Senate Bill 8 would change the tax code to reduce the reliance on topsy-turvy income tax revenues by adding taxes on services and reducing them on personal income. Here’s a description of it from the LegInfo official site:

California’s two trillion dollar economy has shifted from being mainly agricultural and manufacturing in the 1950s and 1960s, when the framework of today’s tax system was set, to one based on information and services, which now accounts for 80 percent of all economic activities in the state. To achieve a future as promising as California’s past, we need a tax system that is based on this real economy of the 21st century while ensuring that new revenue is invested in strengthening the ladder of mobility for all our residents.

The second, SB155, would better integrate California into the Western region’s electrical grid to promote a more resilient system and show how California’s embrace of more renewable sources of energy can be emulated by other states. There’s no bill analysis available, but the intent is to offer up the Golden State as both a model and a partner for states considering more ambitious renewable mandates.

But the twist is that while Hertzberg’s bills are broadly lauded by an East Coast group, in Sacramento they barely made a wave. Neither has ever been voted on, even at the committee level.

Refining tax code proposed — and rejected — before

It’s not clear why other Democrats in the Legislature are cool to SB155. But the central ideas driving SB8 — that we have an outmoded state tax code that poorly serves residents and the business community — have been around for years. They were the driving force behind a 2009 report issued by the Commission on the 21st Century Economy, a panel set up Gov. Arnold Schwarzenegger whose supporters included both Republican luminaries (former Treasury Secretary George Shultz) and Democratic ones (former Gov. Gray Davis).

The report proposed what commission chairman Gerald Parsky called the world’s first tax code specifically designed to promote economic growth; one that reduced many current taxes while imposing new taxes on a wide range of services. Parsky, a Rancho Santa Fee businessman and high-profile behind-the-scenes Republican player, predicted it would lead to a broad California economic boom even without the regulatory reform that business groups have long wanted.

The private Think Long Committee for California, with a more liberal pedigree, made similar recommendations in 2011. The committee chairman, billionaire businessman Nicolas Berggruen, predicted a smart tax code could yield a wave of vast new funding for K-12 and higher education.

Neither got anywhere. Democrats objected to lowering income taxes on the wealthy, while Republicans objected to adding big new areas of commerce for government to tax.

Hertzberg appears to be finding the same resistance.

Last June, I wrote a column forecasting which tax increase measures might be on the Nov. 2016 ballot given the conversations going on then.

Time for an update.

As is nearly always the case in the political world, situations and strategies change. What’s being discussed most heavily today is not necessarily what will be pushed to the ballot for voters to decide in 2016.

By measuring fact, rumor and innuendo, I’ll offer my reading of the top five tax possibilities for the Nov. 2016 ballot.

First, a word about those that did not make the list this time. Previously, a soda tax was on the list, but that possibility seems to have faded for the moment.  Instead, advocates are considering labeling sodas with more information about the sugar content.

There is a constant buzz about restructuring the entire tax system and that has been heightened by the introduction of Senate Bill 8, by state Sen. Bob Hertzberg, D-Van Nuys. The bill would re-do the tax system, cut some tax rates and introduce a service tax.

Hertzberg hasn’t developed the plan in full as yet. Both the Left and the Right have attacked the idea. However, he also is working closely with the Think Long Committee for California, which has the resources to qualify a measure for the ballot. As of now, the idea is not ready for consideration.

To the list, then:

5. OIL SEVERANCE TAX. Previous Ranking #3.

Whether the oil severance tax initiative moves forward depends on one man – hedge fund billionaire Tom Steyer. He said he would rather work through the legislative process, but the bill would be unlikely to pass the Legislature.

Steyer also is said to be interested in promoting an initiative that would require a two-thirds vote in local communities to approve fracking for oil. While he has the resources to do more than one measure, the odds are he would focus on just one, if any.

4. SURPLUS! NO NEW TAXES. Previous ranking: Unranked

Okay, this is obviously not a tax-increase measure. However, with the recent announcement of an unexpected $1 billion in the state treasury many experts predict the state budget will have a surplus of $2 billion dollars or more. Under such conditions, some observers suggest new taxes won’t fly with the voters, so why try?

A lot will depend on the fiscal situation heading into next year’s budget. But even if the economy holds steady and the budget is in good shape, it is hard to imagine there won’t be at least one tax-increase measure on next year’s ballot. Still, the chances are more likely today than they were a year ago that a surplus could stall the tax-increase movement.

3. SPLIT ROLL. Previous ranking: #2

There still is an ongoing grassroots effort to promote a split-roll property tax requiring business property to be taxed on a different basis than residential property. While that’s going on, big players have yet to commit to funding such an initiative.

Certainly, there would be big money spent to oppose such a measure. So both sides are considering the issue carefully. The school establishment would have to step up to support a split roll and consider how a property tax on the same ballot with an extension of the Proposition 30 taxes would play.

Also, a state school bond measure may be on the ballot, attracting attention from the school folks. A couple of sources tell me a little air has come out of the split-roll effort. So while it certainly hasn’t gone away, it drops to #3.

2. CIGARETTE TAX: Previous ranking: #4

The possibility of a cigarette tax on the ballot has moved up simply because some of the items in front of it moved down in the rankings. There really hasn’t been a change in the emphasis of a cigarette tax by proponents.

They will try the legislative route, but if unsuccessful will consider going to the ballot, where they were very close to passing a measure the last time they tried. In 2012, Proposition 29 failed, but by a narrow margin of 50.3 percent to 49.7 percent.

1. EXTENSION OF PROPOSITION 30. Previous ranking: #1

No change here. Many insiders believe Proposition 30, the $7 billion tax voters passed in 2012, would be the easiest tax to pass since it is already levied. Especially if the sales tax piece is removed, many voters would not directly feel the tax’s pinch. That would leave only the tax increases on high-incomes, including the 13.3 percent top tax on millionaires.

All the spending interests may not be happy, since schools get most of the money. But extending Prop. 30 still stands as the most likely tax measure to be on the ballot. The biggest question: What will Gov. Jerry Brown say about continuing the “temporary tax”?

Follow Joel Fox on Twitter @1JoelFox1

The following first appeared in City Journal California.

FEB. 2, 2012

By STEVEN GREENHUT

California’s ongoing budgetary and political dysfunction has spawned a host of reformers backed by wealthy donors. The latest scheme, released with much fanfare in late November, is a report produced by the Think Long Committee for California and funded by billionaire Nicolas Berggruen. It’s called “A Blueprint to Renew California,” and it leaves much to be desired.

Most of Think Long’s proposals—the creation of a “citizens’ accountability committee,” additional spending on infrastructure and education, streamlining the environmental-permitting process—are window dressing for the main one: a $10 billion tax increase, imposed through a ballot initiative that would go before voters in 2012. And then, after it gets voters to sign off on the tax hike, the committee (like many in California’s majority party) wants to rein in the voter-initiative process. Berggruen and Think Long believe that the key to renewing California is to raise taxes on almost all Californians. Their plan would make the state’s tax code less progressive by trimming the corporate tax rate and imposing a new sales tax on services. The goal: to provide still more revenue to a state government that’s already bloated and wasteful.

Conventional Thinking

Think Long released its utterly conventional recommendations with a burst of self-congratulation: “At a time when political leaders in both Sacramento and Washington seem hopelessly mired in gridlock, the committee has shown that difficult bipartisan compromise can be reached if politics is set aside and the public interest is put first.” These words might be more persuasive if Think Long weren’t composed of so many politicians who wielded power during the period when California’s budgetary problems became unmanageable. The committee’s members include former governor Gray Davis, bounced from office in the 2003 recall election; former assembly speakers Bob Hertzberg of Los Angeles and Willie Brown of San Francisco; and former state supreme court chief justice Ron George. Other advisors include former governor Arnold Schwarzenegger, current lieutenant governor Gavin Newsom, and Los Angeles mayor Antonio Villaraigosa. Most of these are poster children for what’s wrong with California; they are an unlikely group of saviors.

The report ignores the Golden State’s real problems: excessive government spending and dominance by public-sector unions and other special interests. The closest that Think Long comes to acknowledging them is three perfunctory paragraphs at the report’s end, which cite the pension crisis crushing municipal governments and offer this solution: “We recommend that the governor, legislature and local government officials make it the highest priority to work with public employee unions to find ways to address the long-term costs of pensions and the unfunded liabilities that have already been built up.” That’s as far as it goes.

Prison Costs

Nothing in the report comes close to articulating major reforms that would help the state stretch its dollars. For instance, the nonpartisan Legislative Analyst’s Office recently reported that the cost of incarcerating inmates in California has more than doubled over the past decade, the result not only of court decisions regarding inmates’ health care but also of escalating compensation costs for correctional officers. A braver committee would have considered prison privatization or constraining the influence of the noxious California Correctional Peace Officers’ Association, which resists even modest reforms and holds outsize influence over both parties.

Even soft-pedaling, Think Long provoked the ire of the California Teachers Association. The CTA resents the committee’s proposal to junk Proposition 98—which directs 40 percent of the state’s budget to education from kindergarten through community college—even though the report goes on to propose an extra $5 billion for the schools from other sources.

Every would-be reformer knows that something is wrong with California’s budget and political process. But most have tended to be left of center and have offered ceremonial, symbolic reforms that don’t get to the heart of the state’s problems. Think Long is the latest example, and its “blueprint,” like the work of its many predecessors, is likely to be soon forgotten.

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