Assembly Bill 2863, introduced by Assemblyman Adam Gray, D-Merced, would make California the fourth state after New Jersey, Nevada and Delaware to legalize some Internet poker websites. The measure, which passed the Assembly Governmental Organization Committee on a 19-0 vote last week, says the sites can only be operated by Indian tribes that already have casinos in California.

The connection between the financial struggles of California horse-racing tracks and online poker is based on track owners’ arguments that they have been financially devastated by the rise of legal online horse betting and by the proliferation of Indian casinos in the Golden State since 2000. That’s when voters approved a state constitutional amendment making it much easier for tribes to get casinos approved. While the racing industry is declining in California, it still has some pull in the Legislature.

But there is a split in the media over how much of a breakthrough online poker advocates truly achieved last week. Coverage in the niche media that specialize in gambling was less likely to see the committee vote as a huge step toward online poker’s legalization than the mainstream media.

OnlinePoker.Report.com challenged the description of some of California’s wealthiest tribes as being “neutral” on AB2863 simply because they had not taken an unequivocal public stand on the measure. In particular, OPR reported, Agua Caliente and Pechanga representatives privately express broad skepticism about Gray’s bill. 

Some CA tribes want to block online juggernaut

Their biggest objection involves what in the online poker world is known as the “bad actor” debate: whether online poker sites with questionable histories should be firmly banned from partnering with casinos in setting up new state-specific online sites.

PokerStars is the site most consistently depicted as a villain, which led to clauses in a Nevada law meant to keep it out of state-approved online poker sites. Founded in 2001, the world’s largest online poker site was the biggest fish targeted in the U.S. government’s 2011 crackdown on online betting. The next year, it settled its legal fight with the Justice Department by paying $700 million without admitting wrongdoing.

Now PokerStars has quickly established itself as a juggernaut in New Jersey with its pokerstarsnj.com site. In 2014, it lined up partners in California: the Morongo Tribe and the San Manuel Band of Mission Indians.

Unless other tribes get language in AB2863 that provides hard protections against a PokerStars-Morongo-San Manuel partnership, the legislation may end up being opposed by most of California’s richest tribes, whose generous campaign donations have given them considerable clout in Sacramento.

There is again a gap between mainstream and niche media coverage of this issue. Instead of being about keeping “bad actors” out of states, gambling news sites depict “bad actor” clauses as being about market protectionism.

One of the world’s best known law professors, Harvard’s Lawrence Tribe, agrees with that description and could work as a lobbyist for and counsel to PokerStars if a state law attempts to keep PokerStars from partnering with California tribes.

Now Mercedes is moving its HQ from high-tax New Jersey — basically, California with bad weather and a Republican governor — for Georgia.

The Wall Street Journal reported:

Wooed by lower costs, proximity to a Mercedes-Benz factory and government incentives, the German luxury car maker in July will begin moving about 1,000 U.S. personnel to a temporary facility and later move to Sandy Springs, Ga.

The operation, which includes staff working on the Sprinter van business and the Smart mini car lineup, will permanently move into a new building erected on a 10-acre site in the same city.

Of course, subsidies means everybody else in the state must take up the slack given to a favored company. But the Garden State also dangled subsidies before Mercedes’ eyes. Yet they weren’t enough to compensate for Georgia’s other advantages:

Daimler executives turned down a significant incentive package from New Jersey to keep its U.S. headquarters in Montvale, where it had been running operations since 1972….

John Boyd, principal of the Boyd Company Inc., a Princeton, N.J.-based site selection consultant, said that New Jersey has the country’s most appealing incentives policy in his assessment, but it was outweighed by the cost-savings and convenience of moving to the U.S. South. He said that the move would reduce Mercedes-Benz’s costs, including real estate, energy and property taxes, by about 20%.

California, of course, was in contention for the Mercedes HQ move about as much as North Korea. Energy costs here are high and going much higher because of Gov. Jerry Brown’s push for 50 percent renewable energy by 2020.

Property taxes here generally are low at 1 percent of assessed value, because of Proposition 13. But numerous state and local restrictions on construction have boosted land values to prohibitive levels.

Mercedes still sells a lot of cars out here. We still have the Silicon Valley digital elite, the $100K Pension Club of retired government workers and others who are in the money and can afford an S-Class Sedan or SL65 AMG Roadster.

But otherwise the company, like so many others, shuns our state, depriving us of thousands of middle-class jobs.

When real estate developer Forest City began construction on a new apartment complex at 2175 Market St., it announced that it would build more affordable units than required by the city — 20 percent instead of 12.

The response was overwhelming. Forest City put a booth in the lobby of the building — chosen because it is centrally located, near public transit and well-recognized — and handed out more than 6,800 applications.

For 18 apartments.

Despite the odds, 2,595 individuals and families completed and returned the eight-page application. Their names were put in a lottery to draw 400 finalists.

Four hundred names for 18 apartments, 11 of them one-bedrooms.

CA’s piecemeal approach to affordable housing can’t work

This article bridles with barely disguised journalistic anger over the failure of local and state government to deal with affordable housing concerns.

Doug Shoemaker, president of the California branch of Mercy Housing, an affordable housing nonprofit, says this is the worst market he’s ever seen. Mercy just opened a 100-until affordable housing building for families at Fourth and Channel Streets. There were 2,995 applications.

“The demand is just intense,” he said. “It was a horrifying reminder of just how hard it is. I’ve been in this field for 20 years and for people looking for apartments this is the most depressing market I have ever seen. It is painful to watch any of it, but what horrifies us most is the homeless families.”

Sara Osaba, a single parent, can’t get over the irony. A former UC Berkeley student, she moved back to San Francisco from Vermont, where she was working for nonprofits, helping low-income immigrants.

“I’ve worked 30 years helping immigrant families find housing,” she said. “Now I’m one of those families. I’ve gone from being a contributing member of society to being essentially homeless.”

State emphasizes process, not results

But any anger should extend to California’s government beat reporters for the complete absence of context in their coverage of this issue. The starting point for understanding why the state is so bad on this big issue is a 2003 Public Policy Institute of California report. I wrote about it last year when analyzing a San Diego affordable housing policy fight with the same dumb dynamics as San Francisco’s:

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.

We say heed the PPIC instead of embracing a failed status quo. It’s foolish for the city to try to address a problem that needs a regional approach and a much smarter conceptual framework. Instead of a massive increase in the “linkage fee,” the City Council should pass a resolution imploring the governor and the Legislature to fix state law — one so flawed that it gets in the way of fixing the problem it is supposed to resolve.

Wouldn’t it be nice if sabermetrics of a sort came to public policy reporting, complete with analytics examining what the effects of well-meaning laws actually were? If this did happen, the idiocy of state affordable housing policies would be obvious and maybe then they would be changed.

Instead, in California, we have affordable housing dealt with in the worst possible way — by individual local governments that obsess with process, instead of with a coordinated, sophisticated state-run program, as seen in New Jersey and Massachusetts, that emphasize results.

Do reporters ever mention this? Nope. They’d rather be indignant than get to the bottom of why they’re indignant.

Wrong.

We’re only third-worst, behind even worse New York and New Jersey, according to a new survey by the Tax Foundation’s new 2015 State Business Tax Climate Index.

Broken down, California ranks 50th — worst — on the income tax, for which we are gouged not just to the bone, but into the bone and down to the marrow.

Corporate taxes — 34th best — and salex taxes — 42nd best — only are a little better.

We’re somewhat better –14th best for both — on the unemployment insurance tax and the property tax — the latter due to the much-reviled Proposition 13, the 1978 tax cut. I hear rumors Democrats and their government-employee union controllers are going to move big time to gut Prop. 13 in the 2016 election. We’ll see. The defenders of Prop. 13 also have resources to keep California from going all the way to North Korea.

The Index noted:

“Anecdotes about the impact of state tax systems on business investment are plentiful. In Illinois early last decade, hundreds of millions of dollars of capital investments were delayed when then-Governor Rod Blagojevich proposed a hefty gross receipts tax. Only when the legislature resoundingly defeated the bill did the investment resume. In 2005, California-based Intel decided to build a multi-billion dollar chip-making facility in Arizona due to its favorable corporate income tax system. In 2010, Northrup Grumman chose to move its headquarters to Virginia over Maryland, citing the better business tax climate. Anecdotes such as these reinforce what we know from economic theory: taxes matter to businesses, and those places with the most competitive tax systems will reap the benefits of business-friendly tax climates.”

Blagojevich was convicted of extortion and currently is serving time at the Federal Correction Institution in Englewood. At least in that case taxpayers know where their stolen tax money ended up.

Thus, someone buying a $300,000 condo this year would pay $3,000 in taxes this year, but at most $3,060 next year.

New Jersey didn’t have an equivalent until recently. Here’s what’s happening:

The average property-tax bill in New Jersey, which already has the highest in the U.S., rose 1.7 percent last year, Governor Chris Christie said.

More than 80 towns, school boards and other local governments saw their taxes drop, while about 160 had increases of less than 1 percent, according to an e-mail from the governor’s office.

New Jersey’s property taxes, which are collected by local governments, increased about 7 percent annually in 2004, 2005 and 2006 before the rate began to slow. Christie, a second-term Republican, has controlled the growth after enacting a 2 percent annual cap. Still, the tax climbed to a record of more than $8,000 per household, from the previous high of $7,885 in 2012, according to calculations by Bloomberg.

“This is the lowest rate of growth in 24 years in this state,” Christie said yesterday at a town-hall meeting in Mount Laurel.

That’s only because home price increases slowed after the earlier peaks. But the taxes remain sky high. And you’re living in Jersey!

By Brian Calle and Josephine Djuhana

It should come as no surprise that the economic growth rates and prosperity for states with excessive regulations and taxes are much lower when compared to states with fewer regulations and modest taxes. Incentives, such as low taxes and humble regulations, attract business and investment, which in turn spur economic benefits and job growth. It is not Republican or Democrat, liberal or conservative, “it’s just good economics,” as Arthur Laffer, noted economist and economic advisor to former President Ronald Reagan, likes to say.

California lawmakers ought to take note.

Laffer’s new book, “Eureka! How to Fix California,” was commissioned by the Pacific Research Institute, CalWatchDog.com’s parent think tank. The former California resident attempts to knock some sense into the political class in Sacramento, urging policy makers to focus on good economics instead of politics as usual. He wrote the book, he said, to create a blueprint for reforming California— to put the once Golden State back on a path of prosperity.

Laffer looked at various state economic data and found some significant disparities between states that instituted progressive income tax policies versus those that did not—particularly the gap in state growth between states with income taxes and states with none.

Eleven states introduced progressive income taxes within the past fifty years—Connecticut, New Jersey, Ohio, Rhode Island, Pennsylvania, Maine, Illinois, Nebraska, Michigan, Indiana and West Virginia. And of the 11, all states declined as a share of the U.S. economy. Michigan’s economy, for example, was at 5.08 percent of the US economy in 2005; that percentage slid to 2.64 percent in 2010. Like Michigan, Ohio’s wealth diminished as a result of similarly poor economic policies, Laffer argues. “The only things that still look nice in Ohio are the public government buildings,” remarked Dr. Laffer, during a recent stop on his book tour in Orange County.

Laffer also explores migration patters between states with varying tax rates; comparing “right-to-work” states—states where employees retain the right to decide whether or not to join or financially support a union—and “forced unionism” states—where an individual must pay union fees as a condition of employment and has forced union representation.

Right-to-work growth

In right-to-work states, Laffer found more economic growth, while “forced union” states trended the opposite direction.

The 22 right-to-work states experienced a 52.83 percent jump in gross state product; on the other hand, the 28 “union-shop” states had a 41.72 percent gross state product growth, less than the 46.61 percent US average.

“Right-to-work” states also trumped their forced-union counterparts in personal income growth, payroll employment growth, population growth and net domestic in-migration. Part of the reason that the growth gap is so large is that employers have a tendency to move away from forced-union states, not just to scale back wages and salaries, but also to avoid intrusive union rules, lawsuits, work stoppage threats and more.

Laffer’s proposal to reform California’s tax system should come as no surprise for those who have followed his work. He calls for a flat tax for the state of California; one simple tax on net business sales, and another on personal unadjusted income. His proposal does call for keeping “sin taxes” on the books, those taxes on cigarettes, etc., that are more meant to alter behavior than to raise revenues. Those concerned with the role of government in legislating personal decisions might argue that such sin taxes ought to be ousted as well.

California’s current tax system causes much unsettling volatility in state tax income year-to-year by making budgeting at the state level often incoherent. For example, in 2001, income from capital gains taxes (and other onetime revenues) made up a quarter of state tax revenue, according to Laffer.

And California has so many taxes (Laffer stopped counting after he studied 162 of them) that the tax code is overwhelmingly and unnecessarily complex, hence Laffer’s push to simplify it.

Looking at Sacramento today, though, there appears to be no political will in the legislature or with Gov. Jerry Brown to reform the tax code and especially institute a flat tax. Laffer dismisses that, noting that, when Brown ran for president in 1992, Brown proposed a national flat tax, making it part of his platform in the Democratic primary. “He was the first prominent presidential candidate to ever propose a national flat tax,” Laffer said. Optimistically, Laffer argues that, given the right situation, Brown could be amenable.  We shall see. Brown, this time around, seems more beholden to public employee unions than during his previous stint as governor.

“Political partisanship is ruining the politics of our country,” Laffer concludes. Fixing California requires a nonpartisan effort to eliminate excessive taxes and regulations, and to create a business-friendly environment that encourages economic activity. Laffer’s blueprint, in short, challenges California politicians to put partisanship aside and embrace simple economics.