Treasurer Chiang talks taxes and the economy

 

With the rising conversation about extending Proposition 30‘s temporary taxes, I asked state Treasurer John Chiang if he would advise that the taxes be continued. Chiang said a promise was made that the taxes would be temporary and circumstances would have to change, such as the economy tanking, to justify continuing the taxes.

A Democrat, Chiang spoke to the Town Hall Los Angeles Thursday, reviewing his actions as state controller, a post he held for eight years before being elected treasurer last November; and reporting that California went from dire fiscal circumstances to the “most robust economic recovery on the planet.”

However, Chiang said all was not rosy. Even with paying down the debt, he said current debt numbers were higher than historic norms, public sector health care and pension liabilities were issues that could not be ignored and affordable housing was important for the state’s economic health.

Last week Chiang joined Assembly Speaker Toni Atkins, D-San Diego, in support of proposals aimed at helping ease the housing crisis. The proposals call for a new fee on real estate transaction recording documents and an expansion of the low-income housing tax credit for builders.

In answer to a question, Chiang said he would study if an increase in the property tax homeowner exemption would also aid in home ownership.

No split-roll

As to business property, Chiang did not support a split-roll property tax that would tax commercial property differently from residential property “at this time.” Doing so would be a major change to Proposition 13, the 1978 tax-limitation measure. Currently, Prop. 13 treats all property the same, limiting taxes to 1 percent of assessed value, with a maximum increase of 2 percent a year.

However, he suggested reforms could be necessary in the rules on change of ownership of business property.

The state’s economy recently moved up to be ranked seventh largest in the world and last week the Fitch rating agency upgraded California’s credit rating to an A+. But Chiang warned a drop in the business cycle could suddenly produce a gap in the state’s finances.

Chiang praised voters for passing Proposition 2, the rainy-day fund measure in the last election, to cushion any revenue shortfalls. But he said more must be done to protect California’s economy. He said business regulation must be reduced and the state tax structure must be reformed.

Chiang spoke about an acquaintance who runs a shrimp company who had to deal with four or five government agencies’ regulations. That process must be streamlined, said the treasurer.

I asked Chiang if he had consulted with state Sen. Robert Hertzberg, D-Van Nuys, on his tax restructuring proposal, Senate Bill 8. It includes a $10 billion tax on services, with reductions to some other taxes.

Chiang said he had not heard from Hertzberg on the bill, but it was important the discussion generated by the Hertzberg proposal go forward; that state tax policies needed to be updated.