Archive for the ‘Proposition 11’ Category

What’s Next for the 21st Century (Tax) Commission

Thursday, June 18th, 2009

weedwhackerUpdated with new info from the California Finance Department.

The blue-ribbon commission rewriting California’s tax code moved ahead on a policy framework Tuesday – but the nut-cutting politics are still to come.

As Calbuzz forecast in eye-glazing detail on Monday, the California Commission on the 21st Century Economy is focusing on a new, broad-based “business net receipts tax” as the centerpiece of its proposed revision of the state’s creaky tax code.

The commission included the tax as part of one overall outline for tax reform. In advance of their next – and final – meeting on July 16, the panel instructed staff members to flesh out this broad strokes outline into a full, detailed proposal, complete with economic forecasts and models that show who pays how much under the proposed new tax structure. Staff also will prepare a look at a less radical option.

That’s when the fun will start.

Ostensibly, the commission has two basic, essentially mechanical, goals in their re-do of the tax system: 1) evening out tax collections from year-to-year with a revenue stream that is less volatile and more predictable than the current spike-and-trough system, which makes long-range fiscal planning a fool’s errand; 2) making changes that are “revenue neutral,” i.e. ensure that the new system doesn’t generate a big tax increase or decrease.

Inevitably, however, any change to the tax system results in winners and losers, and debating that inherently political issue will likely be the focus of the economic debate when the commission meets next. Chairman and Arnold ally Gerald Parsky has made clear he wants the ideologically diverse group to reach consensus on a final proposal, in order to deliver a package to the governor that is politically palatable to both parties in the Legislature.

The first package to be considered  approved yesterday has these key elements:

– Flattening the progressive, steeply-stepped state income tax rate system to a structure with essentially one rate of about six percent.

– Eliminating the state sales tax (local sales tax levies that have been approved for special purposes like transportation would remain in effect).

– Eliminating the corporation tax.

– Imposing the business receipts tax. It would be assessed on nearly every business in the state as a percentage of its gross revenue – minus the cost of goods and services that it purchases from other companies.

– Charging a “carbon tax” on gasoline, diesel and jet fuel, calculated at the refinery at $20 per ton of carbon emissions. This would amount to about 18 cents-per-gallon of gas.

The second scenario would flatten the income tax structure, but not include the receipts tax.

As a political matter, there are at least three crucial issues that will underlie all the green eyeshade talk in the devil-in-the-details debate when the commission meets again:

** How regressive will the new system be? It seems clear that flattening income tax rates will redistribute some of the state tax burden away from the very wealthy and towards the middle class. In making its final recommendations, however, commissioners can make adjustments in this area – by increasing the income level at which people pay zero tax, for example, or by directing some carbon tax revenue to offset an increase in the earned income tax credit – as part of its effort to calibrate a tax calculus that will sell politically.

** How revenue neutral will it be? Although the commission is charged with designing a system that does not raise taxes, the net receipts tax, with its application to more businesses than the sales tax, plainly carries with it the possibility of expanding the base of state tax collections, thereby increasing general fund revenues in future years.

** How will it play with the Legislature? The answers to the first questions will largely determine whether the commission’s proposal will attract the kind of bipartisan support Schwarzenegger hopes to win. This means that Republicans must feel they’re not voting for a tax increase in disguise, while Democrats feel assured that over time the new structure will produce enough revenue to pay for their favored education, welfare and other programs.

As we reported earlier, Schwarzenegger would like the commission to deliver a report that can be quickly transformed into a clean bill for introduction and swift action in the Legislature. He is hoping to win support of the legislative leadership on the policy merits, in order to gain the political backing to force an up-or-down vote on the package in the Legislature.

Given the current toxic climate in Sacramento, passing major tax legislation would be an impressive victory, and give Arnold a second major accomplishment – after voter approval of the Prop. 11 reapportionment reform last fall – to use in pushing back against the widespread perception that his governorship has been a failure.

– By Jerry Roberts and Phil Trounstine

Campbell: Remap Issue Helps Him with GOP Voters

Tuesday, May 5th, 2009


Tom Campbell fears that Pennsylvania Sen. Arlen Specter’s defection to the Democrats will damage the Republican brand. But he still believes California GOP voters may choose him as their candidate for governor for pragmatic political reasons.

The moderate Campbell, in an email exchange with Calbuzz, said that while Republicans nationally are moving increasingly to the right, he could “unify” the state GOP in the same way Pete Wilson did in 1990, around the issue of congressional redistricting.

“The best evidence” that a moderate can win the Republican primary, he said, “is Pete Wilson’s being embraced by the social conservatives when he ran for governor in 1990.” (Of course, Wilson was already in the U.S. Senate and state party brahmins were desperate for a slam-dunk candidate to follow George Deukmejian.)

Although Proposition 11, which was passed last November, handed to an independent commission the once-a-decade job of redrawing Assembly, state Senate and Board of Equalization districts, the power to draw new maps for House seats remained in the hands of the the Legislature and governor.

Campbell thinks that despite his conflicts with the Republican right-wing over social issues – as well as his current support of Proposition 1A on the May 19 special election ballot – he is positioned to make an electability argument in the primary against Meg Whitman and Steve Poizner.

“The new governor will preside over the congressional redistricting,” he told us. “That is a huge issue to all Republicans, and was a large factor in Pete’s ability to unite the party behind his gubernatorial candidacy in 1990 (it included the Legislature too, then).”

Campbell cited his own congressional service as evidence of the importance of having a Republican governor. In 1988 he was elected to the first of two terms in the 12th congressional district seat in Silicon Valley; after giving up the seat to run unsuccessfully for U.S. Senate in 1992, he won a special election for the 15th congressional district, when incumbent Norm Mineta took a cabinet post with the Clinton Administration.

“I was first elected under the gerrymandered map from 1980, Jerry Brown was the governor, the Legislature was Democratic-controlled, and I recall being one of 21 Republicans, with 31 Democrats, in the California Congressional delegation (Please forgive me if that’s not perfect, I’m doing this from recall),” he said. “When I was elected in the (Mineta) special in 1995, it was in a district drawn by the California Supreme Court, because Gov. Wilson had vetoed the Democratic Legislature’s map, and I recall making the delegation an even 27-27 split.

“That shows the difference fair district lines can make; and the importance of having a Republican Governor,” he added. “That won’t be lost on the GOP rank and file.”

But Campbell also acknowledged that Specter’s party switch symbolizes a troubling trend for Republicans nationally, as the dominance of the party’s right-wing makes moderates increasingly uncomfortable.

“The more that moderates leave the party, obviously, the less centrist it becomes. Most Americans, and Californians, seek solutions in the center. So the Republican label becomes less attractive. We can safely assume that Democratic candidates will try to say all Republicans are extremists.”

But that doesn’t mean Campbell sees himself as a switch hitter.

“I don’t see a change of parties in my future, “Campbell said. “I don’t think any candidate ever fits perfectly in any party, but in my case the fit with the Republican Party is much closer than it would be with the Democratic Party.”

You gotta admire Campbell’s persistent search a positive angle and he may be right that in a general election for governor he’d be a strong contender against any of the Democrats now lined up. But Calbuzz is far from persuaded that GOP primary voters will set aside their differences with Campbell on abortion, gay rights and Proposition 1A, to vote in favor of electability.