Quantcast

Posts Tagged ‘California Commission on the 21st Century Economy’



What’s Wrong with the Parsky Panel Tax “Reforms”

Monday, September 14th, 2009

threecardmonteBy Jean Ross
Special to Calbuzz

The Commission on the 21st Century Economy,  the “blue ribbon” panel chaired by Republican Gerald Parsky and charged with recommending changes to California’s tax system, appears poised today to  recommend a massive shift in the cost of financing public services from the wealthy and corporations to middle-income families.

The biggest winners would be the state’s millionaires, who would receive personal income tax breaks averaging $109,000 per year. The biggest losers would be middle-income families who would receive a tiny, if any, reduction in their personal income taxes and who would pay substantially more for goods and services due to the new “value-added” tax the Commission proposes to replace revenues lost due to the tax cuts for the wealthy and repeal of the corporate income tax.

The magnitude of the shift proposed by the Commission is nothing short of stunning. The changes to the personal income tax structure alone would reduce income taxes paid by the poorest 62 percent of California taxpayers by $4 per year, on average, while providing six-figure breaks to the millionaires. The bottom 81 percent of the income distribution – the vast majority of all Californians – would receive 10 percent of the personal income tax cut, while the top 0.2 percent would receive 27 percent of the benefits.

And that’s the “good news.” The Commission would repeal the corporate income tax and the state’s portion of the sales tax and replace it with a new tax on business net receipts – a tax that has never been tried anywhere in the US – that the Commission’s own consultant notes would raise prices of goods and services, while exerting downward pressure on wages and benefits.

The Commission’s proposal is designed to tax a broader range of goods and services than the state’s existing sales tax. That’s not entirely a bad idea. There are many services that could and probably should be taxed in order to eliminate some of the biases of the state’s existing sales tax. But the Commission would throw the good “loopholes” out with the bad. It would, for example, tax groceries to finance tax cuts for millionaires, while taxing child care so that oil companies would no longer have to pay the corporate income tax.

The new tax would also encourage relocation of California jobs to foreign firms that would be beyond the reach of California’s tax collectors. Incentives for offshoring could be created by provisions rooted in a highly technical, but extremely important, area of tax law. So-called “nexus” issues are among the most contentious in tax law and govern what activities states can and cannot legitimately tax.

There are considerable grounds to worry that courts would constrain the state’s ability to tax service providers – such as call center operators or consulting firms – located entirely outside of California. Should the courts rule against the state’s ability to collect the tax, billions of dollars of revenues – sorely needed to balance an out-of-balance budget – could be lost, and businesses would receive substantial tax savings from moving jobs out of California.

A letter signed by some of the of the nation’s most prominent tax policy experts notes the potential for the new tax to be challenged based on the “nexus” issues discussed above and notes that “there is almost no experience in the United States or abroad” with a tax similar to that proposed by the Commission. [Note: This important letter, dated Sept. 5, is NOT posted on the Commission web site, where public correspondence is posted only up to Sept. 4.]

Some might be willing to support these changes if they ended California’s persistent budget crises. But again, the Commission’s own estimates predict that revenues raised by the new tax system would grow more slowly over time than those raised by the state’s current tax system. Thus, the Commission’s recommendations would lead to larger, not smaller, budget shortfalls in the future.

Over the five-year period covered by Commission estimates, the difference in revenue growth would be substantial – the increased deficit under the proposed tax code would be approximately equal to what the state spends for today for the University of California and California State University systems combined.

Finally, it is important to note that the Commission totally side-stepped straightforward options for aligning the state’s tax system with the 21st economy that could be accomplished without shifting taxes from the top to the middle or imposing an entirely new, very risky, tax regime.

The Commission could have encouraged lawmakers to aggressively pursue collection of sales tax on out-of-state retailers that currently go untaxed, leaving California businesses at a competitive disadvantage. It could, as noted above, have recommended extending the state’s existing sales Jean-Ross-smalltax to a broader array of services and using the additional revenue raised to lower the sales tax rate.

Similarly, the Commission could have used tax policy as a tool to mitigate, rather than exacerbate, the widening gaps between the top and middle- and top and lower-income households. This, alas, is the path not taken and an opportunity for real progress foregone.

Jean Ross is the executive director of the California Budget Project (CBP). The CBP’s analysis of the Commission’s proposals is available here.

Parsky Aimin’ to Bushwhack His Tax Reform Panel

Wednesday, September 9th, 2009

johnwayne[3:45 pm update] Whoa there!  We just got sent a document titled “Revenues From Development of California Oil Reserves” which is not on the agenda, is not in the proposed tax package and is not on the commission’s web site. It doesn’t say who it came from although it is likely the result of a request by commissioner Michael Boskin of Hoover Institution and — note this — a member of the board of Exxon Mobil (psst was this disclosed?).

It begins:

Proposal: The state should permit additional offshore oil leases, under strict environmental safeguards, with royalty revenues going to a reserve fund to be used for specific limited purposes.

Rationale: The development of additional oil resources would expand the domestic oil supply, while providing tens of billion of dollars of revenue to the state over a number of years.

[3 pm update below] Gerald Parsky, the Republican bigwig appointed by the governor to run the Commission on the 21st Century Economy, has broken his promise to have proposed legislation available for public review 72 hours before the commission meets Thursday in LA.

The materials weren’t even available 48 hours before Thursday’s 11 a.m. meeting. [UPDATE: A batch of documents, including some draft legislation, were posted on the commission's site and sent to fellow commissioners at about 12:20 pm on Wednesday -- less than 24 hours before the meeting where commissioners are expected to consider completely restructuring California's taxes.] So what does that mean — besides being a violation of the Brown Bagley-Keene Open Meeting Act? It means Parsky is planning to do exactly what Calbuzz warned against: after leadin’ the commission down a box canyon, he’s aimin’ to bushwhack ‘em.

Hey pilgrim — you don’t get to propose a wholesale restructuring of the California tax code without giving the public – and your fellow commissioners — a chance to study the proposals. Who do you think you are — some arrogant, Nixonian gasbag who can run roughshod over the rest of us?

Here’s a more reasoned — less angry — critique by Timm Herdt in the Ventura County Star.

Calbuzz Interview: How Poizner Courts Conservatives

Tuesday, September 8th, 2009

stevepoiznerSteve Poizner faces two key challenges in seeking the Republican nomination for governor: appeasing the GOP’s social conservative mullahs while convincing its anti-government jihadists his economic views fit more with their absolutist ideology than Meg Whitman’s.

An erstwhile Silicon Valley moderate, Poizner now positions himself as an Arthur Laffer-like disciple of economic growth through tax cuts and roll-backs in regulation, while finessing his pro-choice stance on abortion for the pro-life, cultural right-wing of his party.

The 52-year old Insurance Commissioner also has joined the crusade for a part-time legislature, a move that recalls how former Gov. Pete Wilson assuaged conservatives with his embrace of term limits in the 1990 gubernatorial race. All the while, Poizner keeps pounding chief rival Whitman, portraying her as a Schwarzenegger-like, neophyte squish whose vow  to run government like a business is no match for the Democrat-dominated Legislature.

“This is going to come down between Meg Whitman and me,” Poizner told Calbuzz in a sit-down interview, “(Voters) don’t want a career politician for sure, but they also don’t want a rookie, and I really do think that voters understand that politics is different from running a company.

“Being in a board room, I can just tell you, is different. There’s no hiring, no firing, no stock options (in government). The tools are different,” he added. “Between Meg and me, only one of us…has a track record.”

poiznerinsurance

First exchange: For the first time, Poizner and Whitman in recent days have exchanged sharp fire in an effort to paint the other as too liberal to represent the hard-line conservatives who dominate the Republican primary electorate.

Whitman struck first, distributing a video of Poizner’s 2004 Assembly campaign, when he advocated early release of some state prisoners, in sharp contrast to the tough stance he has taken against such a policy in the governor’s race. At the same time, Steve Harmon of the Contra Costa Times reported how Poizner’s “past support of taxes could haunt him” in the primary, detailing his record of backing a measure that made it easier to raise taxes for schools, among other past fiscal positions anathema to the GOP right-wing.

The attacks exposed Poizner’s vulnerabilities among conservative voters, as John Wildermuth showed in an analysis called “Poizner apologizes for being a moderate.”

megonvanyoutubePoizner quickly countered Whitman’s attack with a You Tube video that sent the message his rival is a liberal, cultural elitist; it featured Whitman singing the praises of Van Jones, Obama’s green jobs guru. Jones resigned over the weekend under conservative pressure, following disclosures of portions of his leftist record that included diatribes against Republicans and claims that the Bush administration was complicit in the 9/11 attacks.

“This is an epic battle,” Poizner said of his campaign. “This election will be the most important election in the country in 2010, maybe the most important gubernatorial race in California history, given the mess that we’re in.”

The interview: Cautious and wary, Poizner recently sat down with Calbuzz to talk about the race, his platform and the mess in California. Sitting in an outdoor cafe, he munched from a bag of potato chips after pushing away the nastiest-looking egg salad sandwich in the history of the world, which an aide had bought for him to eat during the late afternoon interview, after a day of campaigning.

“You had to get egg salad,” he said. “You think there’s anything more difficult I could possibly eat?

Here are some weed-whacking excerpts from the interview

ECONOMIC ISSUES

Taxes: “If you want to raise tax revenue the best way to do that is by reducing tax rates.”

“We are looking at broad-based, across-the-board tax decreases to make California more competitive, job-wise. In the next few weeks, we will put out a detailed proposal that will go into specifics of which taxes, how much. We’re going to combine some of our ideas about tax decreases with some reforms of the regulatory system as well. It’s really going to be a jobs proposal, jobs package.

“I went to one of those meetings (Commission on the 21st Century Economy) and, of course, there’s no consensus in that group…

“The (business net receipts) tax has the feel of the sales tax. The thing that worries me…is that people will perceive a major tax cut just happened – they won’t see the impact of the business value-added tax because it will be built into the price of the product. I’m afraid that politicians will want to ratchet up the sales tax over time because people will think it’s so low…

“I oppose a split roll (property tax) and a carbon tax. This is not the time to be adding new taxes.”

EDUCATION

Cuts in education: “I’m very concerned that we’re under-investing in education but the answer is not to increase taxes, because then you get into this accelerated death spiral. It’s going to be painful for the next year or two or three in order to get out of the mess we’re in, there’s going to be pain…

“I support higher tax revenues through lower tax rates and I want to invest these higher tax revenues in higher education and K-12…

“People from universities in other states are creating raiding parties of the UC system, our professors are going to get pilfered left and right here.”

Teachers unions: “(Teachers) are the ones that told me there’s so much money that never makes to the classroom. There are 600,000 people who work in K-12 and over half of them aren’t in the classroom…

“I want to empower teachers. People ask me this all the time – you’re a Republican, how are you going to deal with the unions? My education reform platform is going to appeal to teachers. There’s 300,000 members of the CTA and I’m going to communicate with all of them…

“There are 5,000 schools that report to 1,000 schools districts that report to 58 county boards of education that report … to a whole mixture of…bureaucracy and overlap…We’ve got to totally flatten that out.”

Dysfunctional state-schools financing: “We have to fix that.”

THE CAMPAIGNpoizner

Platform: “How I run for governor is going to be critical to my strategy. I’ll be issuing more and more details – I’m going to be very specific. I will drive my political consultants nuts. Political consultants don’t want you to be specific – ‘don’t let them pin you down.’ But that’s not the way I’m going to be running this campaign.”

“Some of my TV advertising may say the following – ‘please do not vote for me unless you agree with me’…I’m hoping I get elected by a landslide.”

Part-time legislature: “From 1850 to 1967, California had a part-time legislature. I want people who have been successful in their community and then they’re sent to the Legislature to make wise decisions…I want to figure out a way to attract a different kind of person.”

Gov. Schwarzenegger: “I think (he’s) been scattered. Sometimes he’s working in this direction, sometimes he’s working in that direction. I really do admire that he’s gotten the reform movement started…but he doesn’t have necessarily my same devotion to a set of core principles.”

Jerry Brown: “I look forward to running against Jerry Brown. He’ll be a tough, formidable candidate – he’s crafty, it will be a tight campaign. He is the epitome of someone who has never had any experience whatsoever except in politics and I bet you the majority of voters are going to say ‘thank you but it’s time to retire.”’

Tom Campbell: “Tom Campbell…is a great person, but he’s advocating tax increases – he’s running in the wrong primary. He’s not going to get into double digits, he’s not going to be the Republican nominee.”

Meg Whitman: “This is going to come down to between Meg Whitman and me and when people dig in they’re going to realize that only one of us has actually started companies from scratch. The other one is a large company marketing executive – that’s a difference…Only one of us has actually run for office and won. I’m the only Republican to get elected in a regularly scheduled election since 1994…The difference is track record.”

SOCIAL ISSUES

Abortion rights: “I’m pro-choice but I really do feel quite passionate about being against abortions. I want to drive the number of abortions down to as close to zero as possible.

“I just don’t think you can or should outlaw abortion – I mean that’s just not going to happen, wrong step. I’m in favor of outlawing late term abortion…I support parental notification, I support some logical steps that put some reasonable restrictions on abortions and most importantly I’m in favor of bold education programs for teenagers.”

Gay rights: “I don’t support gay marriage (and I support) Prop. 8. I do support civil unions and domestic partnerships.”

Social conservatives: “I’m finding that a lot of very conservative social conservative types they understand that my top priority is family values. There’s nothing more important than making sure that families can make ends meet…

“So we don’t completely agree on the social issues but we’re not 100 miles apart. On fiscal issues we’re 100% in lock step.”

Parsky Tax Panel: Headed for a Box Canyon?

Thursday, September 3rd, 2009

parskyGerald 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 boxcanyonambush-275laws, 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.

Fishwrap: Mysterious Behind the Scenes Secrets

Friday, August 21st, 2009

conradDeliberative body delivered: The next time Senator Kent Conrad starts holding forth on the tube about why Americans are not allowed to choose a public option for their health care insurance, remember this name: Kelly Candaele.

Conrad is the four-eyed, hose-nosed twit from North Dakota whose self-important pronouncements that there will be no public option in health care reform are eagerly sought and duly recorded by the badge-sniffing stenographers of the Beltway MSM. Conrad was last elected to the Senate with 150,416 votes.

Candaele is a four-term member of the Los Angeles Community College Disrict Board of Trustees.* One of seven members, he was last elected with 151,218 votes – 802 more than Senator Dufus.

The fact that Conrad, an alleged Democrat who has bogged down health care reform legislation along with his buddy, Landslide Max Baucus (who won his seat with one-third fewer votes than President Obama scored in Alameda County – 345,937 to 489,106 – fercrineoutloud) suggests that The Framers weren’t exactly planning ahead when they came up with this whole bicameral, one-house-represents-land-instead-of- people notion.

That cheap suit characters like Conrad and Baucus have the power to hold hostage a health insurance policy that 77 percent of Americans favor is an authentic outrage that makes Calbuzz wonder exactly what a Willie Brown – not to mention Lyndon Johnson – would do to these wigglers, after grabbing them up by the scruff of the neck and tossing them and their office furniture out the window to somewhere south of the Watergate parking garage.

We’re just sayin’.

Candaele*As for Kelly Candaele, who mysteriously – oooh – shares initials with Kent Conrad, Calbuzz was unsuccessful in repeated efforts to reach him to seek his views on health care reform, which seem to us at least as important as those of Mr. Dork from North Dakota. We strongly suspect that  Candaele, a journalist, filmmaker and former labor organizer, (whose mother batted .290 in the women’s professional baseball league memorialized in “A League of Their Own” – you could look it up)  is more of a single payer, public option kind of guy.

nixonParsky Channelling Nixon? Calbuzz is picking up grumblings from some members of  the Commission on the 21st Century Economy who are not happy with the Nixonian tendencies of the group’s chairman – Gerry Parsky the investment firm chairman who once served in (you guessed it) the Nixon administration.

Seems the commission’s agenda doesn’t give anyone a clue about what’s coming up for discussion, members have no time to read position papers or analytical documents before they’re released at or just before meetings and Parsky doesn’t even respond to some pretty credible people trying to stay on top of what’s going on with the commission.

For example, see the agenda for the Commission Workshop on the commission website. See if you can figure out what’s being discussed at that meeting.

Or check out the correspondence from Steve Levy from the Center for the Continuing Study of the California Economy. Steve, one of the smartest guys in California, suggests to Parsky et. al. ways to evaluate various tax proposals and asks how the commission intends to do this. But has Parsky or anyone responded to Levy?  Nope.

Meanwhile, they’re talking about scrapping most of California’s tax structure and replacing it with a net business receipts tax – a monumentally complex idea which no other state has attempted. Does anyone on that commission actually understand the implications? We don’t think so.

meginchair

Will She or Won’t She: Kudos to Chapman University for pulling together an October 28 debate with the Republican candidates for governor. Oh wait, make that most of the Republican candidates for governor.

Tom Campbell and Steve Poizner, who share the quaint idea that candidates for office who want the voters to hire them ought to subject themselves to standing face-to-face with their rivals for the job, both accepted the invite with alacrity. Not so fast for Meg Whitman, who acts like it’s five days before the election and she’s sitting on some precious two-point lead.

As Poizner reliably banged on eMeg for running and hiding on her earlier promise to participate in three debates this fall, a spokeswoman for  Whitman offered this, uh, explanation:

“As you know, Meg has made it very clear she is looking forward to debating the issues in the upcoming election, having sent a letter stating those intentions over 2 months ago,” campaign press secretary Sarah Pompei told Calbuzz via email. “She is committed to ensuring Californians know her plans to create jobs, cut spending, and fix education.  Right now, we are looking at the various debate options to see what will work best in our schedule.”

All righty, then.

Gossip: A well-informed, reliable and top-rank California Republican pol whispers that Her Megness, with the aid and comfort of long-time coat holder Henry Gomez, has decided that this whole politics thing isn’t all that different from running a business and so is pretty much directing her own campaign, despite the 87 gazillion dollars a month she’s forking out for consultants. Watch for what you wish for, eMeg.

Health Care Must-Reads: Media critic Jason Linkins, who can be quite tiresome when live blogging the Sunday shows for Huffpost, absolutely nails it in this piece holding the WashPost to account for a dog-ass story packed with anonymous sources attacking “the left” for its hang-tough position on including a public option in health care reform.

And in another morsel of what seems a concerted White House effort to distance themselves from the policy that Obama, um, campaigned on – “We’re shocked! Shocked that these liberals would be wedded to such a thing! – that old mischievous nameless source show up in this nice piece about former DNC chief Howard Dean doing the Lord’s work on health care.

Paging Rodney King: Calbuzz readers gave major props and style points to Garry South, Gavin Newsom’s chief consultant, for his well-honed one liner in our post about Jerry Brown’s expansive views on abortion  the other day.

“This guy’s had more incarnations than Zelig and he’s taken more positions than there are in the Kama Sutra,” South said, to the wild applause of the Croatian judge – “9.9, 9.8, 9.9” – and many others.

While some Democrat critics scold and wag their fingers at South and Newsom for refusing to sign a no-negative-attacks pledge for the primary, others believe in a more positive approach.

Thus, a longtime party loyalist spent several hours Google searching for a  quote in which South actually had something nice to say about Brown:

“I never got to know Jerry very well,” South said in 2007. “But he did a very effective job of becoming a pragmatic mayor in Oakland.”

Ommm….