Tag Archives: Taxes

The Fallacy of Taxes v Services

Field poll shows voters want lower taxes and services, just not any of the services they like

By Brian Leubitz

The Field polling organization occasionally asks voters how they feel about the balance of government services versus taxes. And in the most recent such poll, by a 54% to 35% margin, most California voters say they prefer lower taxes and fewer

government services to higher taxes and more government services. But if you are a Republican, you are going to want to stop reading there.

You see, voters aren’t really sure what they want. They say they want fewer services, but when it comes to choosing services that they would be willing to cut, well that’s a different story. When it comes to pretty much anything that costs a substantial part of our state budget, nobody wants to make any cuts.

However, when voters are asked whether state and local government spending in each of six specific program areas should be increased, reduced or left the same, there is much less support for spending reductions. Only small proportions of voter (between 8% and 15%) support less state and local government spending on the k-12 schools, mental health, road and highway building and repair, and law enforcement and police. In the case of k-12 schools and mental health, majorities favor increased government spending. In the case of road and highway building and repair, and law enforcement and police, pluralities support keeping spending at current levels. Voters are divided when asked about government spending on environmental protection and public assistance programs. (Field)

So, cut our taxes and reduce our services, except the services that we like, which are most of them. It’s a frustrating dynamic, to say the least, but it is a dynamic that the Republicans have been playing off for decades in California and beyond. It hasn’t been all that successful here, but it has worked very well elsewhere, and it is all they really have.

On another front, support for Prop 13 remains high. However, a big majority of voters would like to see the commercial property values reset on any property transaction, not just a complete sale. That change would be bigger than it sounds, as commercial property rarely changes hands completely. This would shift the balance that had been shifting heavily towards housing. But, who knows if it would ever happen, the Chamber of Commerce is still strong, and would bust out “job killer” in under 2.5 seconds.

Prop 13 Reform Gets a bit of a boost

PPIC poll shows majority support for split role

by Brian Leubitz

Prop 13 is still the “third rail of California politics.” When some progressive leaders began arguing that the supermajority should look at tweaking the Property tax measure, Sen. Steinberg immediately responded that it wouldn’t happen this session. And as Warren Buffett learned during his very short stint as an economic advisor to Gov. Schwarzenegger, it still has plenty of juice.

But here is where I buried the lede in yesterday’s PPIC poll post. The poll included a question on the subject:

But one proposed reform gets majority support: 58 percent of adults and 56 percent of likely voters favor a split-roll property tax, which would tax commercial properties according to their current market value. But less than half of Californians (46% adults, 42% likely voters) favor another proposed reform, which would lower the vote threshold from two-thirds to 55 percent to pass local special taxes. (PPIC)


Now, this isn’t exactly all that progressives would want, but split role is a pretty good start. And leaders like San Francisco Assembly Members Ting and Ammiano have at least brought up the issue. Now it awaits a move up the food chain as legislative leaders need to take up the cause before it can really advance.

But what progressives are arguing for is that Prop 13 has fundamentally skewed our property taxes. By gaining consistency over time, we gave up equality between different owners. As this image illustrates, tax patterns have varied wildly. Corporations are able to fudge around the edges with structuring deals in order to avoid reassesments, while homeowners are always stuck with the latest sale price. That means there has been a huge shift from commercial property bearing a strong majority of the property tax burden to residential properties now far outweighing commercial taxes. (See these graphs; the picture to the right is the 2010 residential percentage of property taxes from that page.)

This is hardly the little old lady is going to lose her house issue, but an issue of tax equity. Commercial property owners are unlikely to see any big changes, but as the Sacramento Bee argues voters are going to be the ones that ultimately make the big changes.

Business Roundtable Poll Shows Support for the Governor’s Agenda

Business funded poll has some otherwise predictable results

by Brian Leubitz

The business roundtable is pretty much exactly what you would think it is: a business, right-leaning group that wants lower taxes and job growth.  So, it is no surprise that in their recent poll, almost 79% of Californians think taxes are too high. Now, there are a lot of ways to ask that question, and the results are somewhat confusing considering a strong majority voted for Prop 30 to raise taxes.

But some of the other data is more useful, including some evidence of support for the Governor’s education agenda:

* 54.5%, including 68.3% of Latinos support the governor’s proposed education funding plan to allocate additional money to school districts with higher populations of high-needs students;

* 56.4% support the Governor’s current budget proposal to send an additional $2.9 billion to California schools, including $1 billion in one-time funding to help schools implement recently adopted academic standards. (CBRT)

Now, I think this poll is best viewed in a larger context of other data, and that will come soon enough. However, for now, the Governor appears to be on the right track.

LAO Says More Money Is Coming

LAO thinks more cash is coming than  Gov. Brown

by Brian Leubitz

In his negotiations with the Legislature, perhaps Gov. Brown would prefer to bargain over less money and pocket any extra revenues that fall into the general fund over the course of the fiscal year. But alas, the LAO thinks that the bigger sum should be in discussion:

Legislative Analyst Mac Taylor projected state revenues Friday that are $3.2 billion higher than those projected by Gov. Jerry Brown this week in his revised budget proposal.

The difference translates into $400 million for the current fiscal year and $2.8 billion for the year that begins in July. The projection sets up a potential battle between Brown and fellow Democrats in the Legislature. who want to spend more than he proposes.

Both Brown and Taylor urge fiscal restraint, however, because revenue projections are largely dependent upon economic factors ranging from employment to housing prices. Both also agree that the bulk of the money will go to schools under state law.(SacBee)

Taylor is generally in favor of taking the cautious approach, so that’s no surprise. But acknowledging the extra cash will surely mean that the fight is more intense from legislators that are looking to restore funding for some of the state’s programs. Social services, the judiciary, higher education and other interests are competing with the Prop 98 K-14 funding guarantee, and the fight will be typically intense. This LAO report will only add intensity.

Revenue Higher Than Expected

State may end April $3B ahead of schedule

by Brian Leubitz

The news that April revenues are higher than expected is unambiguous good news. However, this being budget news, there are always caveats. First, the bottom line:

California’s tax revenues began 2013 stronger than expected and will end the all-important month of April some $3.5 billion ahead of Gov. Jerry Brown’s assumptions.(John Myers / News10)

Given the past decade, you can’t help but smile upon those numbers. However, Gov. Brown has already said that he isn’t keen to spend any of the excess quite yet. First of all, much of that money will be automatically diverted to make up for funds cut out of Prop 98 K12 education guarantees. And there is still speculation that a lot of the money was one-time bonuses given out by businesses before the Prop 30 tax increases took hold.

There are sure to be debates in the Legislature about providing additional funding for some of the very worthy programs that were slashed over the last few years. However, don’t expect Gov. Brown to go along with most of that additional spending, as he has already indicated that he’d prefer to save any excess revenue.

All that being said, it is certainly refreshing to be in the situation of discussing excess revenue than our tired budget slashing debates of past years.

California Labor Wants to “End the Gravy Train” of Corporate Tax Loopholes

Taxpayer money subsidizes huge corporations, while vital state services are slashed

by Brian Leubitz

You know about the cuts to services, especially if you are reading this. But, cuts to so-called “tax expenditures”? Well, let’s just say that it hasn’t been a focus. And now the California Labor Federation is trying to change that with their new End the Gravy Train campaign. You can also join the campaign at the End the Gravy Train facebook page. You can also sign the pledge today.

The campaign focuses on some of the tax loopholes that we have in California, particularly on the enterprise zone credit that has somehow been manipulated to subsidize some familiar names:

It’s no secret that corporate CEOs game the system to their favor. There’s a maze of loopholes, carve-outs, and tax dodges for big corporations like Walmart that the rest of us wouldn’t dream of getting. These big corporations are riding the corporate gravy train. And taxpayers like us are paying the fare.

In California, the poster child for the corporate gravy train is the so-called “enterprise zone” tax credit program. The program is supposed to encourage job creation in disadvantaged areas. But the only thing it actually encourages is more of our hard-earned taxpayer dollars flowing to richest of the rich.

Taxpayer money shouldn’t subsidize wealthy mega-corporations like Walmart that treat their workers poorly and pay their CEOs outrageous amounts.

Big corporations have had a free ride on our dime for too long. It’s time to End the Corporate Gravy Train, starting with reforming the wasteful enterprise zone program!

In order to make some of these big changes, where you are fighting a program supported by huge corporations with virtually limitless money, you have to start somewhere.  

More Tax Reform: Distinctive Classes of Property for Parcel Taxes

Freshman Assemblyman Rob Bonta looks to clarify 1980s legislation

by Brian Leubitz

It was the heady days of the mid-1980s, and Prop 13 was something not too distant in the rear view mirror. It was 1986 to be precise, and the Legislature passed some amendments to the Government codes to clarify the status of parcel taxes. Except that the clarification didn’t quite actually clarify everything.

For a few years, several areas, mostly in the Bay Area, had tax rates that varied by usage of the property. Under California tax code, property is assigned a classification, and school districts operated under the theory that if they charged taxes at the same rate within classifications, they were ok with Prop 13.

Except that a resident of the Alameda USD disagreed and filed suit against a 2008 parcel tax. He lost in the trial court, but won at the court of appeal level (for a few days anyway).

The First District Court of Appeals overturned Alameda Unified’s parcel tax, passed in 2008 and lasting three years, that set different tax rates for owners of residential and commercial property. In Borikas vs Alameda Unified, the court said that it violated a state law that requires parcel taxes be uniform. The potential ramifications of the decision are significant as districts look to local property owners for one of the few sources of money outside of state revenue. (EdSource 12/20/2012)

Here’s a link for the decision in Borikas v Alameda USD. But, well, not so fast, because the ruling was vacated pending a rehearing on Jan. 7. But the uncertainty was just too much for Asm. Rob Bonta, who represents the island of Alameda.

The bill, AB 59, by Assemblymember Rob Bonta, D-Oakland, would nullify a state Appeals Court ruling in December overturning an Alameda Unified School District parcel tax that levied one rate for residential and small commercial properties, and another for larger commercial properties. Bonta also represents Alameda. (EdSource)

The bill, in effect, would put the system back to status quo prior to the decision and the uncertainty of the Borikas case.  As it is only dealing with statutes, no supermajority is required. AB 59 is still cooling its jets in the Assembly Revenue committee, with the first possible hearing date being Feb 7. However, Gov. Brown hasn’t said anything on the topic, and with the case still pending in the courts, he probably won’t rush out to say anything.

It is worth keeping an eye out on the court decision, but that can still be a while before we get through the rehearing. In the meantime, parcel taxes remain one of the very few ways that districts can raise money. I expect that there are a few nervous school board members right about now.

PPIC Poll: Strong support for Brown and his budget

PhotobucketJanuary PPIC poll shows majorities support current financial path

by Brian Leubitz

For years, we were told that the people wanted divided government. That we couldn’t mess with the 2/3 requirements because they were somehow sacrosanct.  But that little chart on the right tells us otherwise.  

To be honest, I’ve always felt that PPIC was a little soft on the Legislature. I mean, could you really find one in four people that really approved of the legislature a few years ago? But since we ditched the 2/3 budget requirement, and Democrats were forced to deal with the disaster themeselves, we’ve moved on.  The finger pointing had to stop, and for the most part it has. The Republicans, having lost on Prop 30, and lost even their marginal relevance by failing to garner a third of the legislative seats, are simply trying to get attention any way they can.

With everything that happened last year, Prop 30, and the grassroots field campaign around Prop 32, Brown is now in a better position than most thought he would be after inheriting Arnold Schwarzenegger’s mess.  Yet on the most toxic of issues, the budget, somehow he has built the consensus that many doubted he could create:

When read a brief description of the governor’s overall plan, 69 percent of adults say they favor it and 22 percent are opposed. Across parties, 79 percent of Democrats, 72 percent of independents, and a slim majority of Republicans-51 percent-are in favor. Brown’s 2013-14 budget, which projects a small surplus for the first time in many years, proposes increasing spending on K-12 schools, higher education, and health and human services, as well as paying down the state’s debt and creating a reserve. Support was far lower for Brown’s budget plan in January 2012 (50%).

Of course, with the budget, the devil is always in the details. And summaries, by definition, skimp on those. Yet, the fact remains that Jerry Brown, and his allies, have somehow charted a middle path that eluded Gov. Schwarzenegger.

On other issues, California support for gun control grew substantially after the tragedy in Newtown, CT. From March 2012 to this poll, the number of Californians supporting additional restrictions grew from 53% to 65%. There is a lot more data on gun control at the PPIC site, especially if you care to dig down into the cross-tabs.

While you’re there, you can also see that the President also maintained his popularity here, with a 65% approval rating overall, and a broad other swath of data. Go check it out.

The Low Hanging Fruit? Reducing Tax Thresholds

PPIC Poll shows support for some Prop 13 Reforms

by Brian Leubitz

There’s good news and bad news in yesterday’s PPIC poll. The bad news first, Prop 13, or at least that branding, is still popular. When asked if they felt whether Prop 13 has mostly been a good thing or a bad thing for California, a strong majority said “good thing.” 60% of Californians generally, and even 55% of Democrats say that Prop 13 has been good for the state.

Yet, that doesn’t really tell the whole story. When it comes to the particulars of our messed up taxation system, Californians are very amenable to change. Take the 2/3 vote that is required by voters on local special taxes. When asked whether they would support the threshold going back to 55%,  54% of Californians said they would support it.

Fortunately for us, we at least have a start on that.

So, this doesn’t even go so far as the PPIC poll tells us that voters are willing to go. It is a modest reform that would allow community colleges and K12 school districts put parcel taxes on the local ballot with only a 55% threshold. That would simply put taxes at parity with bonds, as voters already made that change in the early part of the last decade.  

With the pending supermajority, we will have the opportunity to put many measures on the ballot. Perhaps we should be thinking bigger, about totally overhauling our the taxation system. Surely we can’t be giving the voters measure after measure with tweaks.

But Prop 30 bought us a bit of time. We have five years to come up with a sustainable revenue system. A system that can see us through the booms and the busts. Whatever that may be, starting with a simple change in 2014 seems a good place to start.  And if we can’t pass Senator Leno’s measure, we have to question what use the supermajority is at all.  So, let’s get SCA 3 passed quickly and move on from there.

I close with a passage from Federalist 58 on the subject of thresholds:

As connected with the objection against the number of representatives, may properly be here noticed, that which has been suggested against the number made competent for legislative business. It has been said that more than a majority ought to have been required for a quorum; and in particular cases, if not in all, more than a majority of a quorum for a decision. That some advantages might have resulted from such a precaution, cannot be denied. It might have been an additional shield to some particular interests, and another obstacle generally to hasty and partial measures. But these considerations are outweighed by the inconveniences in the opposite scale. In all cases where justice or the general good might require new laws to be passed, or active measures to be pursued, the fundamental principle of free government would be reversed. It would be no longer the majority that would rule: the power would be transferred to the minority. Were the defensive privilege limited to particular cases, an interested minority might take advantage of it to screen themselves from equitable sacrifices to the general weal, or, in particular emergencies, to extort unreasonable indulgences. Lastly, it would facilitate and foster the baneful practice of secessions; a practice which has shown itself even in States where a majority only is required; a practice subversive of all the principles of order and regular government; a practice which leads more directly to public convulsions, and the ruin of popular governments, than any other which has yet been displayed among us.

Ted Lieu, the VLF and the supermajority

SB 746 Tanning Beds TED LIEU PC_April 28 2011_1054Senator backs down from car tax discussion

by Brian Leubitz

If you ever wonder about the gaping hole in our budget that we’ve been trying to close for the last decade or so, there is one part of that larger pie that is bigger than the rest. That is the Vehicle License Fee. Back when Arnold Schwarzenegger was running in the recall election, it was dubbed simply the “car tax.”

And give him credit for this, when elected he did, in fact, slash the “car tax.”  We were able to backfill with a few years of budgetary “smoke and mirrors” but the hole was stubborn. And when 2007-8’s big recession hit, we were proverbial budgetary roadkill. The cuts just couldn’t come fast enough to match the speed of declining revenue, given that we had already made cuts to cover the loss of the VLF revenue.

And so here we stand, with a brand new legislative supermajority sure to eventually show up. So, given the damage the VLF cut brought us, surely it would be at least open for discussion, right? Sen. Lieu thinks so, or at least he thought so a few days ago when he told the LA Daily News just that

The constitutional amendment would restore the 2 percent vehicle license fee slashed by Gov. Arnold Schwarzenegger after he won office partly on that pledge.

The 1.35 percent transportation system user fee increase would generate an estimated $3.5 billion to $4 billion annually for roads and public transit in yet-to-be-decided proportions, Lieu said. … “It would be a test to see what the two-thirds (majority) Legislature means,” Lieu told the editorial board of the Los Angeles News Group. “The best way for us to lose the supermajority is to overreach.

“I’m not saying it would be an easy sell,” he added of the proposal. “I’m aware of the fact I may be attacked for it.” (LA Daily News)

Now, the interesting part here is that the suggested increase would still go to the voters, because, apparently we are all in on the government by plebiscite thing. All this would do is to save somebody a few million dollars of getting the measure on the ballot. To be honest, the amount of money spent getting it on the ballot would pale in comparison to the amount required to pass it. So, yes, Democrats have a supermajority, but no, they won’t be going so far as just passing additional revenues on their own.

Silly you, thinking we had a representative democracy, but even the vote was too much for some.

However, over the last few weeks California’s political landscape has changed.  I have listened carefully to those who have contacted my office or me.  Additionally, more stakeholders weighed in on this important issue.  As a result, I will not be introducing the proposal.  Instead, I will work with transportation stakeholders and the public next year on alternative ways to mitigate the transportation infrastructure problem.  This problem is not going to go away and will only worsen when the final installment of depleted Proposition 1B funds are allocated next year.  I am open to any suggestions and if you have any, please feel free to contact me or my office. – Sen. Ted Lieu

So the good senator got some pressure, and as Dan Walters points out they are loathe to be seen as “over-reaching.” The CW apparently comes down hard, and despite some solid advice from our very own Robert Cruickshank to move forward on progressive legislation, it looks like there is more work to be done here. Now, that being said, it looks like we may get some not inconsequential reform on the ballot in 2014, but the status quo is still quite strong.