.
It is important for taxpayers to realize how important the initiative process is. Without it, we never would have been able to enact Prop 13 and tens of thousands of homeowners whose homes were saved would have been forced out onto the street. And it is not just Prop 13. Other HJTA sponsored measures like Prop 218, the Right to Vote on Taxes Act, would never have come to fruition without giving those who pay the bills – California taxpayers – the right to enact laws and Constitutional Amendments directly.
So, while this legislative session is over, what does the future portend? As Mark Twain said, “No man’s life, liberty, or property are safe while the legislature is in session.” In 2015 we can expect renewed attacks both on Proposition 13 and the initiative process. But for now, Proposition 13 continues to stand tall protecting the rights of California taxpayers. And so, for a few short months, we can relax – a little.
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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.
The terms “Blue State” and “Red State” were coined about a dozen years ago by journalist Tim Russert and were based on the colored maps being used by the television networks to graphically display presidential election results. Although originally based on the arbitrary decision to label Republican voting states red, and those supporting the Democratic candidate blue, these colors have also come to represent liberal (blue) and conservative (red).
The latest Howard Jarvis Taxpayers Association Legislative Report Card demonstrates that, in terms of state representation, California continues to be the bluest of blue. But while California has a reputation as being ultra-liberal on a host of issues, for purposes of the HJTA Report Card, we focused solely on how legislative votes were cast on tax issues.
Taken as a whole, the Report Card shows that a preponderance of lawmakers actively support the redistribution of wealth, not from one citizen to another, but from all citizens to the government. This allows the majority party in the Legislature to continue to reward their most active backers, the government employee unions. Government employees in California are the highest paid in all 50 states and it is no secret that money to meet the payroll must come from taxpayers.
The HJTA Legislative Report Card is designed to help Californians gauge how their state representatives are actually performing on taxpayer-related issues. For the 2013 legislative year, 20 bills were used to evaluate and grade voting records. Practically all of these bills deal with tax increases — often masquerading as fees — or direct assaults on Proposition 13 and Proposition 218, the Right to Vote on Taxes Act.
There is no question that the consequences of what occurs “Under the Dome” are very real and personal for average taxpayers. For example, decisions made by legislators in the last five years have helped ensure we have the highest income, sales, and gas taxes in the nation. These are facts most lawmakers fail to mention when discussing their voting records. The letter grades allow Californians to see past the politicians’ self-promoting press releases and glossy campaign mailers touting their record in Sacramento.
Of the 120 members of the Legislature, three times as many (79) earned an “F” as those who were awarded “25” an “A.” This is more alarming when it is considered that many of these lawmakers will be safely ensconced in their offices for another 11 years due to voter approval last year of an extension in term limits. And with increasing numbers of legislators from both parties capitulating to pressure from special interest lobbyists and government employee union leaders, the environment for taxpayers in Sacramento could get a lot worse before it gets better.
However, there are some lights in the Capitol that are still burning bright. Nine lawmakers achieved a perfect score by standing with taxpayers through thick and thin. Senators Anderson, Gaines, Knight, Nielsen and Wyland, and Assembly Members Dahle, Donnelly, Gains and Jones have provided heroic service to taxpayers in 2013.
To view the entire Report Card and see how your representative faired, please visit www.HJTA.org and look under “Hot Topics.” And if you want to have influence on their future votes, we recommend you contact your representatives to thank or excoriate them as you see fit.