Those Tied Hands Loosen Somewhat For Corporate Cash

I spoke at yet another Democratic Club meeting on the May 19 propositions yesterday, against yet another member of the California Legislature, Julia Brownley (who I really like and respect).  One thing I sought to make clear to everyone is that we are going back to the drawing board on May 20 no matter what happens on May 19.  The Legislative Analyst already finds the February budget deal to be $8 billion dollars out of balance, and April tx receipts came up $1.8 billion dollars short of the budget projection.  Some of us recognize that this means alternative solutions must be gathered right now, because Democratic legislators will be stuck in the chamber with the Yacht Party on May 20 regardless.

I was heartened to hear Assmeblywoman Brownley note that a majority vote fee increase will probably be part of the solution.  When the Legislature passed this in December, they raised more money than would be sacrificed if Props. 1C, 1D and 1E failed.  An argument could be made that the majority vote fee increase combined with the passage of those props would obviate the need for almost any cuts.  I think that’s faulty reasoning, since 1D and 1E ARE cuts, to vital services that will cost the state more money in the long run.  As for 1C I find it completely unworkable and just a borrowing gimmick.

I do have to say that it would be much easier to swallow this posturing from the ballot measure supporters that they would have no choice but massive cuts on May 20 if everything failed, if they didn’t enable massive permanent corporate tax cuts in the last budget deal…

Corporate tax attorneys are chuckling over the absurd deal in the last agreement that lets multistate and multinational taxpayers decide, each year, how much income they want to report to California. Because this was negotiated in private, with no hearings and no independent expertise brought to bear, the result is a giveaway and a national embarrassment, in a state that had prided itself on a fair, successful corporation tax.

Here’s how it works. Each state typically figures out what percentage of a large company’s business is done in the state, and then taxes that percentage of income. Historically, if 10% of a multistate company’s payroll, property and sales are located in the state, then 10% of its nationwide or worldwide income is subject to tax. In the budget deal, California changed the formula to allow companies to choose to make that percentage based only on sales in California.

…and if they didn’t protect the very corporate interests who are now bankrolling their ballot measures:

The entire architecture of the ballot pact that emerged was heavily shaped by leaders’ desire to please – or at least neutralize – the state’s most powerful political players.

Now, some of those very interest groups protected in the budget deal are bankrolling the campaign to ratify it.

For the oil industry, the package omits a once-proposed 9.9 percent oil severance tax. Energy companies have given more than a million dollars to pass the plan, led by a $500,000 donation from Chevron.

For the liquor, beer and wine industry, increased alcohol taxes were shelved. Alcohol industry heavyweights, such as E. & J. Gallo Winery ($100,000) and California’s Beer and Beverage Distributors ($50,000), have all opened their checkbooks.

For the teachers union, the list of ballot measures includes a separate measure to ensure repayment of deep cuts to schools and protections for top-priority programs. The California Teachers Association has contributed $7 million to the passage of Propositions 1A and 1B.

For casino-operating Indian tribes, the state lottery measure avoids any new games that could threaten their gambling operations. Tribes, who could have been major contributors against the lottery proposition, have kept their checkbooks closed.

In the last budget deal, all the industry-specific taxes, all the service-based taxes that wouldn’t be so regressive, faded away, and the same groups protected by that fade (including practically every sports team, as sporting event-industry taxes were once on the table) ponied up for the special election.  So pardon me if I don’t believe your lament that you’ll just be forced to cut state services, when you found room for billions in tax cuts to the largest corporations in America and protected every single industry that could donate money for ads and mailers.  Let’s just say I don’t buy the image of a legislature with their hands tied.

One thought on “Those Tied Hands Loosen Somewhat For Corporate Cash”

  1. Thanks David for reminding us that the budget deal went out of whack before the ink dried.

    And thanks for pointing out that the other Golden Rule still applies, those with the gold make the rules.

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