A confusing 2017 California Supreme Court ruling about the threshold of approval for local ballot measures that are qualified for the ballot through citizen-led signature-gathering efforts – as opposed to being placed before voters by local officeholders – is causing major uncertainty in the Bay Area.

In the case of California Cannabis Coalition v. the City of Upland, the state high court appeared to suggest that citizen-qualified tax or fee measures needed only a simple majority for approval, while others required two-thirds support. But the court did not offer a definitive statement. Many legal experts questioned how justices came up with a new interpretation of 1978’s Proposition 13 and 1996’s Proposition 218, which generally imposed a two-thirds requirement for voter approval of local taxes.

This has created uncertainty around three measures in San Francisco and one in Oakland that were approved by strong majorities of voters – but not by two-thirds.

One city attorney says majority OK; other says two-thirds needed

Last week, the Harvard Jarvis Taxpayers Association, the California Business Roundtable and the California Business Properties Association launched a legal challenge to San Francisco’s Proposition C. It is a complicated measure that imposes a new tax on businesses with more than $50 million in gross receipts. Some industries are charged 0.175 percent, while others pay 0.69 percent – nearly four times as much. This is on top of San Francisco’s existing gross receipts tax on companies with $1 million or more in gross receipts.

Relying on City Attorney Dennis Herrera’s interpretation of the 2017 California high court ruling, the city has treated the new tax as valid despite its November passage with less than a two-thirds majority. Proposition C is expected to generate at least $300 million a year for homeless programs.

Herrera holds the same position on two measures approved by San Francisco voters last June. One imposed an annual parcel tax of $298 to help increase teacher salaries. The other raised taxes on some commercial rents to fund child care and education programs.

In interviews, Herrera has offered explanations for his position that seem more populist than rooted in any broader legal theory about how California direct democracy should function. He’s said voters should be able to impose tax hikes with simple majorities.

In Oakland, a divided City Council last week decided not to levy an annual $198-per-house, $135-per-apartment annual parcel tax in 2019. The parcel tax was passed by voters as Measure AA in November. It was expected to generate as much as $900 million for education programs over 30 years. While two council members wanted to begin collecting and spending the funds immediately, a council majority ended up heeding City Attorney Barbara Parker, who wrote in the official voters guide that two-thirds support was necessary for passage.

S.F. unruffled by loss of city’s highest-grossing firm

By far the most controversial of the four measures in legal limbo is Proposition C. It was opposed by Mayor London Breed and Twitter co-founder Jack Dorsey not just because it could be seen as creating a hostile business climate but because the measure would fund homeless programs without setting up metrics to determine what worked and what didn’t.

One huge multinational corporation made plain its unhappiness with the new levy. On Nov. 30, 11 days after a CalWatchdog report anticipating the decision, pharmaceutical giant McKesson Corp. announced it was relocating its headquarters from San Francisco to a Dallas suburb. The loss of McKesson – by far the highest-grossing San Francisco company, the second-largest in California after Apple and the sixth-largest in the U.S. – appeared to vindicate Breed’s and Dorsey’s warnings.

But despite McKesson’s exit and huge problems with housing and homelessness, San Francisco officials are much more upbeat than those in elsewhere in Silicon Valley about the sustainability of the tech boom. From 2010 to 2017, while tech job growth began to slow in the region, the number of tech jobs in San Francisco went from about 21,000 to 84,000.

A San Francisco Chronicle analysis noted that no large tech firm had left the city in recent years. Such companies, development analyst Colin Yasukochi told the Chronicle, are “in the innovation business. Being able to attract the best and brightest minds is going to give them a competitive advantage when it comes to innovating new products and services.”

Next fiscal year, Newsom wants to give $3 billion to the California Public Employees’ Retirement System. He also proposes giving up to $5.9 billion over four years to the California State Teachers’ Retirement System.

Both funds have less than 70 percent of the assets they will need to pay off promised pensions. Last year, CalSTRS’ unfunded liability was estimated to be $107.3 billion and CalPERS’ was put at $136 billion. Some see Newsom’s proposal as a confirmation of the failure of ballyhooed efforts by Gov. Jerry Brown and the Legislature to reform pensions and shore up the pension giants.

In 2012, they enacted the California Public Employees’ Pension Reform Act (PEPRA). It changed retirement terms for state employees hired after Jan. 1, 2013, by limiting what types of pay would apply toward pensions and by making small reductions to benefit calculation formulas and pushing back when employees could retire.

Brown hailed the law’s passage as a significant first step toward Sacramento bringing pension costs under control.

The next significant step came in 2014, when the Legislature and Brown approved a bailout of CalSTRS. It gradually raised the $5.7 billion that school districts, the state and teachers contributed to CalSTRS in 2013-14 to $11 billion in 2020-21, when the phased-in increases were complete. Districts have to pay for 70 percent of the new contributions, with the state picking up 20 percent and teachers 10 percent.

‘Significant’ CalSTRS changes didn’t stabilize fund

The nonpartisan state Legislative Analyst’s Office described the funding law as a “significant” accomplishment with promise to keep CalSTRS on firm ground for decades to come.

But as Brown’s second term wore on, with CalPERS alternating between poor and relatively successful years with its investments, it became clear that the 2012 pension reform measure hadn’t changed the grim long-term picture for CalPERS’ finances. A 2017 Pensions & Investment report detailed how CalPERS’ 10-year record of 4.4 percent average returns wasn’t keeping up with its obligations and noted that in one poor investment year alone, CalPERS saw its unfunded liabilities soar by $27.3 billion.

And the LAO soon changed its tone on the CalSTRS bailout. In 2016, its analysts warned that liabilities continued to increase. And in November, as CalWatchdog reported, an internal CalSTRS analysis concluded there was a 50 percent chance that CalSTRS’ funding would drop to less than 50 percent over the next 30 years. Pension analysts note that few pension systems ever recover from dropping below the 50 percent level.

Perhaps the most significant hope for pension reform from the Brown era came as the surprise result of a legal challenge to some of the limits on pensions for new hires in the 2012 law. A public safety union argued that this was a violation of the “California rule,” the long-standing court precedent that held pension benefits could not be reduced for public employees without comparable additional benefits being provided.

But two appellate courts not only disagreed with the lawsuit’s premise, they held the “California rule” of inviolate pensions didn’t apply to years not yet worked by public employees, and that cheaper benefits could be collectively bargained.

The California Supreme Court held a hearing on the lawsuit last month and a decision is expected in coming weeks.

Only about one-third of Californians can afford to realize the American dream of owning their own home. The homeowners’ property tax exemption of $7,000 (worth a $70 deduction on your property taxes) has not been increased since 1972 when the median priced home sold for $28,660. Currently, an average home is selling for nearly 10 times that amount, and yet the homeowners’ exemption remains unchanged.

Increasing the homeowners’ property tax exemption from $7,000 to $32,000 will save every homeowner in California an additional $250 per year. This will help to mitigate the heavy financial burden placed on homeowners from property tax increases to repay local bonds, and provide some relief from excessive utility fee and charge increases.

By increasing the renters tax credit, this act will provide tax relief to renters, who also face severe housing affordability problems.

Details on the renters’ credit can be found on page 5 of this PDF.

Spotlights on existing CA programs

At a time when affordable housing and poverty are emerging as big issues in California, the Howard Jarvis measure is likely to have little trouble gathering signatures. The cost of housing pinches everyone.

But the measure is also likely to put the spotlight on existing affordable housing programs in the state. A 2003 report by the Public Policy Institute of California on those programs was not flattering, depicting them as helping relatively few people and as being inefficient and ineffective. I have cited this report on CalWatchdog.com and in U-T San Diego editorials. Here’s a previous summary:

The study cited profound flaws in the state’s primary affordable-housing law. It forces cities to plan for needs that are much more appropriately addressed on a regional level. It emphasizes process — laborious long-term planning — over results — more housing units.

The PPIC analysis identified high-cost states with similarities to California that had significantly more success with affordable housing. In New Jersey, the “builder’s remedy approach” gives developers concessions in return for helping a community meet its affordable-housing obligations. Giving developers a profit motive has yielded “far more housing units” than previous policies. California’s version of this approach is much more constrained.

In Massachusetts, the state radically simplified the approval process for residential projects in which at least one-quarter of the units had “long-term affordability restrictions.” To limit NIMBYism, developers can appeal permits rejected at the local level to a state board.

Assembly speaker wants to ramp up approach PPIC knocked

But instead of heeding the PPIC, Assembly Speaker Toni Atkins, D-San Diego, seeks to double-down on the approach the think tank criticized. She’s calling for hundreds of millions of dollars in new state subsidies to create a few thousand new units across California.

New York Mayor Bill de Blasio, by contrast, argues that housing prices will only come down in a significant way if there is much more housing stock. He’s seeking to add 240,000 units in his city.

The Howard Jarvis proposal is less ambitious than de Blasio’s, but it would also offer broad benefits. As the PPIC report laid out, the current California approach of providing affordable housing to a few lucky families is more comparable to a lottery than to a program offering help to a broad category of residents.

The PPIC report can be read here.

A major component in the fight to keep professional football in Oakland and San Diego or move a team to Los Angeles is taxes: Will taxes be necessary to build a stadium?

Team owners want a public subsidy to help build a stadium in Oakland and San Diego. But two new proposals for stadiums in the Los Angeles area are not tied to any tax proposals.

A tax set aside for a football stadium would be a special tax requiring a two-thirds vote. The two-thirds vote provision was placed in the California Constitution when voters approved Proposition 13 in 1978.

City officials are concerned the two-thirds hurdle is too high to clear since voters don’t see using tax dollars for a sports stadium as a top priority.

According to a Contra Costa Times article on Oakland’s effort to improve the Coliseum for the Raiders and major league baseball’s A’s, a city-commissioned poll “found that keeping the A’s and Raiders finished last among 20 spending priorities for the 701 Oakland residents randomly polled. Only 7 percent of those polled were willing to pay significantly more to keep the teams.”

San Diego Chargers

Prop. 13’s requirement for a two-thirds vote for local tax increases for a specific purpose was an issue in San Diego. Mark Fabiani, representing the Chargers, accused the city of trying to work around the state law that required a two-thirds vote, thus putting more pressure on the city to somehow fashion a deal both the Chargers and the voters would accept.

The Los Angeles proposals are expected to pencil out without public money because it is believed the teams could raise hundreds of millions of dollars by selling personal seat licenses that allows for the purchase of prime tickets, a formula that is not probable in smaller markets.

While the Los Angeles proposals do not include tax increases, past efforts to fund a football stadium or refurbish the Coliseum in Los Angeles using tax increases ran into plenty of opposition.

Howard Jarvis

In July 1999 I wrote an opinion piece in the Los Angeles Times, “L.A., Say No to the NFL Owners’ Greed.” The subheadline was: “No public funds should be expended to bring a football team to the Southland.”

I quoted then-NFL Commissioner Paul Tagliabue from an April press conference, “We all understand the reality of taxes in California since someone named Jarvis came on the national scene.”

He was referring to Howard Jarvis, who led the campaign to pass Prop. 13. And as I noted, “Residual attitudes from the tax revolt Howard Jarvis helped foster have local politicians from the mayor on down declaring that no new taxes will go toward refurbishing the Coliseum for the NFL.”

Fifteen years after that op-ed and, with still no NFL franchise in the country’s second-largest market, the NFL may be willing to back off the demand for public funds to establish a Los Angeles team.

The first has to do with its allegedly devastating effect on revenue.

It didn’t turn off spigot

There’s something about Proposition 13 that induces derangement among the political and media establishment in California. You can make an argument, as Joe Mathews has, that using direct democracy to shape key state policies is a formula for straitjacketed government. But then the argument should apply to lots and lots of props, not just 13, starting with 1988’s Proposition 98, which made permanent teachers unions’ dominance of state spending and budget decisions. Why should one result of direct democracy bear the blame for other exercises in direct democracy?

But to argue that capping one source of taxes has ruined the state, as the Peter Schrags and the George Skeltons of the world like to do, is bizarre. By any measure, tax revenue in California has gone up far faster than inflation plus population growth since Prop 13’s adoption in 1978. By any measure, California has among the nation’s highest sales, income and gasoline taxes and the highest corporate taxes in the West. Only in property taxes are we in the middle of the 50 states.

We have enough to live within our means. The only reason it sometimes seems like we do not is because of political decisions that place the interests of public employees ahead of the interests of the public, in pay, benefits, job protections and more.

This is pretty well understood among libertarians, conservatives and small-government advocates.

Not just about limiting taxes; it’s about protecting homeowners

But the second grounds for offering a vigorous defense of Prop 13 is often not appreciated enough by people across the California political spectrum — including its admirers. The measure was drafted and passed in a landslide for a very specific and powerful reason: to protect people from losing their homes or suffering financial disaster because of housing bubbles.

This is from a June 5, 1978, Newsweek story about the mood in California on the eve of Prop. 13’s adoption:

“Shaken homeowners and landlords wobbled out of the country assessor’s office in Los Angeles last week with rebellion in their eyes. In the suburb of Palos Verdes, Don Johnson, a certified public accountant who earns $25,000 a year, returned dumbstruck to his four-bedroom ranch home. When he and his wife, Ellen Ann, bought the home in 1959 — for $33,900 — their tax bill was $600 a year. But inflation ballooned the assessed value of the home, and by last year, the Johnsons’ taxes were $1,593. Last week, the tax man released the latest listings. Overnight the assessed value of the Johnson home has soared to $135,000 and the Johnsons’ taxes threatened to skyrocket to $4,139.

“At the assessor’s office in West Los Angeles, an ashen-faced husband emerged to give similar bad news to his wife, a woman in a matronly blue dress. ‘Sam, Sam, don’t tell me,’ she cried. ‘I’m going to have a heart attack right here.'”

Why can’t members of the political-media establishment (including occasional contrarians Joe Mathews and Dan Walters) grasp that we’d have seen a wave of such stories during the housing bubble from 1998 to 2006 without Proposition 13?

Home prices in some markets nearly tripled over that span.

Retirees, those living on fixed incomes and middle-class families with big mortgages would have been devastated  if their property taxes had nearly tripled. We’re talking about millions of people.

So while we are used to seeing Prop. 13 as an artifact from a distant era, we don’t realize it remains an enormous protection TODAY for current homeowners who can barely make ends meet and who would be ravaged by a huge tax hike.

This may not be central to the fight over whether businesses should be exempt from Prop 13’s caps on how fast property taxes can increase. But it should be central to the broad debate over whether Prop 13 is bad or good for California. During the latest housing bubble, as in all the housing bubbles that preceded it, Prop 13 did far more to protect regular Californians from financial disaster than any other single factor.

That should matter much more than it seems to.

By Dave Roberts

It hasn’t been a great year for the California Department of Forestry and Fire Protection. In January, the Los Angeles Times revealed that for seven years Cal Fire has been hoarding a slush fund that grew to $3.66 million. In February, the Sacramento Bee reported that Cal Fire fees that were supposed to be used for fire prevention measures had instead been used to investigate wildfires, according to the legislative counsel.

And earlier this month, the Howard Jarvis Taxpayers Association served Cal Fire and the state Board of Equalization with a lawsuit seeking to nullify Cal Fire’s $150 annual fee (or tax) on homeowners in mostly rural California for fire prevention. In addition, three bills have been introduced by Republicans in the Legislature seeking to do likewise.

The slush fund was a major black eye for Cal Fire. Instead of following the law by depositing money from legal settlements into the state General Fund, fire officials put it into the care of the California District Attorneys Association. In addition to paying CDAA a fee to hold the money, fire officials spent it on digital cameras, evidence sheds, GPS equipment, metal detectors and a conference at a Pismo Beach resort, among other expenditures.

Cal Fire faces bipartisan fire over slush fund

Coming on the heels of the revelation of the state Department of Parks and Recreation’s secret $54 million slush fund, Cal Fire was pilloried on editorial pages up and down the state:

— “Once again, California residents have been asked to pay higher taxes to help revenue-challenged state agencies fund important services — only to learn that those agencies had hidden large sums of money in secret accounts to keep it away from public scrutiny,” editorialized the Orange County Register.

— “Its arrogance underscores the larger issue: The money doesn’t belong to some bureaucrat with a badge. It belongs to the people,” lectured the Sacramento Bee.

Gov. Jerry Brown was quoted in the Bee calling the slush fund “a relatively boring story, to tell you the truth.” But the governor added that he would look into it. Senate Republican Leader Bob Huff, R-Diamond Bar, responded that “’boring’ is the last word I would use to describe these very disturbing revelations of hidden funds.”

Cal Fire spokesman Dennis Mathisen said in an interview that there was no effort to conceal the fund.

“The reality is that the fund had been publicly known,” he said. “We initiated our own audit of the fund a few years ago. The audit tried to determine the appropriate way of administering the fund. We are going through the process of re-evaluating it and determining the correct method of administering the fund.”

Scathing audit was three years old

Apparently that re-evaluation process has been going on for more than three years. The 26-page audit report, which was issued in November 2009, contains numerous criticisms of the way Cal Fire was handling the money:

— The funds collected from legal settlements were not reported to the Cal Fire Departmental Accounting Office or the Law Enforcement Program, and did not become part of the state’s accounting system.

— The money was dubbed a “Fire Investigation Trust Fund” — but was never placed in a trust account — in order to ensure it wouldn’t go into the state’s General Fund. “It is not clear what authority Cal Fire has to separate the Fund money from State money,” the audit states.

— There was no documentation of how the fund committee made its decisions on spending the money.

— State purchasing guidelines were not followed for hundreds of thousands of dollars spent on equipment.

— Travel expenses for training conferences were improperly documented, including numerous overcharges for lodging and unapproved travel to conferences in other states.

Slush fund depicted in benign light

Mathisen defended the expenditures, saying, “The sole purpose of that fund is to help support fire investigation-related things such as equipment and training. That involves Cal Fire investigators, local agency investigators, district attorneys.” The Pismo Beach conference focused on fire investigation training, he said, adding that “the hotel charged the typical government rate, which is lower than the standard rate.”

Mathisen also disputed the Bee’s report that fire prevention fees were not supposed to be spent on wildfire investigations.

“One of the fire prevention activities that’s mentioned in the law, it’s very clear that it includes the activities involved in fire investigations,” he said. “We look at the act of investigating fires and determining the cause, whether negligence or a crime such as arson. [If arson is suspected] we go through case development and district attorneys to prosecute. In the case of accidents, [investigation] helps us educate the public on how to prevent those things from happening in the future.”

The enabling legislation for the fire prevention fee, ABX1 29, does not specifically cite wildfire investigation as one of the uses for the funds. Money can be spent on public education, fire prevention projects and activities as well as fire severity and hazard mapping.

But there is no definition for what constitutes a “fire prevention project.” The legislation leaves it up to the Cal Fire board to determine that. In essence, the fire prevention fee, which was projected to total as much as $89 million annually, is potentially another slush fund for Cal Fire officials to use as they see fit as long as they can call it a fire prevention project or activity.

The goals of the Howard Jarvis lawsuit

And that’s what concerns the HJTA, which filed its class-action suit in Superior Court in Sacramento in October.

“This tax was dreamed up by politicians in Sacramento who are so desperate for revenue that they were willing to ram this through the Legislature without the proper two-thirds vote,” said HJTA President Jon Coupal in a press release. “The fire tax is a direct violation of Prop. 13. It is our goal to overturn this tax, prevent the politicians from taking more money from hardworking people for a program they were already paying for, and help taxpayers to get a refund from the government.”

The suit argues that the fire prevention assessment does not fall under the state constitutional definition of a “fee.” Therefore, it’s a tax requiring two-thirds approval in the Legislature, which it did not receive due to strong Republican opposition.

Article 13 A, section 3, subdivision (b) of the California Constitution defines a tax as “any levy, charge, or exaction of any kind imposed by the state” unless it’s imposed for a specific benefit, privilege, service or product provided directly to the payer that is not provided to those not charged, and which does not exceed the reasonable costs to the state of providing the benefit, privilege, service or product.

It’s likely that state attorneys will argue that fire prevention fits the definition of a fee instead of a tax, because it’s: 1) a specific service provided directly to people living in the mostly rural 31 million acres of California that are in Cal Fire’s State Responsibility Area, 2) that it is not provided to people outside of that area who are not charged a fee, and 3) it does not exceed the cost of providing that service.

A version of that argument was made by the author of ABX1 29, Assemblyman Bob Blumenfield, D-Los Angeles, on the Assembly floor just before the bill was approved on June 15, 2011.

“This approach has long been supported by the LAO [Legislative Analyst’s Office],” he said. “It reduces the financial exposure of the state to fight fires in the State Responsibility Areas, especially at a time when local governments continue to approve developments that increase fire risk. … We worked very closely when the Senate sent this over with leg[islative] counsel. And the key distinction here [making this a fee instead of a tax] is that it deals with prevention rather than protection. And so it’s not replacing existing services. But there’s a direct nexus. And that’s why this is an acceptable bill.”

Prediction of fire tax’s demise

Blumenfield was responding to then-Assemblyman Kevin Jeffries, R-Lake Elsinore, who predicted the fire assessment would soon be doused.

“We’ve seen this bill before,” he said. “At least I have over previous terms here. A funny thing happened: it failed in previous versions. When it was a $50 tax — you can call it a fee — but when it was a $50 tax it required a two-thirds vote. Now that it has moved to a $150 tax, somehow it’s been changed to a majority vote. I’m wondering if the leg[islative] counsel has issued a new opinion reversing their previous opinions that said this was a tax. It clearly violates Proposition 26 [requiring two-thirds support for tax hikes], and will last maybe a week at best until any number of interest groups, property rights proponents, any group out there who just happens to have a spare moment, and this bill will be dead. This tax will die a fast, quick death.”

Despite Jeffries’ assurance, the assessment is very much alive and well nearly two years later. The first billing for about 750,000 habitable structures was sent out from August through mid-December last year (in alphabetical order by county). A little over $73 million has been collected so far.

That’s short of the estimated revenue because 20 percent of respondents have declined to mail back their payments. More than 87,000 have filed an appeal. About 71 percent of the appeals, which were based on the fee being an illegally passed tax, were denied, according to Mathisen. More than 12,000 appeals were granted, however, as those assessments were based on misinformation from incorrect records.

“When this law was created there was no database in existence that identified all habitable structures in the SRA,” said Mathisen. “That was a significant task to put together that database. So we knew that there were going to be some inaccuracies. We are making those corrections as we move along.”

Fighting fire tax: The big picture and at individual level

The second round of billing for the current fiscal year was due to start in April. But it will be delayed, according to the Associated Press, to allow more time to sort through the thousands of complaints stemming from the initial billing.

In the meantime, three bills seeking to kill the fire prevention assessment are due to be heard in committees this legislative session: AB 23, AB 124 and SB 17. Click here for more information on the assessment from Cal Fire’s perspective. For the HJTA’s take, including instructions on filing an appeal, click here.

By Chriss Street

In January, California state tax collection beat Gov. Jerry Brown’s 2013-14 budget projections by $4.3 billion, or 39.1 percent.  The out-performance was due to two expected one-time events that took place: $1 billion in delayed sales tax deposits and $3.3 billion of taxes on capital gains, dividends and bonuses collected in January for a prior period.

But something should be very disturbing to giddy state politicians and lobbyists who are cranking up for a new spending spree: January sales taxes plunged by $582.7 million, or 27 percent.  It seems that Taxifornia finally raised taxes so high that affluent residents are moving their investments and spending elsewhere.

Many financial analysts declared the California debt crisis over two weeks ago, after the Legislative Analyst’s Office said the state was on track to collect $5 billion more in tax revenue in January than estimated in the governor’s budget.  The revenue was expected to come from high-income earners cashing out of investments early to beat the rise from 15 percent to 20 percent in federal capital gains tax rates as part of the congressional fiscal cliff deal.

But according Department of Finance Spokesman H.D. Palmer, “As we always caution, you can’t assume or build a long-term trend — good or bad — off of one month’s worth of data, because any number of factors can swing one month either way.”

January windfall

California clearly enjoyed a windfall in January, with affluent residents paying $3.3 billion more in retroactive estimated tax payments under November’s voter-approved Proposition 30 tax increase initiative and booking of capital gains, business income, and other income not subject to withholding prior to the January 1 federal tax increase.  But income tax collections fell far short of the anticipated $5 billion bonanza; and sales taxes tanked.

During the campaign for Proposition 30, the $6 billion tax increase voters approved, the Howard Jarvis Taxpayers Association  and other opponents warned that there is an inverse relationship, called the Laffer Curve, between rates of taxation and the resulting government tax collections.  Lowering tax rates incentivizes more investment, and the volume of taxes rises.  Raising tax rates strangles investment incentives, and the volume of tax collection falls.

Brown, who led the pro-Prop. 30 campaign, pooh-poohed concerns of competition from low-cost states, like Texas, if California imposed the highest statewide income tax at 13.3 percent, the highest sales tax at 7.5 percent (plus local levies) and 2nd highest gasoline tax at $.67 per gallon.  Brown promised that if voters approved new taxes and he cut spending, California’s 2013-14 Budget would achieve the first surplus in a decade.  At the news conference celebrating the passage Prop. 30 Brown said:

“I think the real lesson here is that voters have trusted the elected representatives, maybe even trusted me to some extent, and now we’ve got to meet that trust.  But we’ve got to make sure over the next few years that we pay our bills, we invest in the right programs, but we don’t go on any spending binges like we did in the days when we had the dot-com boom.“

When asked how he would maintain discipline, Brown cited a mantra he performed every night before bed while studying at a Zen monastery in Japan in the 1980s:

“Desires are endless, I vow to cut them down.”

As Palmer said, it’s too early to say if the current trends will continue. But if they do, Brown is going to have to cut down a lot more desires that take the form of state spending.

CHRISS STREET & PAUL PRESTON
Present “The American Exceptionalism Radio Talk Show”
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Click here to listen:  http://www.ustream.tv/channel/american-eceptionalism-news

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]]> https://calwatchdog.com/2013/02/11/are-higher-taxes-killing-ca-tax-collection/feed/ 30 37870 https://calwatchdog.com/2012/12/04/beware-of-lawmakers-selling-prop-13-snake-oil/ https://calwatchdog.com/2012/12/04/beware-of-lawmakers-selling-prop-13-snake-oil/#comments Tue, 04 Dec 2012 17:12:44 +0000 http://www.calwatchdog.com/?p=35129 Dec. 4, 2012

By Katy Grimes

Like geese migrating South for the winter, every year a combination of journalists, editorial boards, and “experts” join California’s liberal politicians in calling for the repeal of Proposition 13. They can’t stand the 1978 ballot initiative which revolutionized the property tax system in California.

The latest clarion call comes from Democratic Sen. Mark Leno from San Francisco, who announced last week that he plans on introducing a constitutional amendment that would turn Prop. 13 on its head. Leno’s amendment would allow local parcel taxes for schools to pass with 55 percent of the vote, instead of the two-thirds currently required by Prop. 13.

“This change in law would give voters the power to make decisions about public education at the local level, allowing schools much-needed flexibility to improve instruction, fund libraries, music, the arts or other programs, or hire more teachers to reduce student-to-teacher ratios,” Leno said in a statement.

Despite the annual arguments predictably attacking Prop. 13, “The $55 billion in property tax revenues is 11 times what they were after Proposition 13’s passage,” Sacramento Bee columnist Dan Walters reported.

This is more than the growth in state income and sales tax revenues during that period, despite the rate limit, according to Walters.

Ignoring reality

But Democrats and members of the media continue to ignore what led up to the 1978 taxpayer revolt. Prior to Prop. 13, property taxes doubled in 10 years, with some elderly Californians literally taxed out of their homes. There was no limit on annual property tax increases, and no end in sight.

California’s greedy government refused to help property owners even though the state was running a surplus.

In 1978, Prop. 13 was passed overwhelmingly by angry voters, 65 percent to 35 percent.

Prop. 13 cut the property tax rate from an average of three percent of a property’s value to 1 percent, and required a two-thirds supermajority in the Legislature to pass any tax increase in the state.

Prop. 13 returned property assessments to 1975 levels and capped annual property tax increases at 2 percent.

Prop. 13 caused a major shift in thinking in the state, as many property owners began to question the outrageous growth in property taxes that had been foisted upon them.

Assaults on the voter initiative

A 2011 cover story in the Economist magazine was just one of many attacks on Prop. 13. The Economist reported that, in 2011, California was at the end of its fiscal year with a huge budget hole, but incorrectly blamed Prop. 13.

The argument always used by Democrats and liberal media is that, because voters agreed overwhelmingly to make property taxes predictable and more affordable, the California Legislature is unable to balance the annual state budget.

This argument is a truckload of baloney. The Legislature had already refused to balance the annual budget several years in a row before Prop. 13 was passed. The voter initiative just became an easy and convenient fall guy.

Déjà vu all over again

Leading up to the passage of Prop. 13, tax reform advocates had tried unsuccessfully to pass tax reductions and reforms. California’s liberal Democratic Legislature, and equally liberal Gov. Jerry Brown, refused to deal, which led to one of the biggest tax revolution since the Boston Tea Party.

Brown was an outspoken opponent of Prop. 13, but became a survivalist and changed his tune quickly when it came time to run for re-election. Brown declared himself a “born-again tax-cutter.”

Many California taxpayers today wish Brown would embrace his “born-again” era.

The elderly were hardest hit, and will be again

According to the Howard Jarvis Taxpayers Association, named after tax fighter Howard Jarvis who spearheaded Prop. 13, prior to its passage, “Some properties were reassessed 50 percent to 100 percent higher in just one year, so their owners’ tax bills skyrocketed, often beyond the homeowners’ ability to pay their property taxes!”

In one year in Los Angeles County alone, more than 400,000 people were unable to pay their property taxes.

Seniors and the elderly were among the hardest hit prior to Prop. 13. Although many had paid off their mortgages, they still were faced with losing their homes because they couldn’t afford to pay skyrocketing property tax bills.

Out-of-control spending, and misspent priorities

The current efforts to undermine Prop. 13 are an ill-fated attempt to fund misplaced priorities.

In 2012, the Legislature recklessly voted to fund the $68 billion-and-growing high-speed rail project. The Legislature agreed to fund the first stretch of high-speed rail for $8 billion. The “train-to-nowhere” will start with 130 miles from Madera to Bakersfield.

In October, the California Air Resources Board held the first carbon credit auction. This tax on business will not result in lower carbon emissions in California, nor will this program do anything to end global warming. But businesses will pay anyway.

The recklessness with which California lawmakers and Gov. Jerry Brown are driving this dangerous vehicle, will undoubtedly end up in a fiery crash… and they are planning on dragging the state’s cash-strapped citizens behind the car.

Jon Coupal, president of the Howard Jarvis Taxpayers Association, has come out with a powerful call to arms in opposition to a half dozen ballot initiatives funded by billionaire California crony capitalists. The tax increases often are designed to feather their own pocketbooks.

Having already achieved the dubious distinction of being dubbed Taxifornia, the state of California infamously has America’s worst credit rating, second worst unemployment rate, third worst taxes and worst state business climate.  Raising taxes through the state initiative process for the benefit of special-interest billionaires seems like economic suicide.

In spite of its already brutal tax burden on individuals and businesses, the California state budget is estimated to have a $13 billion deficit over the next 18 months.  Gov. Jerry Brown last week announced his “leadership of California” is behind a state ballot initiative that would raise taxes $7 billion per year through increased income and sales taxes.

Grass-Roots vs. Billionaires

The Jarvis group’s founder, Howard Jarvis, pioneered the grass-roots use of the initiative process in 1978 to pass restrictions on rapidly escalating local property tax rates.  Because this people’s movement passed Proposition 13, California’s real estate taxes are only the 18th worst in the nation. This is why the Howard Jarvis Taxpaayers Association became so appalled that special interest billionaires are now highjacking the initiative process for their own benefit.  Jon Coupal offers as examples:

“Tom Steyer, a billionaire hedge fund manager with major investments in renewable energy, is promoting a $1.1 billion tax on out of state businesses with operations in California to fund renewable energy projects.  His initiative would make California an even more hostile place for businesses to operate, likely kill jobs and raise consumer prices, while diverting taxpayer money to corporate welfare for tycoons such as himself.  In 2010, Californians voters rejected the same tax increase on out of state businesses by a 58 percent to 42 percent margin

“Molly Munger wants to increase income taxes on everyone to raise $10 billion annually.  Munger is the daughter of billionaire Charles Munger, a partner of Warren Buffett at Berkshire Hathaway and is a Los Angeles civil rights lawyer. She has been credited for devoting some of her considerable fortune to support early childhood education, but she now seems intent on compelling everyone else to support the cause she has selected.  Regardless of her good intentions, forcing taxpayers to cough up another $10 billion will be a substantial additional burden in a state that already ranks third highest in income tax rates….

“The Think Long Committee [is] funded by Nicolas Berggruen, who is often called ‘the homeless billionaire’ because he lives in hotels and does not own a home.  Their initiative would raise taxes by $10 billion on all Californians by charging sales taxes on services, while reducing income taxes on the wealthy.”

Billionaires’ Paradise

The Think Long Committee, according to its Website, believes that California’s system of governance is broken. It states, “Meanwhile, decisive and unified leadership elsewhere in today’s world, notably in China, is building for the future.”

The leadership for the new worker’s paradise Berggruen seems to envision would require average Californians for the first time to pay a 6.75 percent sales tax every time they get a haircut, go to the drycleaners or pay an accountant to calculate their state tax rate.

Meanwhile, Mr. Berggruen would grant himself and other benevolent billionaires a 27 percent state income tax cut.  To demonstrate that billionaire-money-talks-very-loud in California, Mr. Berggruen has recruited as spokespersons former governors Grey Davis and Arnold Schwarzenegger and former Assembly Speaker Willie Brown.

Mr. Coupal acknowledges the range of motivation for billionaires to fund initiatives that “increase the tax burden on average Californians” may be for “using other people’s money to help what they believe are good causes, while, for others, it’s just good old fashioned greed — the measures they support will help themselves.”  But he worries that the California initiative process, meant to allow the average citizen to stop special interests in the state legislature, has been corrupted by a small cadre of billionaires with special interests and their crony allies.

Jan. 5, 2012

By JOHN SEILER

Opponents of Gov. Jerry Brown’s proposed $12 billion tax increase already are spoiling for a fight. They’re not waiting to find out the fate of the governor’s proposal to put the matter before voters in June.

“We always have to be prepared are are starting to develop a campaign strategy,” Jon Coupal told me today; he’s president of the Howard Jarvis Taxpayers Association and has fought many anti-tax battles in California.

However, Coupal added, “Today, it looks increasingly like there won’t be a vote.” Fresh from attending the weekend’s Republican convention, he said that he’s hopeful that the Democratic majority in the Legislature will not be able to peel off the two Republicans votes in each house, the Assembly and Senate, needed to put the matter before voters.

But he’s not taking any chances. “I think we’ll be ready the way were two years ago,” he said, referring the the successful effort to defeat a nearly identical tax increase advanced by then-Gov. Arnold Schwarzenegger. According to Ballotpedia:

If Proposition 1A had passed, $10 billion in “temporary” sales, use, income and vehicle taxes imposed as part of the 2009-2010 budget agreement would each have been extended for one or two years, resulting in a further tax increase of some $16 billion.

Brown’s tax increase would be for five years.

Prop. 1A was wiped out by voters, 65 percent to 35 percent.

Anti-tax Coordination

Coupal said he already is coordinating with the Tea Party Network, Americans for Prosperity and other activists. “We’ll have a fairly broad-based coalition,” he said. “We’re already looking at a media buy” for anti-tax ads. “We’re actually more ready than we were two years ago. We’re more confident about defeating these tax increases.”

In media depictions of anti-tax activists, Coupal and the Jarvis group often are paired with Americans for Tax Reform and its president, Grover Norquist, whose main offices are in Washington, D.C. ATR tries to get legislators at all levels of government to sign anti-tax pledges, including opposition to even putting tax increases before voters. Most GOP members of the California Legislature have signed it.

ATR’s California activism has even drawn a reaction from Brown. The governor blasted Norquist’s efforts to keep tax increases off the ballot as “highly undemocratic.”

“We’ve definitely been following the situation in California,” Patrick Gleason, ATR’s director of state affairs, told me. “We’re doing robocalls in targeted districts. We hope the tax increase won’t get referred to the ballot. We’re still trying for that. But we’re looking ahead. We’re already planning strategy for the No campaign.”

Local Activists

Unlike across the nation last November, California’s Tea Party activists didn’t have much influence on California’s elections. They hope to change that should a tax-increase be on a ballot in June or later.

“Absolutely we’re gearing up for an election,” Dawn Wildman of Tea Party Patriots in San Diego told me. She’s also the California state coordinator and one of the national coordinators for the Tea Party. “We’re already opposing it while it’s still squirreling around the chambers of the Legislature. We’re planning anti-tax events for April 14-18.” In 2011, the filing deadline for state and federal taxes is April 18.

“We’re real certain the governor will be pushing for a vote,” she added. “We want a narrative about the tax increases. The governor and the mainstream media are not getting out the information that these are tax increases, not extensions.”

I wondered if this election would be similar to the recall election of Gov. Gray Davis in 2003, which garnered national attention. “No,” Wildman replied. “The biggest challenge right now is watching the Republicans in the Legislature to make sure a couple of them don’t go to the dark side” and vote to put the tax increase on the ballot.

Another difference between past elections and events this year, she said, is the maturity of the Tea Party activists. “We get the game now,” she said. “We’re just not playing the game.”

Game Over?

Indeed, it may be that this activity by anti-tax activists will signal that the game is over for putting the tax increase on a ballot in June, or later. As I wrote a month ago, a vote on a California tax increase would become a national melee, drawing anti-tax groups from around the country against the increase, while also bringing in union pro-tax activists from across the land.

But the tax increasers almost certainly would lose, just as they did in 2009, and again with a different tax increase in 2010, Proposition 24. According to Ballotpedia, Prop. 24 lost by 58 percent to 42 percent.

Moreover, as I keep reminding people, the biggest problem in California isn’t the $25 billion budget deficit, but the 12.4 percent unemployment rate. Not just conservative economists, but liberal economists insist that the worst thing to do during a recession is to slam the economy harder with tax increases.

That may be why the Bee yesterday reported that an “all cuts budget may surface.”

We may be witnessing the end of the tax-increase game.