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Posts Tagged ‘sales tax’



Red-Blue Clash Emerges in 21st Century Commission

Monday, July 13th, 2009

fred keeley_0102The Commission on the 21st Century Economy, headed by Schwarzenegger pal and Republican bigwig Gerald Parsky, has been developing a plan to overhaul California’s tax system that includes flattening personal income tax rates and broadening the sales tax, as loyal Calbuzz readers know.

Instead of achieving the consensus sought by Parsky,  however, the commission faces an ideological (and factual) conflict at its meeting in San Francisco on Thursday, as liberal members are now proposing an alternative plan. Their draft proposal, among other things, rejects as too regressive a flat income tax system, and also suggests amendments to Proposition 13.

The commission’s Blue Wing (as in blue state/red state) is questioning underlying assumptions of the Red Wing flat-taxers, like: 1) Is California actually unfriendly to business? 2) Are jobs and businesses actually fleeing California? 3) Does improving competitiveness demand elimination of the progressive tax system and the sales tax?

The introduction of the Blue Plan has already raised partisan political hackles between appointees of the Republican governor and those of Democratic legislative leaders.

Former GOP Assembly Speaker Curt Pringle, in a letter obtained by Calbuzz, accused former Democratic Assemblyman Fred Keeley, one of the leaders of the liberal wing of  “crafting a plan in private” and end running commission procedures with “an 11th hour presentation.”

“Why shouldn’t every commissioner gather their respective philosophical mates and assemble and submit competing plans in the weeks and even the months ahead,” Pringle said.

But Keeley, now the Treasurer of Santa Cruz County, insisted he has honored commission procedures, and has been raising similar issues in meetings since March.

boskinThe conservative Red Wing, led by Parsky and Michael Boskin of Stanford, previously had hoped that their plan was on track for recommendations to flatten and simplify the income tax, eliminate the business tax and create a net receipts tax, like a European value added tax, to replace the sales tax.

But after the elements of that idea – which became known as the Red Plan — were well-publicized and thoroughly examined by the commission’s staff, the liberal wing on the commission, led by Keeley and Christopher Edley, dean of the Boalt Hall School of Law, came forth with an alternate Blue Plan.

Still in draft form, their plan would:
– Require that all state revenues that are 5% or higher than Department of Finance estimates be placed in a rainy day reserve fund.
– Make no change to personal income taxes, but reallocate capital gains tax revenue, with one-third going to the General Fund; one-third to debt and retirement fund payments; and one-third to the reserve fund
– Reduce the sales tax by 2% and expand it to cover, not just goods, but also a wide variety of services.
– Reduce the rate of the corporations tax, but broaden its base by restricting deductions on business losses and rolling back tax breaks for companies that operate outside California
– Subject the controversial business net receipts, or value-added, tax to further study.
– Adopt a pollution surtax on carbon-based fuels
– Amend Prop. 13 elements of the California Constitution to allow local governments (cities and counties) to increase existing local sales tax by up to 1.50% (or any .25% fraction thereof) by a majority vote of its electorate, instead of the currently required two-thirds,.
– Amend Prop. 13 to change the non-residential property tax rate from 1% to 1.50%, effective upon change of ownership, essentially establishing a “split roll” assessment system.

The Blues also would require display of all tax expenditures – special tax breaks, credits, deductions and exemptions – in the governor’s budget, and require them to sunset in no more than five years.

At this Thursday’s meeting at UCSF, the Blue Wing will ask that their proposals be given the same thorough analytical treatment that the Red Wing proposals have received and then be considered at the July 22nd meeting at UCLA.

The Blue Wing rebellion was first reported by Dan Walters of the Sac B-, who suggested the commission is headed for deadlock. That’s certainly possible, given the stark differences in world view commissioners have, but Keeley, for one, isn’t so sure.

He believes the commission can come up with a compromise, Purple Plan that combines elements of the two approaches.

It wouldn’t include a flat tax on income, but it might mitigate some of the brackets and could easily address capital gains. And while it might not replace the sales tax with a net receipts tax (which Michigan has had trouble predicting), it might lower the sales tax rate and broaden its application to services, as many other states have done.

“It depends how deeply people want to hold onto their ideology versus producing a game-changing product,” Keeley said.

Davis Bullish on Wider Sales Tax, Bearish on eMeg

Friday, June 5th, 2009

graydavis1It’s not often that former Gov. Gray Davis makes news, but in a low-key appearance with Erin Burnett on CNBC’s “Street Signs” Friday, California’s recalled chief executive made several observations worth noting on taxes and the governor’s race.

Asked by Burnett – who seemed fixated on blaming the initiative process for all that ails the state – Davis pointed squarely to the 2/3 vote requirement to pass the state budget and California’s dependence on income taxes as the culprits.

“Fifty percent of our income tax comes from the top one percent (of taxpayers) and they pay us a lot of money when the market is doing well and real estate is doing well, neither of which are happening right now. So that’s a very volatile tax,” Davis said.

“But the sales tax is very predictable and I think you’ll see Governor Schwarzenegger’s tax commission come back and recommend that the sales tax be lowered and widened. Meaning that law firms, accounting firms — any service — when you go get your car repaired — all that will be subject to a sales tax. And I think that will be a much more dependable that will even out the ups and downs we experience.”

Mark those words, Calbuzzers – lower the sales tax rate and widen its application. Don’t be surprised if Arnold’s Parsky Commission recommends a similar change, linked to something like a small reduction of the capital gains tax – the combination aimed at increasing and stabilizing tax revenues.

Since it was Erin Burnett and a business show, Davis was also asked if he thought former eBay CEO Meg Whitman would make a good governor.

Davis: (pause) “Uh, she may be. I know her. She’s a good person. Outsiders have not had a great track record in winning in California or governing that effectively. People like to say it’s like running a business but if it was, government would run more efficiently. But I think people tend to change and after a Republican governor I think they’ll be looking for change, so I think Democrats have a better chance in 2010.”

So says Senior Statesman GGD.

Split Personality of Californians Fuels Dysfunctional Government

Tuesday, May 12th, 2009

split-personality Calbuzz has spared neither effort nor expense to bash the governor and legislative leaders for the shameful spectacle of the May 19th ballot measures.

But we’d be remiss if we didn’t also call out our fellow voters, who exhibit a maddening syndrome of self-canceling impulses about how to pay for their government.

A recent Field Poll on the subject, which passed with little media notice amid widespread reports about the life-support status of the five budget props, brings some quantitative rigor to the diagnosis of this heart-breaking disorder, which afflicts Californians of every political persuasion.

For starters, two-thirds of the voters – including 83% of Republicans, 65% of independents and 57% of Democrats – agree we should balance the state’s budget mostly through spending cuts. Fair enough, but where to cut?

Not anywhere that would affect most of those calling for cuts – or take a serious whack at spending by state government.

Majorities of voters oppose cuts in public schools, health care and higher education – three huge chunks of spending which collectively represent nearly three-fourths of the budget.

Oh yeah, they also oppose cutting law enforcement, child care, mental health, water storage, environmental regulation, public transportation or state roads and highways.

The only items majorities of voters favor cutting are prisons and state parks, which make up about 12% of the total budget.

On the revenue side, six in 10 voters say they are not willing to pay higher taxes, meaning income, general sales, vehicle license or property taxes should be off limits, according to most citizens.

They also don’t support higher business property taxes, 37%; increased gasoline taxes, 27%, or expanded sales taxes for entertainment, legal, medical or professional services, 25%.

But voters are willing to raise taxes on things they perceive as not necessarily affecting them personally: sale of pornography, 80%; income taxes for millionaires, 78%; tobacco taxes, 75%; alcohol taxes, 74%; legalizing and taxing recreational marijuana, 56%; oil severance taxes, 54%; and out-of-state Internet sales, 51%.

quentin-tarantino-gun-to-head1What do policymakers see when they look at such data? Voters, pointing a gun to their own heads, screaming “Stop, before I shoot!”

Having been in and around state government for decades, we get that there’s some of the famous waste, fraud and abuse that can be trimmed out of the state budget. Sure, there are some efficiencies to be implemented. But this stuff is nibbling at the margins.

As a practical matter, the Capitol will remain in near-permanent budget deadlock, as long as a) California remains one of only three states to require a two-thirds vote in the Legislature to approve the state budget and b) legislative districts are drawn to protect incumbents and partisan interests.

There is some evidence that voters might consider relaxing the two-thirds vote rule.

For the first time, the Public Policy Institute of California reported in January that a majority of Californians – 53% – favored relaxing the two-thirds budget rule. However, two months later, after the February budget deal that produced the May 19 election props, support had dropped back to historic levels, with only 43% favoring the idea.

Look for the two-thirds issue to become an issue in next year’s governor’s race: two initiatives to reduce the 67% rule to 55% have been cleared for circulation by the Secretary of State, and new state Democratic Party chairman John Burton has said passage of such a measure will be a priority.

The 2010 candidates for governor need to know that as long as California remains in the august company of Rhode Island and Arkansas in requiring a supermajority to pass the budget, no governor will have the power to fashion a spending plan that makes sense.

P.S.: Netroots progressives, who also want to relax the two-thirds vote for passing new taxes, will find the political territory far more rugged: According to the Field Poll, seven in 10 voters — including 84% of Republicans, 72% of independents and 58% of Democrats – say they like the requirement for a two-thirds vote of the Legislature to enact new taxes.

Challenge to Governor Candidates: Campbell’s Got Cojones, Do You?

Monday, March 23rd, 2009


Calbuzz props to Tom Campbell, Presidential Scholar and Visiting Professor of Law at Chapman University, who was the first of the potential candidates for governor to answer — ALL — of our pithy gubernatorial questions in writing.

Campbell, 56, is a former Republican U.S. Congressman, California State Senator, California Director of Finance and Dean of the Haas School of Business at U.C. Berkeley. It’s unclear whether Campbell can raise the money to launch a campaign for governor in a race that includes moneybags like Meg Whitman and Steve Poizner. But he’s a smart guy with a sterling resume and we applaud his willingness to speak directly to the state’s key concerns.

Click here for Campbell’s complete answers. Here’s just a taste:

“We should budget based on revenues one year in arrears. There’s nothing partisan about that suggestion, so I think it has a good chance of being followed. It will take several years to accomplish this; but the “rainy day” fund aspect of Prop. 1A is a good start. After ten years, perhaps sooner, we would raise revenue one year, let it earn interest, and spend it the next year. There would never again be any doubt about how much money we would have to spend. And if there were a decline in revenues, we would see it a year in advance, and take steps with more care to address it”.

“Every new state regulation should carry a 5-year sunset. A regulation could be re-promulgated if it’s been effective, otherwise, let it drop…To attract and keep jobs, we need to continue public works unabated. That means freeways, water storage and transport, port facilities, airports, energy infrastructure, and other projects . . . On taxes, we need to lower every tax that discourages jobs in our state. We need to get more in line with our competitor states’ levels on income tax, sales tax, and business tax.”

Re. Proposition 13: . . . “the ‘split roll’ idea is a job-killer.”

Re. Dealing with the Legislature: “. . . The Governor needs to be respected by and have respect for the Legislature. The Governor who wins by demonizing the other party, or the other branch, cannot hope to be effective once in office.”

Newsom: San Francisco Values an "Advantage" in Governor’s Race

Thursday, March 19th, 2009


San Francisco Mayor Gavin Newsom not only has to beat a batch of better-known rivals in the Democratic primary for governor, but also must overcome the Curse of Sunny Jim.

James “Sunny Jim” Rolph, Jr. was the last person who served as mayor of that city to be elected governor of California. The longest-serving mayor in San Francisco history — 1912-1930 -– Rolph was also the last sitting S.F. alcalde to be governor.

Since he died in office in 1934, three other big-name mayors of the town tried and failed to duplicate the feat:

Joe Alioto’s 1974 effort was skunked by Jerry Brown (who liked the experience so much he’s trying it again 35 years later).

George Christopher, the last Republican to be S.F. mayor, couldn’t overcome some guy named Reagan in the 1966 GOP primary (Christopher also has the footnote distinction of running for lieutenant governor in 1962, when Richard Nixon was humiliated by Jerry’s dad in the governor’s race and promised – falsely – that we wouldn’t have him to kick around anymore).

And Dianne Feinstein, the Hamlette of the 2010 governor’s race, got tripped up in 1990, three years out of the mayor’s office, when Pete Wilson’s mean machine used her San Francisco-centric words and deeds on issues like affirmative action, illegal immigration and gay rights to run over her.

Now Newsom, who’s best known for being the state’s most visible advocate for gay marriage – “whether you like it or not,” as he famously crowed in the best pro-Proposition 8 ad of that winning campaign last year – thinks his San Francisco connection will give him a boost in the campaign for governor.

In a recent interview, we posed this question to Newsom: How will you overcome the negative associations many Californians have about your city and San Francisco values?

“It’s an advantage right now,” Newsom replied. “We’re outperforming the rest of the state in many ways –- we have fewer job losses, we have a budget reserve, our bond rating was upgraded, we’ve passed universal health care, which is a top-of-mind issue –- these are all rather transcendent issues right now.”

As for gay marriage, Newsom told us that the weight of the recession and economic decline have made the polarized issue of same-sex unions a second-tier concern. “People…have moved on,” he said. Uh, except for that whole Prop. 8, Supreme Court thing.

Before a town hall event this week in Santa Barbara, calbuzz’s World Marketing Headquarters, Newsom said that as governor he would:

– Fight to change the two-thirds vote requirements for passing a budget and raising taxes in the Legislature, to end the GOP’s minority veto. Government by Twitter: Newsom said he had favored a 55-percent requirement, but a recent “firestorm” of comments to his Twitter account convinced him to rethink a 50-percent-plus-one standard.

– Consider an amendment to Proposition 13 establishing a split roll property tax assessment system, relaxing limits on annual increases for commercial real estate while leaving intact restrictions on residential property raises, a change that would generate billions for government. Prop. 13 long has been the third rail of California politics, but Newsom said that voters he has met “want that to be on the table.”

– Rule out future increases in state income tax rates, but might support a plan to “modernize” the state sales tax, lowering the rate but extending it beyond sales of goods to a range of services.

– Oppose any expansion of offshore oil drilling in California. Newsom said he was “disappointed that Obama changed his position on that.”

– Support efforts, as a matter of public safety, to permit illegal immigrants to have drivers’ licenses. Newsom pointed with pride to a widely inclusive system for public identity cards in San Francisco, calling it “a national model.”