“The teaching profession is critical to California’s economic success and impacts every vocation and profession in the state,” state Sen. Henry Stern said in a statement. “SB807 addresses the immediate teacher shortage and sends a loud and clear message across the state and nation: California values teachers.”

Senate Bill 807 would exempt teachers from paying state income tax after teaching for five years and would also provide a tax deduction for costs relating to obtaining credentials.

It comes at a time when California is scrambling to hire teachers, as between 20 percent to 40 percent of teachers leave the profession after the first five years, according to recent research, and the amount of teachers is at a 12-year low.

But critics say it’s an impractical solution to combating the problem of poor-performing schools.

“If you take an entire class of people based on their occupation and say that they are somehow ‘more deserving’ than everyone else and should be exempted from paying state income taxes, what other groups might qualify?” conservative commentator Jazz Shaw, writing for the Howard Jarvis Taxpayers Association, argued.

The bill comes at a time when proficiency rates among California students still are under 50 percent, as 49 percent in English and just 37 percent in math scored proficient on CAASP tests in 2016, with minority students scoring even lower.

It’s also unclear what effect the bill would have, as opponents have noted it appears to be a measure to provide monies to veteran teachers, where retention is less of an issue, at the expense of the taxpayer.

Furthermore, the starting salaries at even small high schools stands near $44,000, just slightly less than the median household income in the U.S., which stands at around $50,000.

If teachers are exempt from paying income tax, is raises the question of what other occupations may qualify due to their perceived importance in society.

Details on the effect on tax revenues have not been released and the California Teacher Association has so far not taken a position on the proposed legislation.

In recent months, sponsors of tax increases have filed the necessary paperwork to obtain a ballot title and summary for multiple tax increases, including two versions of a Prop. 30 tax extension. Critics of higher taxes say that an extension of Prop. 30 violates the promise made in 2012.

“Prop. 30 was creatively advertised and sold to the voters by a union, the California Teachers Association, which depicted it as a ‘temporary’ tax to support public schools,” contends former Democratic State Senator Gloria Romero. “But even while Prop. 30 was being pitched to voters as a temporary tax increase, no one in the political world actually believed it. In fact, discussions were already underway before its passage about extending Prop. 30 tax increases beyond the two expiration dates.”

Version 1: Prop. 30 Tax Extension

In September, attorneys on behalf of the Alliance for a Better California, a coalition of education unions, organized labor and health care providers, introduced the “School Funding and Budget Stability Act,” which would impose higher income taxes on high-wealth earners for the next 12 years. The $9 billion in anticipated higher tax proceeds would go towards schools. That also explains why the California Teachers Association is among the proposal’s biggest supporters.

“Temporarily extending these critical revenues will help keep our state budget balanced, and prevent devastating cuts to programs affecting students, seniors, working families and health care,” Gale Kaufman, a longtime Democratic strategist and representative of the coalition, told the Educator, the CTA’s monthly magazine.

Under the plan, California residents earning more than a half-million dollars per year would continue to pay Prop. 30’s higher income taxes until 2030. The quarter-cent sales tax increase would expire next year as scheduled.

Version 2: Prop. 30 Tax Extension

Not content with one tax hike, the same group introduced a second Prop. 30 tax extension in December. The measure would impose Prop. 30’s higher tax rates on those earning more than $250,000 per year — with the proceeds allocated in a slightly different manner.

In an apparent bid to gain support from California’s hospitals, “The California Children’s Education and Health Care Protection Act of 2016” would allocate up to $2 billion towards Medi-Cal spending.

“Whether this version truly represents a joint teachers union/health care effort remains to be seen,” explains Loren Kaye, president of the California Foundation for Commerce and Education. “The health care union has not indicated its position on this approach; indeed, in a bizarre twist, it recently sued the CHA for entering into negotiations with CTA in the first place.”

“Amid this uncertainty, one fact remains unassailable: the CTA has a measure ‘on the street’ for which they can begin collecting signatures. Everything else for now is speculation,” he added.

Sponsors of the tax increase say it is desperately needed to avoid catastrophic cuts to schools and other public services.

“Unless we act now to temporarily extend the current income tax rates on the wealthiest Californians, our public schools will soon face another devastating round of cuts due to lost revenue of billions of dollars a year,” the sponsors of the ballot measure wrote in a draft initiative. “We can let the temporary sales tax increase expire to help working families, but this is not the time to be giving the wealthiest people in California a tax cut that they don’t need and that our schools can’t afford.”

Prop. 30 Tax Extension Could Backfire

Many economists fear that any Prop. 30 income tax extension could backfire and further drive high-income earners out-of-state. California’s $115 billion General Fund budget has become increasingly dependent on income tax revenue, which frequently fluctuates based on the stock market.

“(T)he initiative to extend Prop. 30 taxes, rather than solving a problem, creates a worse one,” writes Jerry Nickelsburg, a senior economist for the UCLA Anderson Forecast. “Our current greater dependence on high-income earners to balance the state budget makes us more vulnerable.”

Nevertheless, many state political observers say that a tax extension, which could generate upwards of $11 billion in revenue, is likely to pass in 2016. At a recent economic summit, “Controller Betty Yee predicted that a Proposition 30 extension and a cigarette tax will be on the 2016 ballot and both would pass.”

That assessment comes even as one-time supporters of Prop. 30 question the rationale for its extension.

“In a time of financial crisis, Prop. 30 made sense,” the Los Angeles Daily News recently editorialized. “But the state is no longer in crisis, and any ballot measure playing off the fear of a return to dark days should be seen for the political ploy it is by unionists seeking to protect their own interests.”

Tax reform is in the air. One proposal is by state Sen. Bob Hertzberg, D-Los Angeles, also a former speaker of the Assembly.

Senate Bill 8, the Upward Mobility Act, would raise $10 billion in sales and use taxes to replace the $7 billion Proposition 30 raised largely from taxes on the wealthy. Prop. 30 was passed by voters in 2012 and was heavily supported by Gov. Jerry Brown. Prop. 30 expires in 2018. SB8 would take effect in 2019.

Oddly, SB8 largely would target such Democratic Party constituencies as professionals and service-sector businesses with more than $100,000 in gross income. Health care and education services would be exempted.

The money would be spent this way: $3 billion would go to K-12 schools and community colleges, $2 billion to the university systems, $3 billion to local governments and $2 billion to a new earned-income tax credit for poor families.

The reasoning behind SB8 was spelled out by columnist George Skelton:

“California is relying less on the sales tax, which applies only to purchased goods, while leaning heavily on the richest 1 percent, whose incomes fluctuate like a roller-coaster.

“In 1950, the sales tax generated 60 percent of all state revenue, the income tax just 10 percent. Today, the sales tax brings in around 25 percent, the income tax more than 60 percent.”

Under current law, the sales tax is applied to concrete items, such as a car or computer; food is exempt. The reasoning behind not taxing services is that what is offered – such as business consulting or legal advice – is intangible. Moreover, many such services easily could be outsourced to another state to avoid taxation – such as hiring computer programmers in Texas or India.

The services tax also especially would hit small- and medium-sized businesses, such as independent real estate brokers, auto repairmen and handymen.

Tax boost

By costing $10 billion to the $7 billion of Prop. 30, SB8 would be a 43 percent tax boost. And although the California economy is performing well now, it’s impossible to say how it will be doing four years from now.

A services tax also would encourage the growth of black markets. For example, in September the Los Angeles Times reported:

“Nine people were arrested in raids targeting 75 locations, and $90 million was seized — $70 million in cash. In one condo, agents found $35 million stuffed in banker boxes. At a mansion in Bel-Air, they discovered $10 million in duffel bags. 

“Federal officials said they believe that the drug organizations have used businesses throughout Los Angeles to convert their vast earnings into pesos, turning the city into a hub for ‘trade-based money laundering.’” 

People in black markets obviously don’t pay sales, income or other taxes.

GOP minority

Although Republicans remain a minority in both houses of the California Legislature, on Nov. 4 they gained enough new seats to prevent a two-thirds Democratic supermajority.

All Republicans are expected to oppose any tax increase of any kind.

So it’s the lack of a supermajority that would prevent SB8 from being passed.

Shift to non-profit economy

Oddly, SB8 is being advanced at a time when some tax-generating assets are being taken off the tax rolls, also benefiting the rich at the expense of everybody else.

One is the current shift of private electric utilities to non-profit municipal electricity-buying cooperatives, called Community Choice Aggregation.  Such cooperatives tout savings to customers for avoiding taxes paid by such regulated electric utilities as Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric.

Currently, 16 cities in the South Bay area of Southern California are planning to opt out of Edison and set up their own cooperatives, with the wealthy cities of Redondo Beach and Manhattan Beach leading the way. That will be lost corporate taxes to the state and property taxes for local government. Effectively, the wealthy people in those areas are sloughing off their tax obligations to those in other areas.

As reported by CalWatchdog.com, electric buying cooperatives not only avoid paying corporate taxes but offload expensive green power costs onto federal taxpayers by buying heavily subsidized green power and Renewable Energy Credits.

The long-term experience of the State of Illinois with electric buying cooperatives is that they show initial benefits to customers, but don’t make economic sense in the long term.

Assembly Bill 2145 of 2014 proposed to make it more difficult for cities to form electric buying cooperatives.  However, it died in the state Senate in September.

But the lusts of government for our money are infinite. Taxing the rich wasn't enough to pay for World War I, Social Security, World War II, the Cold War, Medicare, Medicaid, the Global War on Terror (GWOT), Obamacare, food stamps, Section 8 housing, the federal takeover of education, farm subsidies, etc. So the income tax quickly was extended to almost everybody with a heartbeat who went to work.

The Social Security/FICA/Payroll tax really is an income tax. So is Medicare. So will be the Obamacare tax. These programs are sold as being “insurance” policies. Except the money is not stored somewhere. It's not invested in securities or stocks, as with a life insurance policy you might take out with a private company. There's no vault where your money is kept until you need it. It's all spent on current recipients and government functionaries.

For a while, a Social Security “surplus” piled up, as the Baby Boomers paid into the system more than was taken out by their retired parents. But that “surplus” never was invested; it all was spent on current programs. Nothing was saved. Now, the Boomers themselves are retiring. Their birth rate was less than half that of their parents, meaning there aren't enough replacements-slaves to keep the system solvent. So the “surplus” is gone, contributing to the massive federal deficits.

Revenue Act

Dan Mitchell of the Cato Institute put up a good piece on the income tax:

[O]n this day in 1913, one of America’s worst Presidents, Woodrow Wilson, signed into law the Revenue Act of 1913, which imposed the income tax.

The law signed that day by President Wilson, to be fair, wasn’t that awful. The top tax rate was only 7 percent, the tax form was only 2 pages, and the entire tax code was only 400 pages. And a big chunk of the revenue actually was used to lower the tax burden on international trade (the basic tariff rate dropped form 40 percent to 25 percent).

But just as tiny acorns become large oak trees, small taxes become big taxes and simple tax codes become complex monstrosities. And that’s exactly what happened in the United States.

We now have a top tax rate of 39.6 percent, and it’s actually much higher than that when you include the impact of other taxes, as well as the pervasive double taxation of saving and investment.

And the relatively simply tax law of 1913 has metastasized into 74,000 pages of Byzantine complexity.

Not to mention that the tax code has become one of the main sources of political corruption in Washington, impoverishing us while enriching the politicians, lobbyists, bureaucrats, and interest groups. Or the oppressive and dishonest IRS.

However, even though I take second place to nobody in my disdain for the income tax, the worst thing about that law is not the tax rates, the double taxation, or the complexity. The worst thing is that the income tax enabled the modern welfare state.

Before the income tax, politicians had no way to finance big government. Their only significant pre-1913 sources of revenue were tariffs and excise taxes, and they couldn’t raise those tax rates too high because of Laffer Curve effects (something that modern-day politicians sometimes still discover).

Once the income tax was adopted, though, it became a lot easier to finance subsidies, handouts, and redistribution. As you can see from the chart, the federal government used to be very small during peacetime.

But as the decades have passed, the Leviathan state in Washington has grown. And in the absence of genuine entitlement reform, it’s just a matter of time before the United States morphs into a bankrupt European-style welfare state.

And as government becomes bigger and bigger, diverting more and more resources from the productive sector of the economy, we can expect more stagnation and misery.

That’s why October 3 is an awful day in American history. All the bad results described above were made possible by the income tax.

By Katy Grimes

As the behind-the-scene negotiations take place between the NBA, the owners of the Sacramento Kings and prospective buyers, there is really only one thing to remember: everything is economic.

The top Kings player is paid more than $8 million. Wouldn’t he like to save a cool $600,000 a year in income taxes just by moving from Sacramento to Seattle?

Even uber-liberal HBO “Real Time” host Bill Maher recently said he may leave California, due to the state’s high tax rate.

Basketball is big business

Sports franchises are multi-million dollar businesses.

Team owners and accountants spend a great deal of their time scrutinizing the finances. A move from the economically depressed Sacramento to Seattle is a hardly a conundrum.

As the Maloof family has suffered losses in their Las Vegas business ventures, unloading the Sacramento Kings, a generally losing NBA team, probably looked good.

Migrating businesses

The marginal personal-income tax rate for wealthy Californians  is 13.3 percent. Washington state has no state personal income tax. So after deductions and tax write-offs, the California state income tax on an $8 million NBA salary would be something like $600,000.

“According to migration data from the Internal Revenue Service, over the 15-year period from 1995 to 2010, King County, where Seattle is located, has gained $32 million in adjusted gross income from Sacramento County,” Forbes reported in January.

“Other California counties have added significant amounts to King County’s coffers, too,” Forbes reported. “During those same 15 years, Orange County lost $98 million in net AGI to King County. Los Angeles saw a huge hit, with King County gaining $313 million of Los Angelenos’ net AGI.”

As the negotiations continue, Sacramento officials seem only to be getting more shrill. The only way Mayor Kevin Johnson, a former NBA star player, can seem to attract and keep business is to promise millions of dollars in public subsidies.

But Sacramento taxpayers have already voted down a public subsidy.

Public subsidy is how the NBA plays

“The league and its players have enjoyed over $3 billion in public funds for new arenas since 1990 and sources tell PBT on the condition of anonymity that the league is sensitive to what a move out of Sacramento could do to future subsidy collection efforts by the NBA,” NBC’s Pro Basketball talk found.

“Any additional ammunition given to public subsidy opponents could impact the league’s bottom line much more than what owners would proportionately receive in a relocation fee, which some have guessed to be in the $30-$45 million dollar range.  The fee can be anything the league wants, and can be as high as the most recent franchise fee or franchise sale amount according to legal scholars at Loyola Marymount.”

Despite this “new norm” of publicly subsidized arenas, Mayor Johnson is spending money he doesn’t have. Cities like Sacramento just don’t have the money, and it is irresponsible and unrealistic of Johnson and the Sacramento City Council to claim tax revenue generated by a new downtown arena would pay for the subsidy. The numbers don’t pencil out.

“With opposition of public subsidies for sports facilities growing every day, sources say the league wants to avoid a situation in which Sacramento provides a “model offer” only to have their team taken away,” Pro Basketball talk said. “This would send a message to future cities that their long-term investments in the NBA are not safe, even if the city does everything reasonably expected of them.”

We can hope. In the meantime, can any public subsidy really take precedence over the high income taxes pro-ball players must pay to live and play in California?

“The Golden State’s new 13.3 percent income tax on top earners prompted golfer Phil Mickelson to say earlier this month he was considering a move, and according to the accountants who advise millionaire athletes, he was just saying what a lot of jocks were already thinking,” Fox News reported in January.

“They’re going to have an exodus of people,” said John Karaffa, president of ProSport CPA, a Virginia-based firm that represents nearly 300 professional athletes, primarily in basketball and football. “I think they’ll see some [leave California] for sure. They were already a very high tax state and it’s getting to a point where folks have to make a business decision as well as a lifestyle decision.”

By Chris Reed

It’s not just money from Proposition 30’s sales-tax and income-tax hikes that is being used to provide for teacher pay raises and to allow continuation of “step” pay policies that give teachers raises most years just for time on the job and to maintain “column” pay policies that give teachers raises for meaningless accumulation of graduation school credits.

It turns out that the other tax-hiking measure that won approval in 2012 — Proposition 39 — is also a vehicle to that end. The measure blocked multistate corporations from getting to pick where they paid their taxes on revenue generated in California. It is expected to yield about an extra $1 billion a year to the state treasury. It’s long been anticipated that some of the money would be used to increase energy efficiency in school districts.

But instead of distributing the money to schools with the most needs, Gov. Jerry Brown is instead proposing to base its distribution on “Average Daily Attendance,” the same basic method that is used to determine how much money the state gives school districts — and to do so with relatively little oversight. Districts, which stand to get $2.6 billion over the next five years, would basically self-report on their compliance.

This has already triggered complaints from early sponsors of Proposition 39 and criticism from the Legislative Analyst’s Office. Both say that spending should be targeted.

A clandestine way to divert money to teacher compensation

But this is even more of a scam than is understood. The problem isn’t just that the spending isn’t prioritized to get the money to where energy efficiency is the biggest concern. It’s that the language of Brown’s proposal appears to allow districts to spend their Prop. 39 funding on energy-related items in their operating budgets. This would free up more funds for employee compensation, which consume more than 90 percent of the regular budget in many districts.

School districts have been caught lying about attendance, stealing school lunch money, and misusing billions in bond funds — all so as to free up money to keep the automatic raises going to teachers. Diverting Prop. 39 funds would be a relatively minor sin on this front.

All of which brings me back to Reed’s Law, which I wrote about here last month. That law: Whether in the Legislature or in local school districts, the top priority is always freeing up or increasing revenue to allow tenured teachers to receive the automatic “step” raises that typically are provided for 15 of their first 20 years on the job — just for showing up.

Understand this, and California politics becomes demystified and uncomplicated.

Understand this, and it’s no surprise that a ballot measure that’s ostensibly about ending a tax loophole and promoting energy efficiency ends up being one more stealth measure to preserve automatic teacher raises.

The conventional wisdom about the California Teachers Association being a powerful player in Sacramento doesn’t come close to describing the truth. The CTA’s push to protect the pay and tenure of veteran teachers is so powerful, intense and unrelenting that it distorts policies in areas that seem to have little overlap with education.

I look forward to the day that “investigative journalist” Evan Halper points this out.

By John Seiler

From the NY Post:

“The city’s hedge-fund executives are flying south — and it’s not for vacation.

“An increasing number of financial firms, especially private equity and hedge funds, are fed up with New York’s sky-high city and state tax rates and are relocating to the business-friendly climate in Florida’s Palm Beach County.

“And they’re being welcomed with open arms — officials in Palm Beach recently opened an entire office dedicated to luring finance hot shots down south.

“’Florida is a state of choice,’ said Thalius Hecksher, global development chief for Apex Fund Services, who moved many of his operations to Palm Beach. “=’It’s organically grown. There’s no need to drag people down here. It’s a zero-income-tax jurisdiction.’”

The improvement in weather also is significant. By contrast, wealthy folks fleeing California for Florida (or Texas) move into worse weather.

Still, the New York situation is another blow against Gov. Jerry Brown’s contention that rich people won’t flee tax slavery in California for someplace that treats them better.

As the tax receipts come in for the state government over the next few months, we’ll know.

More from the Post:

“Federal tax rates are the same in Florida and New York.

“But there’s no state income tax in the Sunshine State. Compare that to New York, where the state and local governments took $14.71 of every $100 earned in 2010, according to state records.

“The only state with a higher rate is Alaska.

“And Florida residents lost 3.31 percent of their income in total taxes, versus New Yorkers, who pay just over 5 percent, according to the National Tax Foundation’s latest report, which used 2009 Census figures.

“That’s a substantial difference in bottom line for those who stand to make millions of dollars a year in income.

“Also, commercial property values are much cheaper in Florida, and New York City will likely become even less friendly to businesses when Mayor Bloomberg leaves office next year, hedge-fund executives said.”

As with leaving California, moving from New York to the Sunshine State means getting a much bigger home, albeit with a little worse weather. But if the bugs and hurricanes get you down too much, with all the money you save moving there, you can take a long vacation in California, then leave before Gov. Jerry shows up to grab your taxes.

Florida, here they come.

By John Seiler

Not only does Proposition 30 increase income taxes; it also boosts California sales taxes, already the highest among states, to an even higher level. The following chart shows state sales taxes.
And remember, a state like Tennessee, whose 7 percent sales tax is nearly has high as Taxifornia’s, doesn’t even have an income tax.

(Hat tap to Richard Rider, taxpayers’ best friend.)