Parsky Tax Panel: Headed for a Box Canyon?
Gerald Parsky, chairman of the bi-partisan panel tasked by the governor to propose reforms for California’s tax structure, has pledged that his group’s complex proposals will be available in draft bill form for public consumption 72 hours before the commission’s next meeting on Sept. 10.
This would be a big improvement, because most of the complex items discussed by the Commission on the 21st Century Economy so far have not been spelled out in detail or offered for adequate public review before meetings.
“We are seeking to craft legislation to reflect the recommendations the commission puts forward,” Parsky told Calbuzz. But, he cautioned, “We’re not here to take the place of the Legislature,” and expects that if the commission proposes any actual laws that the Assembly and Senate would deal with them through normal channels, including committee hearings.
If however, you want any idea what the commission is going to propose – good luck. You can check out the two-pager Parsky likes to refer to here, where all you’re going to find is a PowerPoint presentation with items like:
Personal Income Tax (PIT)
— Simplified Rate Structure (two brackets)
— Standard Deduction
— Itemized Deductions for mortgage interest, charitable giving, property taxes
Note: a condition to the proposal regarding PIT is that all AGI brackets, as shown in our last presentation , will receive a reduction in taxes. If this objective cannot be achieved with two brackets, consideration will be given to other alternative structures
All righty then.
The so-called “Blue Plan,” put forward by some of the Democrats (blues) on the commission to counter the “Red Plan,” put forward by some of the Republicans (reds), is deader than a doornail. However, a proposed “pollution tax” is still under consideration along with a split-roll property tax. But some big guns have come out against both of these elements. And they’re not too crazy about the business net receipts tax – one of the Red Plan’s love children.
Parsky and some of the governor’s appointees want to eliminate the corporate income tax, flatten the personal income tax and generally tilt California’s very progressive tax structure away from its reliance – they say, over-reliance — on the wealthy. Most of the liberals on the commission would go along with some of these kinds of changes – like reducing capital gains taxes – but only in exchange for balancing elements that would not benefit the rich at the expense of the middle-class.
The liberals bolted, for example, when after promising a plan that would be fair to all income levels, Parsky’s team offered a proposal that would dramatically raise personal income taxes on the poor and middle-class while reducing them for the wealthy.
There’s also been some grumbling about the meetings-after-the-meetings Parsky tends to hold, wherein he dismisses the public and the press and then huddles with commissioners to work out the real details. “How are we going to handle this going forward?” we’re told he asked fellow commissioners and staff, after the public and media were ushered away last Friday in Los Angeles.
Now, at least, Parsky has pledged to have actual, detailed, legislation ready for public review before the Sept. 10 meeting. A fancy PowerPoint presentation won’t do. The Legislature doesn’t vote on outlines, it votes on bills. And if Parsky wants his commission to propose 
laws, then that’s what has to be on the table.
Increasingly, however, we’re afraid the Parsky Commission is looking like another big fat Schwarzenegger waste of time and resources. Or as one member of the group said of Parsky: “He’s led the commission down a box canyon.”
Calbuzz just doesn’t want to see the public get bushwhacked.
The tax panel recommendations will make a great Christmas gift. You will be able to find it on bookshelves across California, right next to the California Performance Review and the Governor’s Committee on Educational Excellence report.
Well, it was pretty obvious that, whatever else you do, you can’t cut the tax rate for the richest Californians.
And that this commission was unlikely to go anywhere, given the partisan divides.
“There’s also been some grumbling about the meetings-after-the-meetings Parsky tends to hold, wherein he dismisses the public and the press and then huddles with commissioners to work out the real details. ‘How are we going to handle this going forward?’ we’re told he asked fellow commissioners and staff, after the public and media were ushered away last Friday in Los Angeles.”
Down a box canyon and into a violation of the Brown Act too, it looks like. Don’t newspapers have lawyers anymore?
Well, that’s the technical and not especially relevant side.
The bigger question, clearly, is how California gets from here to there.
I think the Parsky commission was given a narrow canyon that it boxed in itself. Its title sounded like it would recommend some grand redesign of the whole system. Instead, it really just addressed one specific, yet important, fiscal issue, revenue volatility (and really just income tax volatility). Other issues like automatic spending requirements and supermajority restrictions were beyond its purview. The Commission exacerbated this, and fatally hemmed itself in, by unilaterally putting Prop 13 off the table.
It was left with a conundrum that it either didn’t recognize or just ignored until late in the game. Income tax volatility is principally the result of the state’s progressive income tax structure which has relatively high marginal rates on high income earners. Reducing this volatility necessarily means lowering income taxes for high income households and, in order to keep revenues neutral, somehow shifting the burden to more stable but more regressive taxes. By not considering taxes on assets or property (the Prop 13 exclusion) it ensured that it was going to recommend a hefty tax increase for the majority of the state’s middle-income households while lowering taxes on the wealthiest.
Another basic dilemma (again largely of its own making) is that by focusing just on the taxes that support the General Fund, it ignored the full spectrum of state and local taxes and fees, which means it conveniently ignored the system’s already regressive parts. Thus it really didn’t address the state’s “tax system” but just the portion that excites ‘flat tax’ advocates.
No one can come up with reasonable solutions to the state’s fiscal problems by looking at taxes in isolation and certainly not by looking at just one narrow set of taxes. Even the Commission tacitly recognized this since early on its recommendations included a rainy-day fund provision and carbon taxes.