The Parsky Commission is asking for another delay in presenting its final report, now to come some time between July 31 and September 15, in order to “reconcile” the progressive and regressive solutions. Fred Keeley and Chris Edley’s “blue plan” and progressive criticism, including that of Calitics has succeeded in killing the worst, most regressive proposals:
The new approach rejects further consideration of a flat income tax rate that would apply across all income brackets. The effect of such a change, critics charged, would have been to increase the share of taxes paid by middle-income taxpayers while lowering taxes on the wealthy.
“Concerns about increasing the burden on the middle class at the expense of the higher-income group need to be taken into account,” Parsky said.
He recommended instead that commissioners consider changes that would include at least three graduated tax brackets and perhaps maintain all six existing brackets, “but under the condition that all brackets get a reduction.”
So obviously Parsky wants to maintain the basic concept of moving away from income taxes, an effective method of raising revenue, and shift the burden toward the middle and working classes through higher taxes on services that are more frequently used by those groups than by the rich.
Dan Walters takes a look at a possible compromise:
Finally, after several hours of discussion, the commission agreed to consider elements of both, including a simpler income tax, a “split roll” that would eliminate Proposition 13’s property tax limits for commercial property, a “rainy-day” reserve similar to Schwarzenegger’s oft-rejected proposal, a new “carbon tax” on fuel of as much as 18 cents a gallon and either a net receipts tax or a revised sales tax that would apply to services as well as hard goods.
Depending on the details this could be rather interesting. The main flaw with this commission, of course, is its mandate to be “revenue-neutral”, which is nonsensical given the state’s desperate need for new revenue to prevent lasting economic and human damage.
Of course, the right is still peddling the discredited “volatility” argument – that relying on wealthy people to pay income taxes makes California’s revenue go in a boom-and-bust cycle. Dan Walters is an especially prominent purveyor of this theory:
The volatility of California’s tax revenue – booming one year, plummeting the next – plagues the state budget.
The volatility, born of the state’s reliance on personal income taxes from a relative handful of high-income Californians, is the underlying factor in revising the current state budget to close a whopping deficit.
Walters later on admits that the recession plays a role in shaping tax revenues, but he doesn’t pursue this to its logical end – for if he had it might undermine the overall volatility argument.
The fact is that there is no tax that is not volatile. All taxes we have today are dependent on economic activity. If there is an economic boom, then all forms of taxes will boom as well. If there is a bust, all forms of taxes will fall too. And while the state’s personal income tax has fallen off a cliff, so too have sales tax receipts, as tends to happen in a consumer-led downturn.
Further proof that this isn’t actually about volatility is the fact that neither Walters nor Parsky are willing to revisit the residential property tax protections of Prop 13. Property taxes are volatile too, but usually much less so than income or sales taxes. The present collapse in real estate values is producing volatility there, but this collapse is not a normal phenomenon, and comes after nearly 20 years of uninterrupted growth in land values.
But because the goal here is to protect Prop 13 and to let the rich out from their obligations to society, things like higher property taxes aren’t on the menu. Volatility matters only until it clashes with the underlying purpose of shifting the burden of state taxes onto those least able to bear it.
Talking about conspiracy theorists, a guest on the Rachel Maddow show last night said something like, “The thing is that you can’t argue with them. No matter what the evidence, they somehow make it support their theory.”
The same is true with California right-wing economic theorists. Just take one example: higher taxes will drive the rich to leave the state. In fact, the Public Policy Institute of California just issued a study saying that, despite having a somewhat higher tax on higher income earners than some states, more poor people are leaving California than rich. Almost twice as many.
The argument that privatized services are always better and cheaper than public ones suffers a similar fate when examined. They have failed miserably in most states that have tried them. Ask a Texan if you don’t believe me.
Yet Republicans continue to insist on the “truth” of their position. The media continues to report on their arguments without fact checks. And they continue to press for these awful policies that have already failed elsewhere.
A few weeks ago, the CA Budget Project blog had a quote from Susan Kennedy, who was discussing the commission’s work, and she said: “The problem is that our tax structure is way too progressive.” I.e., when the commission was tasked with finding more stable revenue, it was clear that “stable” was to be a code word for “regressive.” Once I’d picked up my jaw from the floor onto which it had fallen, I became extremely dubious and edgy about the commission’s actual job (especially on learning of the “revenue-neutral” absurdity mentioned). Still worried, but glad to see the progressive side has managed to at least blunt the attack. So far.
I’d agree with everything said in the other comment, but would just remind us that these failed policies have failed the people and communities in question — but for the right wing’s clientele, the economic elite, they have been resounding successes. Which is all they care about. And that’s why I don’t put it past them to have done all they could to engineer the current crisis, and work to profit from it today and secure their interests well into the future… to whatever extent they can get away with it. They don’t let up for a minute and are always, er, “innovative” in creating new methods. When the question is between stupidity and malice, it usually turns out to be the latter with these folks. And things like Calitics are even more important because of it.
The problem with a lot of taxes is that they are strongly “pro-cyclical” — they go up when the economy is doing well, and go down sharply when the economy is weak.
It’s not dumb to care about this, since in a state budget, you don’t want to be cutting services drastically (the way we currently are) when tax revenues go down due to recession.
But fixing Prop 13 would both be a “progressive” reform (it would affect higher income people more than lower income) and would also reduce volatility, since in most recessions, asset values don’t change all that much. This downturn is a bit of an exception, but that’s only because asset bubbles had a lot to do with why the economy is in the crapper.
All taxes are indeed somewhat volatile. But as Orwell might point out, some are less volatile than others.
And as Kennedy doesn’t seem to get, you can choose taxes that have more progressive incidence as well.