We’ve been pessimistic about the so-called Parsky commission, whose task it was to reform the tax code. At first, the concept seemed benign enough, a panel to investigate ways to reduce volatility in our revenue. Terriffic. But we became suspect when Gerald Parsky was named chair, and we haven’t really felt a whole lot of enthusiasm for the ideas emerging out of the commission. Mostly because they are regressive changes, increasing taxes for the middle class and reducing taxes on the wealthy. Because, you know, it’s better to have stability than a sound economy and a growing middle class.
At any rate, the big news today is that the Governor plans on calling a special session for the fall upon completion of the Parsky Commission’s assigned task. Now, the problem here is that there may not be one plan. As Dan Walters originally reported, Fred Keeley has introduced the idea of a so-called “Blue Plan” for a more progressive reform of the tax code.
Given the distance between the two sides only recently, it seems unlikely that a) the Commission will be able to produce a unanimous report or that b) that report wouldn’t be DOA in the Legislature. As Parsky and the staff at the “21st Century Commission” have outlined, the biggest component of both plans is to merely increase taxes on those making between $20,000-200,000 and to decrease taxes on those making between $200,000 and over. In that large PDF file, under fairness (on page 14) they have the phrase “Reduces Progressivity Somewhat” and “Increases Number of Taxpayers.” Because somehow those are fair? Well, let us just say fair is in the eye of the beholder.
There are some other bits and pieces of both plans, but both are odious to any progressive. And a Democratic Legislature, if only given the option of an up or down vote, would be required by their constituencies to vote No.
Now, the Keeley plan was still quite nebulous before, and few details are really out there. But there the problem is the same that we have faced in the past, Republicans are unwilling to vote for anything with an ounce of progressivity. It would be hard to imagine any tax commission dealing with what ultimately needs to be dealt with in this format.
So, in September or October, we’ll go through some Kabuki to come up with what we already know: this system is too broken to fix this system.
UPDATE: I’ve added the Governor’s Order over the flip.
EXECUTIVE ORDER S-15-09
Governor of the State of California
WHEREAS California is and should
remain the best place in America to live, work and raise a family; and
WHEREAS California’s long-term prosperity requires that employers and
entrepreneurs invest, remain and grow in the state and that workers desire to
live in the state; and
WHEREAS the quality of life for Californians benefits from essential
and important services provided by state government directly and through
funding for local government operated programs, and it is beneficial for those
essential and important services to have a stable and predictable source of
WHEREAS General Fund revenue over the last several decades has
fluctuated dramatically due to changes in the economy in general, but primarily
as a result of the volatility that is inherent in California’s current tax
WHEREAS the volatility inherent in California’s current tax system is
reflected by fluctuations during the last decade, as exemplified by:
(a) a 28.1% increase in personal
income tax revenue in Fiscal Year 1999/2000, followed by a 25.9% decrease in
personal income tax revenue in Fiscal Year 2001/02;
(b) a 22.7% decrease in corporate
income tax revenue in Fiscal Year 2001/02 and a 27.6% increase in corporate tax
revenue in Fiscal Year 2002/03;
(c) an 11.1% increase in sales and
use tax revenue in Fiscal Year 1999/2000 and a currently estimated 1.4%
decrease for Fiscal Year 2007/08; and
WHEREAS the volatility inherent in California’s personal income tax is
driven significantly by its reliance on capital gains tax revenues, which have
experienced decreases in the last decade as great as 59.1% in tax year 2001,
and an increase of 64.9% in tax year 2004; and
WHEREAS this fluctuation in General Fund revenues creates difficulty
in funding the operations of government year-to-year, as the need for state
services such as operating state parks, operating state prisons, overseeing
elections and providing funding for healthcare and social services do not
change in response to revenue, but in relation to population, demographics and
service availability; and
WHEREAS this fluctuation in General Fund revenues makes it even more
difficult to plan for those activities of government which, due to their
magnitude, require funding over several decades, including projects for
environmental remediation and infrastructure development; and
WHEREAS the California economy has changed significantly since our tax
code was designed for the economy of the last century, shifting from a
primarily manufacturing- and agriculturally-based economy to an information-
and innovation-based economy; and
WHEREAS, California’s current tax system could be improved to provide
greater incentives for firms to increase employment in the state and invest
more in entrepreneurial activities and research that lead to high paying jobs
and more exports; and
WHEREAS an improved tax system would decrease the pressure for future
tax increases to address revenue shortfalls that will continue to occur if the
volatility of the current system is not reduced; and
WHEREAS Californians would benefit from an improved tax system that
supports a strong economy and job climate and provides a more predictable
revenue source for essential and important government services; and
WHEREAS elected officials could benefit from a study of tax system
alternatives and information to develop strategies to improve the state’s tax
WHEREAS I established the Commission
on the 21st Century Economy (Commission), and the Commission has
made excellent progress in its review of the existing tax structure and has
identified reforms to make California’s tax structure more aligned with the
modern California economy; and
WHEREAS the complexity and
far-reaching nature of tax reform necessitates time for thoughtful
deliberation, careful analysis and public comment; and
WHEREAS, in consultation with the Legislative leaders, I will call a special session in September 2009 to consider the
recommendations made by the Commission to improve California’s state tax
THEREFORE, I, ARNOLD SCHWARZENEGGER, Governor of the State of
California, by virtue of the power and authority vested in me by the
Constitution and statutes of the State of California, do hereby issue this
Order to supersede Executive Orders S-12-08, S-01-09 and S-03-09 and become
1. The Commission on the 21st Century Economy (Commission) is hereby
established. It shall consist of fourteen members, seven of whom shall
be appointed by the
Governor, three of whom shall be appointed by the Speaker of the
Assembly, three of whom shall be appointed by the Senate President pro
one of whom shall be appointed jointly by the Speaker of the Assembly
Senate President pro Tem. The Governor shall designate one of the
chairperson. The members of the Commission shall serve without
compensation and at the pleasure of the official who appointed them.
2. On or before September 20, 2009, the Commission shall deliver a
report to the Governor and to the Legislature with recommendations to change laws to
achieve the following goals:
a. Establish 21st century tax
structure that fits with state’s 21st century economy;
b. Stabilize state revenues and
c. Promote the long-term
economic prosperity of the state and its citizens;
d. Improve California’s ability
to successfully compete with other states and nations for jobs and investments;
e. Reflect principles of sound
tax policy including simplicity, competitiveness, efficiency, predictability,
stability and ease of compliance and administration;
f. Ensure that tax
structure is fair and equitable.
3. The Commission shall be disbanded 30 days after delivery of their
report unless the Commission’s service is extended by further Executive Order.
4. The Commission shall comply with applicable open meeting laws.
IS FURTHER ORDERED that State Agencies shall cooperate and provide
support to the Commission in the implementation of this Order. Other
entities of State government not under my direct executive authority, including
constitutional officers, legislative branch, judicial branch, and local
agencies, are requested to cooperate and provide support to the Commission.
is not intended to create, and does not create, any rights or benefits, whether
substantive or procedural, or enforceable at law or in equity, against the
State of California or its agencies, departments, entities, officers,
employees, or any other person.
FURTHER ORDER that, as soon as hereafter possible, this Order be filed
in the Office of the Secretary of State and that widespread publicity and
notice be given to this Order.
IN WITNESS WHEREOF I have
hereunto set my hand and caused the Great Seal of the State of California to be
affixed this 29th day of July 2009.
Governor of California
Secretary of State