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Split Roll and the Bottomless Hole

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.

Ten Fallacies Used To Justify Opulent Government Pensions

There are many implicit rationalizations justifying paying generous government pensions. Here are my nominations for the top ten bogus excuses:

1. “Public employees deserve high pensions because of their low pay.”

FALSE. Perhaps true at one time, but not anymore. In many instances, today’s government employees are earning 10%-30% more than their true private sector counterparts — with far better job guarantees.

2. “Government employees should not have to save for retirement.”

FALSE. They can use retirement accounts to add to their nest eggs — just like the rest of us. They can invest in stocks, real estate, annuities — just like the rest of us.

3. “Government employees deserve to retire earlier than private sector employees.”

FALSE. If they do “need” to retire early, they can get another job to supplement income (as do most military retirees).

4. “Government employees and their families deserve to live and retire comfortably from a single 40 hour a week job.”

FALSE. Today most private sector middle income and upper middle income couples fully expect to generate multiple incomes — working over 40 hours and/or both working.

5. “Government workers deserve guarantees because they are ‘public servants’ not motivated by greed.”

FALSE. As a group, public employees, thanks to their their unions, are as greedy as they come, and they rely on the force of government to get what they want. The REAL “public servants” are the TAXPAYERS.

6. “No matter how many or few years a public employee works for government, their only source of retirement income is (and should be) their government pensions.”

FALSE. Downright ludicrous. Yet government pension apologists will point to a 10 year government worker’s relatively modest pension, bemoaning the worker’s poverty-stricken plight at retirement. They include such workers in their “average government pension” propaganda.

7. “Many government employees don’t get social security.”

LARGELY FALSE — or at least misleading. While many public employees don’t pay into social security, most can qualify for at least a minimum social security income from other jobs.

8. “Without guaranteed pensions, many government employees would retire in poverty.”

LARGELY FALSE — or at least not the fault of taxpayers. This assertion is based on the absurd assumption that, unlike private sector employees, government employees would (and should) otherwise save nothing for their senior years.

9. “Many government employees should be able to retire with essentially the same income they earned on the job.”

FALSE. This is the “90% pension at 30 years” common in public safety jobs — and for too many other government employees (including all San Diego County government employees). Indeed, given that a retired employee no longer pays for pensions, union dues, Medicare, or commuting costs, a 90% pension is actually HIGHER than the net salary received while working.

10. “We have to pay top pensions to attract ‘the best and the brightest’ to government work.”

FALSE — and a bad idea to start with. We DON’T want to attract “the best and the brightest” to government work. We need such folks in PRODUCTIVE employment in the private sector. All that government pensions do is to assure that government employees STAY as government employees – regardless of work quality.

Richard Rider is the chairman of San Diego Tax Fighters, a grassroots pro-taxpayer group. Rider successfully sued the county of San Diego (Rider vs. County of San Diego) to force a rollback of an illegal 1/2-cent jails sales tax, a precedent that saved California taxpayers over 14 billion dollars, including $3.5 billion for San Diego taxpayers. He has written ballot arguments against dozens of county and state tax increase initiatives and in 2009 was named the Howard Jarvis Taxpayers Association’s “California Tax Fighter of the Year.”