The day after the election

Oct. 22, 2012

By Katy Grimes

With the 2012 election in full swing, everyone’s focus seems to be on the candidates and ballot initiatives.

We are inundated with ludicrous, often irrelevant political advertising. But what happens after the election? What happens if President Obama gets reelected and California passes all of the tax increase ballot measures, along with the 35 local sales tax increase measures?

The presidential race

Should Obama win reelection, he will still be stuck with a Republican U.S. Congress, and possibly even a Republican Senate. Either way, expect to see more of the last four years of gridlock and executive orders.

Obama will continue to “look at how we can work around Congress.” And for that

work-around, expect to see many more executive orders. Obama signed 140 Executive Orders during his first term.

Because of the country’s $16 trillion debt, and the reckless spending habits of the Obama administration, some in the finance world expect that the entire U.S. economy will crash if President Obama is reelected.

If Mitt wins…

If Mitt Romney wins, he has promised to repeal Obamacare on day two, and begin immediately to undo some of the business killing policies put in place by the Obama administration.

But perhaps even more importantly, Romney would eliminate and replace the entire cabinet of far-left extremists that Obama appointed.

Gone will be some of the more notorious statists with unchecked power:  Energy Secretary Steven Chu, Secretary of Health and Human Services Kathleen Sebelius, Homeland Security Secretary Janet Napolitano, Secretary of the Interior Ken Salazar, and Secretary of State Hillary Clinton.

What happens to California?

California already levies a 7.25 percent general sales and use tax on consumers, which is the highest statewide rate in the nation, according to the California Taxpayers Association.

California’s statewide gasoline taxes and fees total 48.6 cents per gallon, the second highest in the nation. Many counties add local sales taxes on top of that.

California’s personal income tax has the second-highest top tax rate, at 10.3 percent,  and one of the most highly progressive structures in the nation.

Only eight states have a higher corporate tax rate than California’s 8.84 percent flat rate, which CalTax reports is the highest corporate tax rate in the Western states.

Even with Proposition 13, California’s property tax rate is 14th highest in the country. While each tax may or may not be the highest, put them all together, and Californians are living in a very high tax state.

According to the California Taxpayers Association, “California’s business tax climate will worsen and the state will have a tougher time attracting and retaining jobs,” if Propositions 30 and/or 38 are passed by voters.

In the 2013 State Business Tax Climate Index, a new study by the Tax Foundation, “a survey of all 50 states, ranks California’s tax structure 48th — worse than all the other states except New Jersey and New York.”

The study  found that, if both Propositions 30 and 38 are approved, the results will “reduce California’s score in individual tax and overall.”

“The evidence shows that states with the best tax systems will be the most competitive in attracting new businesses and most effective at generating economic and employment growth,” according to the report.

Perhaps one of the most important issues to remember is, “States do not enact tax changes (increases or cuts) in a vacuum,” according to the Tax Foundation. “Every tax law will, in some way, change a state’s competitive position rela­tive to its immediate neighbors, its geographic region, and even globally. Ultimately, it will affect the state’s national standing as a place to live and to do business. Entrepreneurial states can take advantage of the tax increases of their neighbors to lure businesses out of high-tax states.”

This will impact business even more, including business decisions, job creation and retention, business location, competitiveness, the transparency of the tax system, and the long-term health of a state’s economy.

“Most importantly, taxes diminish profits,” the Tax Foundation reports. Taxes cut into a business and often prevent the business from reinvesting back into the community.

The Tax Foundation explains, “If taxes take a larger portion of profits, that cost is passed along to either consumers, em­ployees, through lower wages or fewer jobs, or shareholders. Thus, a state with lower tax costs will be more attractive to business investment, and more likely to experience economic growth.”

It’s that simple, and that ugly.

Ending union dominance in CA

Proposition 32 would prohibit corporations and public employee unions from making direct contributions to political campaigns. And, it would ban automatic payroll deductions by corporations and unions of employees’ wages to be used for politics.

Should Prop. 32 pass, it would level the political playing field and give grassroots organizations and voters a political voice in California once again.

Labor union leaders call Prop. 32 a fraud, and claim that its backers have exempted themselves from the new rules. But with most of the Democratic state legislators handily assisted into office by the state’s  public employee unions, it is no wonder labor leaders are in a frenzy.

This should make every working man and woman in California ecstatic. If Prop. 32 passes, union employees will get to keep more of their pay, and unions will no longer have such a huge financial influence in elections.

Real reforms?

Proposition 31 is packaged with some real reform measures in it, but there are too many flaws in the measure for the reforms to really matter. However, if it passes, expect another layer of government bureaucrats added to California’s already top-heavy system. Prop. 31 would also prohibit future legislation on reducing taxes.

According to CalTax, Prop. 31 would “effectively prohibit legislation (including the state budget) from reducing taxes by $25 million or more unless the same legislation included a tax increase or spending cut.”

Prop. 39: Another corporate tax

Proposition 39 would require businesses headquartered out of the state to use the “single sales factor method,” in which their tax liability is based solely on their amount of sales in the state.

They would no longer be allowed to use the other option, known as the “three-factor method,” which bases tax liability on a combination of the sales, property and number of employees a business has in the state. That option was a tax-cut part of the budget deal in 2009 that otherwise increased taxes and was negotiated between then-Gov. Arnold Schwarzenegger and the Legislature.

Prop. 39 is backed by wealthy hedge fund manager Tom Steyer, who stands to benefit from the passage of the measure. While the state stands to collect about $1 billion in added revenues each year, half of that money must be used on the Clean Energy Job Creation Fund for the first five years. After five years, all of the additional tax revenue would go to the state’s General Fund.

Steyer, who is pushing hard for passage of Prop. 39, is the co-chairman of the Clean Energy Job Creation Fund, and is heavily invested in green, clean-tech businesses, which many have said potentially stand to benefit somewhat from the $1 billion of additional tax money.

The measure is written to sound as if big business has a sweetheart deal with the state. But anything designed to squeeze more taxes out of any business right now could devastate California’s economy even worse.

Should Prop. 39 pass, expect to see more business shrinkage, jobs lost, and multi-state businesses pulling operations out of California.

Local tax increase measures

Thirty-five California cities have tax increase measures on the ballot, totaling a whopping  241 tax and bond measures. Of the 2012 local tax elections, the majority are school bonds.

There are nine local ballot measures proposing a 1 percentage-point increase in the sales tax, which would increase the tax on gasoline significantly. That would be on top of the 7.25 percent state sales tax levy, plus any local sales taxes already on the books. Cha-ching.

Final blow to California economy

Some cynics suggest that we should just allow everything to pass in order to speed up California’s demise. The more optimistic folks believe that California could be turned around, but only if unions are no longer running the state’s Democrats.

If these ballot measures pass, there will be much higher unemployment, and businesses large and small will not reinvest. Some businesses will shrink even more, some will close and even more will move, if possible. Taxpayers will be squeezed even more, shrinking everyone’s take home pay.

However, on a lighter note, Californians have rejected the last eight tax increases on the ballot. While another rejection of tax increases sends a loud message to Gov. Jerry Brown, he and the Democrat-controlled Legislature have demonstrated that they are not beholden to voters; their constituency is the unions.

However, if Prop. 32 passes, California voters and taxpayers just might get the ear of the Democrats.


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  1. Kevin Dayton - A Plan for 2013-2014
    Kevin Dayton - A Plan for 2013-2014 23 October, 2012, 09:31

    Because it’s unclear what the California Republican Party is going to do in the next two years, here is a 2013-2014 proposed plan for California advocates of economic and personal freedom:

    1. Encourage dozens of general law cities to propose charters to voters in order to free themselves from the costly mandates of the state legislature.

    2. Implement “Operation Close the Spigot” to discourage or defeat further attempts by local governments to borrow money through bond sales and take on more debt for future generations.

    3. Ban municipal governments from selling Capital Appreciation Bonds, in which interest compounds over the life of the bond and then is paid back to the investor in one huge sum. Local governments are taking on too much foolish debt.

    4. Use legislation, litigation, and advertising to highlight and perhaps actually blunt the brazen abuse of the California Environmental Quality Act (CEQA) by outside groups to achieve economic objectives unrelated to environmental protection.

    5. Develop a free-market oriented policy institute that can effectively present to Californians an intellectually-based alternative to activist government as the way to solve societal problems in California.

    6. Compile a web database of all of the wacky schemes, proposals, and quotes of liberal Democrats throughout the state over the past ten years, so people get an accurate idea of where the state is going.

    7. Using the San Diego Republican Party as an example, overhaul the California Republican Party to focus on the mundane but necessary work of building an effective grassroots operation. The state party apparatus should never spend one second on anything unrelated to preparing and promoting an alternative way to govern California on the state and local level. Never mention President Obama again, even if he wins re-election.

    8. Try to convince Republican legislators to focus on repealing laws rather than finding clever angles to get new ones enacted. Make the “Party of Yes” be an affirmative statement to REPEAL all the junk in state laws and regulations. Fight the battles of the past instead of constantly playing defense against the relentless intrusion of government while retreating a little each year. Put the government activists on the defense for once.

    9. Develop a program to show how poorly-written, costly laws passed on the state level are actually implemented on the local level.

    10. Rein in and provide greater accountability for Joint Powers Agencies and regulatory boards that make huge decisions that no one knows about because of the obscurity of the agencies.

    11. Develop and adopt candidate training programs that allow people to understand and articulate their philosophical principles before they learn the logistical aspects of campaigning, so the public can more easily discern between candidates with a plan for governance versus candidates whose primary motive is glorifying the self.

    12. Establish and promote a specific plan for how Republicans would govern California differently than the Democrats. Here is a sample plan of twelve proposals divided into four categories:

    I. Reform the workings of the Legislature so it serves the People of California and not special interest groups:

    1. Put the Legislature under the same employment laws, contracting laws, and public records access laws as apply to the rest of the people of California.

    2. End the disorder and lack of accountability at the Legislature by allowing the people of California to adequately review proposed laws, end the notorious “gut-and-amend” process, require legislators to be present in committee for votes to count, and alternate annual legislative sessions between budget sessions and general sessions.

    3. Strictly limit the ability of special interest groups, including lobbyist employers, to give gifts to members of the Legislature.

    II. End special deals for union cronies that force taxpayers to surrender more of their money to the government:

    4. Reform the calculation and coverage of the inflated state-mandated wage rates for taxpayer-funded construction and allow local governments the freedom of choice to establish their own policies tailored to their local regions.

    5. Remove all exemptions from state law awarded to parties in union collective bargaining agreements.

    6. Provide (or effectively implement and enforce if Prop 32 passes) employees who are represented by a union with the right to pro-actively choose whether or not money extracted from their paychecks is used by unions for political purposes.

    III. Encourage economic growth and job creation by stopping schemes that impose excessive and unnecessary costs when doing business in California:

    7. Reform the California Environmental Quality Act (CEQA) to the pure intent of Governor Ronald Reagan by ensuring public involvement is strictly confined to legitimate environmental impacts.

    8. Freeze all new regulations for six months and enact a package of reforms that allow a reasonable amount of time for regulatory compliance, properly evaluate regulatory costs to businesses and taxpayers, and end regulations that are ineffective or show an unreasonable disparity between costs and benefits.

    9. Discourage foolish, frivolous, and harassing lawsuits by enacting a modified “loser pays” rule for the courts.

    IV. Make taxpayers aware that the “problem with California” is NOT that they aren’t giving enough of their money to the government:

    10. Set up a simple flat tax for households and corporations and include minimum income thresholds based on household size and type.

    11. Pass a Taxpayer Information Act – similar to the Social Security annual reports, annual reports would be provided by the state in early October to households, corporations, vehicle owners, and property owners indicating the total amount paid for the past five years in taxes and fees to the State of California and California local governments.

    12. Require the executive branch to report annually to the Legislature and the People of California about the state’s financial liabilities, require the executive branch to provide proposed budgets for the upcoming two fiscal years that honestly establish the amount to be collected from taxes and fees and amount to be saved by spending reductions, and ensure that revenues equal expenditures in proposed and enacted budgets.

    Reply this comment
  2. Dyspeptic
    Dyspeptic 23 October, 2012, 09:46

    “However, if Prop. 32 passes, California voters and taxpayers just might get the ear of the Democrats.”

    Dream on Katy.

    If Prop. 32 passes you can expect a flurry of union lawsuits, Wisconsin style demonstrations by labor cartel thugs and much conniving and duplicity from Demogoguecrat politicians. You can also expect state and municipal officials to violate the provisions of Prop. 32 for years to come, until the courts have the final say. These people have no respect for the law or the will of the people. They are utterly ruthless ideologues.

    I guarantee the unions will go judge shopping and find some odious partisan legal hack like Thelton Henderson who will declare Prop. 32 to be a violation of every provision of the U.S. Constitution, The Magna Carta, The United Nations Charter, The Holy Bible, The Koran, The Talmud, etc. etc. Before you can say “shit howdy” some left wing hack Federal judge will slap a “temporary” injunction on Prop. 32. in the name of social justice. It could be years before the dust settles on all this.

    Remember, our Socialist Overlords never give up and they never play by the rules. To them, all is fair in politics as long as you win in the end.

    Reply this comment
  3. Hondo
    Hondo 23 October, 2012, 10:01

    I agree with Dyspeptic here. Even if prop 32 passes, you can bet of the 9th circut throwing it out. And then wait years for the supremes to vote on it. We can count on Roberts can’t we?

    Reply this comment
  4. Rex the Wonder Dog!
    Rex the Wonder Dog! 23 October, 2012, 10:08

    Thelton Henderson is a very respected judge, and as a federal judge he would not hear any lawsuit over Prop 32, only a state court judge would. But if he did he would roll with the people, not the scammers.

    Reply this comment
  5. Rex the Wonder Dog!
    Rex the Wonder Dog! 23 October, 2012, 10:10

    Hondo- the 9th Circuit would not hear a Prop 32 case. And the fact is the 9th Circuit is run by a right wing demagogue idiot named Alex Kozincski. Today half the 9th are extremist right wingers.

    Reply this comment
  6. Dyspeptic
    Dyspeptic 23 October, 2012, 10:52

    “Thelton Henderson is a very respected judge, and as a federal judge he would not hear any lawsuit over Prop 32, only a state court judge would. But if he did he would roll with the people, not the scammers.”

    Sure Rex, he is respected by his left wing fellow travelers. They put him there after all. A brief review of his bio. shows that he is the epitome of a left wing judicial hack. Law degree from U.C. Berzerkley, U.S. “Justice” Dept. civil rights lawyer, Legal Aid Society honcho, has a center for “social justice” named after him at Boalt Hall and he was appointed to the Federal bench by none other than Jimmie “Goober” Carter. I’m sure Eric Holder, Barack Obama and Hugo Chavez think the world of him.

    Did he roll with the people when he struck down Prop. 209? Don’t think so.

    Did he roll with the people when he put the state prison system into Federal receivership because the inmates didn’t get gold plated healthcare? Don’t think so.

    Did he roll with the people when he overturned the conviction of a racist, murdering, Marxist Black Panther thug like Johnny Spain? Don’t think so.

    You may admire him Rex, but the man is a stone cold race hustler, poverty pimp and left wing ideologue. Jimmy Carter wouldn’t have it any other way.

    Reply this comment
  7. Rex the Wonder Dog!
    Rex the Wonder Dog! 23 October, 2012, 12:22

    One ruling does not make one a “legal hack”.

    “On 2 August 2010, the Supreme Court of the state of California found for the second time that Proposition 209 was constitutional The ruling, by a 6-1 majority, followed an earlier unanimous affirmation of the constitutionality of Prop. 209 by the same court. On 2 April 2012, the 9th U.S. Circuit Court of Appeals rejected the latest challenge to Proposition 209. The three-judge panel concluded that it was bound by a 9th Circuit ruling in 1997 upholding the constitutionality of the affirmative action ban.”

    Reply this comment
  8. Rex the Wonder Dog!
    Rex the Wonder Dog! 23 October, 2012, 12:25

    Did he roll with the people when he put the state prison system into Federal receivership because the inmates didn’t get gold plated health care? Don’t think so.
    You have no idea what you’re speaking of, NO INAMTE has “gold plated” health care- in fact health care was essentially non existent for many prisoners, Henderson and ANOTHER judge both stepped in and forced a fix after the state was violating constitutionally protected rights. I WANT a judge up there who will protect constitutionally protected rights, not some right wing nut like Clarence Thomas who sides with the gov on over 95% of their cases…..

    Reply this comment
  9. us citizen
    us citizen 23 October, 2012, 13:03

    Get rid of the illegals.

    Reply this comment
  10. Ulysses Uhaul
    Ulysses Uhaul 23 October, 2012, 16:31


    Reply this comment
  11. C.J.
    C.J. 23 October, 2012, 17:38

    I just want to point out the fraud of Prop.38.
    The pro argument is that the money will go into a special fund and will only be spent on “our kids.”
    The fact is Californians already know this is a lie – remember the Lotto?
    These “special” funds are simply part of a shell game that the pols and robo-crats love to play. Whatever goes into this special fund, they’ll simply deduct other money from maintenance, etc. and nothing will change.
    Garbage in, garbage out.

    Reply this comment

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