California On Verge of Second Massive Boondoggle

Gov. Jerry Brown, Anne Gust“I’ll gladly pay you Tuesday for a hamburger today.” That was the catchphrase of J. Wellington Wimpy, simply known as just “Wimpy” on the “Popeye” cartoon show. For good reason, the proprietor of the diner rejected Wimpy’s request because of his reputation for not paying on Tuesday.

The inability to repay one’s debts can come with severe consequences, as anyone who has borrowed money from a loan shark can attest. California, despite record revenue coming into the state treasury, has a real problem with debt. High on that list, of course, is the state’s multi-billion-dollar unfunded liabilities for its pension obligations. But we have a problem with bond debt as well.

State-issued bonds can be a legitimate method to finance public projects that have a long useful life. But key to bond financing is a clear and predictable plan to repay those bonds.

California is now on the verge of adopting a second massive boondoggle plagued with financing issues. We are all familiar with the notorious high-speed rail project that was sold to voters as a safe and economical alternative to air travel between Northern and Southern California. A third of the money was to come from the private sector, a third from the feds and the rest from the sale of Proposition 1A bonds. All three of those revenue sources have disappeared in a puff of smoke and, instead, the HSR project is kept on life support through “cap-and-trade” revenue that didn’t even exist when voters approved the original bond.

The second mega-project destined to adopt the boondoggle label is Gov. Jerry Brown’s “twin tunnels” project, intended to transport water from the Sacramento River to the pumping stations at the south end of the delta. Bear in mind that the project will not provide a new water source but would be built ostensibly for environmental reasons.

However, like the high-speed rail project, the financing for the twin tunnels is illusory. Virtually all the potential major wholesale customers of water from the twin tunnels are highly skeptical of its viability and balk at paying for it. The one exception is the Metropolitan Water District in the greater L.A. area, which is considering the adoption of a plan to finance a scaled-down version of the project — meaning one tunnel instead of two.

To read the entire column, please click here.

This article was originally published by the Orange County Register

What would make legislation in California truly ‘family friendly?’

CapitolEvery year California politicians push bills advertised as “family friendly.” This label is certainly useful to gain sympathy for a proposal. It’s akin to labeling a bill “The Protect Puppies Act.” Who could possibly object to that except heartless cretins?

Last year a number of bills were advanced as “family friendly” including Senate Bill 63 by Sen. Hannah-Beth Jackson, D-Santa Barbara. Known as the “baby bonding” bill, it is now illegal for an employer of 20 or more employees to refuse to allow an eligible employee to take up to 12 weeks of job-protected parental leave to bond with a new child within one year of the child’s birth, adoption or foster-care placement. It also mandates that an employer maintain and pay for the employee’s continued group health coverage during the duration of the leave. Prior to the passage of this bill, parental leave was mandated only for companies with 50 or more employees.

Another “family friendly” bill that became law last year was Assembly Bill 1127, from Assemblyman Ian Calderon, D-Whittier. It requires that diaper-changing stations be available to dads as well as moms at sporting arenas, auditoriums, libraries, passenger terminals, shopping malls, large restaurants and other places.

It is difficult not to be sympathetic to legislation which, at least on the surface, appears to make life easier for parents. But does the family-friendliness of such proposals cloud the judgment of our policy leaders as to the potential downside? California already has a horrible reputation as being anti-business. Indeed, for more than a decade CEO Magazine has ranked California dead last among states as a place to do business.

It’s no secret that, even with a resurgent economy, California continues to bleed jobs. Its share of the growth in the national labor force is a fraction of what it should be, given our population. The trend line of citizens moving out of California — known as “net domestic outmigration” — is well documented. …

Click here to read the full article from the Orange County Register

Gas Tax Repeal Has 3/4 of Signatures Needed — with 30 Days to Go

An effort to repeal California’s new gas tax repeal has collected three quarters of the required signatures, and has 30 days to gather the last 200,000 to place an initiative on the November ballot.

The Reject The Gas Tax referendum, sponsored by the Howard Jarvis Taxpayers Association, has received substantial bipartisan voter support towards gathering the 587,407 California signatures from valid registered voters that are legally required to place an initiative on the ballot.

California’s Democrat-controlled legislature claimed that “The Road Repair and Accountability Act” of 2017 (SB-1), which they passed almost a year ago, would provide $5 billion per year to address significant funding shortfalls to maintain the state’s multimodal transportation network as the “backbone of the economy and critical to quality of life.”

But advocates of the gas tax were silent on how the regressive measure would hammer middle-income and lower-income families. The average California family of four is now paying about $300 more per year in gas taxes and fees and will pay about $400 more in 2019, along with an additional $50 in gas taxes for each year thereafter.

Progressives understand that after California Gov. Grey Davis increased car registration fees in 2003 by a similar $263 per year, voters retaliated by recalling the Democrat governor and sweeping Republican Arnold Schwarzenegger into office. …

Click here to read the full article from Breitbart.com/California 

The Board of Equalization got the last laugh on a gas tax increase

Gas-Pump-blue-generic+flippedIn a normal universe, the rejection of a gas tax increase by a state agency would be based primarily on policy grounds. But in a strange mix of wonkish tax policy, political turf fighting and revenge, California drivers will be spared — temporarily — from a 4 cent per gallon tax increase on gasoline.

On Feb. 27, the Board of Equalization was expected to approve a routine request by the governor’s Department of Finance to raise the tax. But it did not. As a result, the state treasury will miss out on a little more than $600 million (much to the relief of California drivers, however).

Because California already has one of the highest gas taxes in the nation, citizens may not care one bit about why the Board of Equalization rejected the tax increase. But understanding how this happened is an object lesson in the strangeness that is California.

It begins with the “gas tax swap.”

In 2010, Gov. Arnold Schwarzenegger signed into law two fuel tax measures commonly referred to as the gas tax swap, which adjusted the rates of the sales and excise tax on gasoline. (The excise tax is a “gallonage” tax based on the amount of gas purchased). The fuel tax swap legislation was designed to be “revenue neutral,” meaning the total taxes paid at the pump would not increase because of the change in the law.

But ensuring that the gas tax swap was actually revenue neutral required some backward-looking calculations, because the price of gasoline can greatly fluctuate. In short, the state had to determine how much sales taxes would have been collected had the law not been changed and then adjust the excise tax in an attempt to even things out. Yes, it’s weird, and the reason they did this is beyond the scope of this column.

For the last several years, the Board of Equalization was tasked with making that annual adjustment after receiving a recommendation from the California Department of Finance. That annual adjustment has always been viewed as routine and non-controversial.

All that changed last year because of two notable events: First, a massive increase in the gas tax and, second, a turf battle between the legislature and the Board of Equalization.

When the legislature enacted the infamous Senate Bill 1 raising the gas tax to a stratospheric level, which taxpayers are now trying to undo with an initiative measure, it also took away the Board of Equalization’s authority to make the annual adjustment. The adjustment that was to occur last month was to be the last exercise of that authority by the board.

In the meantime, progressives in the legislature were increasing their criticism of the Board of Equalization which they viewed as being a bit too sympathetic to taxpayers. (The Board of Equalization is the only popularly elected tax board in the nation and would actually give taxpayers a fair hearing when there are disputes over tax liability of individuals and businesses.)

In recent years, the Board of Equalization has endured a few minor (by Sacramento standards) scandals involving office space and political activity. The Legislature then saw these issues as an opportunity to pounce and deprive the Board of Equalization of the bulk of its authority, shifting much of its responsibilities to a new bureaucracy-driven California Department of Tax and Fee Administration that has no direct political accountability.

It is with that background that members of the Board of Equalization, including one Democrat, refused to adjust upward the gas excise tax, an otherwise ministerial act. And although the members who spoke against the increase cast their positions as looking out for California taxpayers, no one who has observed the Board of Equalization over several years missed the real message being delivered to the Legislature. The board’s decision leaves the fuel excise tax at 29 cents per gallon, instead of 33 cents, for another year unless the legislature finds a clever way to bypass the process.

When one considers all the machinations of politics and the manner in which legislation is enacted, it’s no wonder people refer to the California Legislature as a sausage factory. Actually, that’s an insult to sausage factories.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

This article was originally published by the Orange County Register

Once again, California sees the unintended consequences of bad legislation

property taxLast July, we wrote a column regarding the foolishness of Senate Bill 2, a new $75 tax on real estate recordings, ostensibly for the purpose of funding housing programs. We pointed out that imposing a tax on real estate transactions to pay for programs to make housing more affordable is like treating someone with a low blood count with leeches.

While the fundamental irrationality of SB2 is water under the bridge, a host of implementation problems have now arisen that need corrective action, and quickly.

For example, SB2’s language makes it difficult for California’s 58 County Recorders to determine if they should charge the additional $75 for tax liens and lien releases presented by government agencies.

These tax liens can originate from small local business activities like selling Avon, from failure to pay your annual income taxes, from a missed tax payment on your jet ski, for child-support collection and more. You don’t even need to own a house to have one of these liens recorded against you, and worse yet, you may not even know that the lien exists until it shows up on your credit report.

State agencies and the IRS have refused to pay the $75, arguing that these documents are exempt from the new tax. The attorney general agrees (see AG 18-101), but California’s Office of Legislative Counsel issued an opinion that contradicts the attorney general — making it even more confusing for taxpayers and county recorders.

At this point, most recorders interpret the statute as mandatory, because the legislative counsel has told them this was the original intent of the bill. Therefore, they are mailing back lien releases as unrecorded to state agencies and to the IRS for lack of the $75. For property owners, this is a real problem because their debt has been paid but their credit is not cleared because the lien hasn’t been released.

Some taxpayers are so eager to clear their credit that they are intercepting the lien releases at their county recorder’s office and offering to pay the $75, legal or not. The Department of Child Support Services intends to record all lien releases itself instead of giving them to the redeemed payer to record more quickly on their own, but it is still being held up. Some child-support payers might be offering to take the release to the recorder themselves and paying the $75 to have their credit cleared. As the situation continues, however, others might be discouraged from paying up their child support arrears or tax debts in the first place. The extra hurdle is not helping the government, the taxpayer, or the children.

It is also true that the state of California cannot tax the federal government. Although this has been settled law for hundreds of years, many county recorders are attempting to collect the tax from the IRS. And although this is legal doctrine, it makes common sense as well. Would there be any sense or justice if the states had the power to tax the federal government out of existence?

Because the language of SB2 is so confusing, and it relies on many assumptions that the county recorder has no ability to independently verify, payment of the tax on most documents relies on self-certification. Most people do not have law degrees, so many people are paying the tax when they are not legally required to pay it, and others are receiving exemptions when they are not entitled to them.

SB2 gives a long but non-exclusive list of “real estate instruments” to which the fee applies. This includes a “release” and a “mechanic’s lien,” but not just a “lien” nor a “tax lien,” and certainly not a “child support lien.” SB2 also uses the words “transaction,” “in connection with” and “relating to real property,” none of which are defined in statute. Is enforcing a government debt a “transaction”? Are IRS tax liens and releases “relating to real property”? Tax liens use specific real property to enforce a debt, but they are not like a mechanic’s lien where the contractor performed work on that specific property.

There are many other types of liens where intent could vary as to whether to charge the $75: liens for postponement of property taxes for senior citizens, government liens recorded in error, government liens released due to discretionary re-prioritizing, and, less sympathetically, liens for graffiti nuisance abatements or violations of various safety codes. It is unclear whether the legislature intended to extend the tax to these recordings, although they were aware that this was a potential issue and chose not to address it.

Clean-up legislation is needed promptly. SB2, as substantive legislation, was bad enough. Its implementation is almost worse.

Jon Coupal is the president of the Howard Jarvis Taxpayers Association and Kammi Foote is the clerk-recorder of Inyo County.

This article was originally published by the Orange County Register

High-speed rail is the best reason to repeal the gas and car tax hike

High speed rail constructionWould you trust a surgeon who has a history of amputating the wrong limb? Of course not. For the same reason, California taxpayers should not trust our state politicians with more transportation dollars. Let’s get one thing clear from the outset. Any spending on the California high-speed rail project is, by definition, transportation spending. Therefore, any discussion about the wisdom of repealing the gas tax cannot ignore what the state of California has done with its “showcase” transportation project.

The complete dysfunction of HSR is no longer in dispute.

The latest development is the failure of the HSR authority to issue its revised business plan to the California Legislature as required by law. Its excuse? The authority is in the midst of hiring staff so it can’t issue a timely report. Besides being a complete non sequitur, one would think that the hiring of additional staff would be a reason to issue a report as soon as possible.

Moreover, this latest shortcoming is consistent with the authority’s continued aversion to transparency. Just last month, Republican legislators called for an emergency audit when it became evident that just the Central Valley segment of the project was $1.7 billion over budget. While that request was denied, this week Democratic legislator Jim Beall joined with Republicans seeking a comprehensive audit when it was revealed that the Central Valley segment was actually a stunning $2.8 billion over budget.

Many who originally supported the high-speed rail project have had a dramatic change of heart. Quentin Kopp, a former state senator and High Speed Rail Authority chairman, is now vigorously opposed, noting that “this is not what the voters approved.” Likewise, the San Jose Mercury News this week ran an editorial entitled, “Stop the California Bullet Train in its Tracks.”

The foolishness of the project is especially evident when considering that one of its main purposes was the reduction of greenhouse gas emissions. Indeed, that justification is why the project is currently being funded almost exclusively by “cap-and-trade” funds that are generated by the sale of “carbon credits,” a hidden tax on energy.

But ironically, even the respected, nonpartisan Legislative Analyst’s Office notes that the project is a net greenhouse gas producer. If the state of California were more serious about GHG emissions, it would direct those funds into more traditional transportation projects including road improvements and lane capacity. Stopped traffic produces more pollution than traffic that moves.

Despite the higher gas and car taxes that drivers have been paying since November, a new report by the State Auditor says transportation infrastructure remains one of the “high risk” issues facing California. Why? Because of uncertainty about the “effective and efficient use” of the money collected from the tax hikes.

In short, our current political leadership, which jammed the massive car and gas tax increase down our throats without a vote of the people, has no credibility whatsoever as acceptable stewards of transportation dollars. And as long the high-speed rail project continues, they never will.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

This article was originally published by the Orange County Register

Nothing that comes from government is free

Chitty Chitty Bang Bang is a Walt Disney classic from 1966 starring Dick Van Dyke as a quirky inventor who turns a broken-down Grand Prix car into a magical flying machine. Along with his two young children, they soar off to a fantasy land with the mission of rescuing the beloved grandfather being held in a strange make-believe city.

There’s a particularly creepy scene in the movie where the diabolical villain lures the two kids from their hiding place. He walks down the street yelling out, “Ice cream. Get some ice cream! Today, it’s all free!” The children can’t resist and they emerge from a building to get into a carriage where they are promised the sweets. Once inside, the curtains fall from the side of the carriage to reveal they have walked into a metal cage.

jerry-brownI was reminded of this scene when Gov. Jerry Brown signed Assembly Bill 19, which mandates freshmen at California’s community colleges be given free tuition. The legislation, authored by Assemblyman Miguel Santiago, D-Los Angeles, would expand the current fee waiver for low-income students. The new grant would waive the first year of fees for all first-time, full-time students attending a California community college, regardless of need.

The notion that citizens are entitled to “free stuff” from government is an unhealthy trend in America. While there is certainly a public benefit to education — which is why kindergarten through high school is free in the United States — students who move on to college should be expected to have some “skin in the game.”

At the national level, the push for tuition-free college is a potent movement. Groups such as College Promise Campaign celebrated the passage of AB19 as step toward the goal of free college education nationwide. Not surprisingly, openly socialist candidates like Sen. Bernie Sanders are big proponents.

Nobel economist Milton Friedman was fond of saying that “there’s no such thing as a free lunch.” Indeed, he published a series of his essays in a book of the same title. His point was simple: Nothing is free; someone — either voluntarily or under compulsion — has to pay. And it’s not just limited government advocates who recognize this brutal truth. As it relates to AB19, officials in the Los Rios Community College District in the greater Sacramento area are trying to figure out how they are going to pay for the tuition break. Perhaps this question should have been asked when the legislation was being considered.

Another dose of economic reality struck California’s far-left leaning Legislature this past session as progressive activists pushed hard for a state-run single-payer health care system. The price tag, $400 billion, or three times the current state budget, was so daunting that even the progressive Speaker of the Assembly Anthony Rendon had to pull the plug after it passed in the state Senate. The entire discussion of single-payer in California proves the maxim that “if you think health care is expensive now, wait until it’s free.”

Whether it is higher education, health care, cellphones, food or transportation, knowledgeable citizens ought to be wary of free stuff from government. Yes, we need basic public services paid for through taxes as well as a basic safety net for our most needy who cannot care for themselves. But increasing reliance on Big Brother government comes with a cost — lack of choice and a loss of freedom.

Free stuff from government only feeds higher expectations and a pervasive notion of entitlement. And the reverse, that which is earned through effort and innovation, leads to more fulfilling lives and self-empowerment.

Citizens, especially the young, ought to beware: A government big enough to give you everything you want is big enough to take everything you have.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

This article was originally published by the L.A. Daily News

Politicians try to mask pain of gas tax hike

Gas-Pump-blue-generic+flippedHave you ever had a tooth extracted without Novocain or some other pain killer? When facing something painful, it’s always helpful to apply a numbing agent and, when administered by competent medical personnel, anesthesia provides effective relief. But when politicians try to mask pain, be skeptical.

The 12 cent increase in California’s gas tax which took effect this week has garnered a great deal of media attention, much of it negative. That explains why California Democrats have tried to mask the pain of the tax hike.

In perhaps their most deceptive move ever, California Democrats chose the same day that gas prices traditionally go down by 12 cents to increase them by 12 cents. Nov. 1 was the first day California’s cheaper “winter blend” gas can be sold which costs about 12 cents less a gallon. Nov. 1 was also the day that the 12 cent per gallon tax goes into effect statewide.

But this is just phase one of a yearly $5 billion tax hike on California families.

The largest gas tax hike in state history means drivers will pay a total of 50 cents a gallon in taxes to the state when they fill up. By 2019 it will have risen to 57 cents a gallon. Diesel truck drivers are getting hit too. Their price per gallon will jump 20 cents a gallon and will also include a 4 percent sales tax increase. Note that these figures do not include the excise tax from the federal government, another 18 cents per gallon.

Phase two will hit when you re-register your vehicle next year. The average driver will pay $50 more than last year due to a brand new “transportation improvement fee,” though some could pay up to $175. Electric car owners aren’t off the hook either. They’ll pay $100 more a year to register starting in 2020. …

Click here to read the full article from the Orange County Register

Which legislators stood up for California taxpayers this session?

CapitolIn 2017, the California Legislature launched a sustained and withering assault on middle-class taxpayers. Its victories were numerous and significant: A $75 per document recording tax was approved, affecting up to 400 different transactions; a gas and car tax, which takes effect November 1, will cost California households another $600 a year; and an increase in environmental regulations, known as cap-and-trade, could increase the cost of fuel by an additional 70 cents/gallon by 2030.

In the face of such devastating policies, it is easy for taxpayers to question whether legislators will ever be held accountable. However, a useful tool to assist taxpayers is the annual legislative Report Card published by the Howard Jarvis Taxpayers Association. Introduced back in 2007, the point of the report card is to document how lawmakers have voted on issues important to taxpayers. Lawmakers tend to hide behind statements, often of dubious veracity, to justify their votes. The report card sets aside motives, politics and party affiliations and simply asks one question: did legislators stand up for the interests of taxpayers?  While politicians may obfuscate, the numbers don’t lie.

HJTA’s 2017 scorecard featured a list of 22 bills which, represents a broad sample size, making it easy to see who is either a friend to taxpayers or beholden to the special interests that pervade the state Capitol. Beyond the obvious tax increases listed above, other bills include those that make it easier for local governments to increase sales taxes, and allow for San Francisco Bay Area residents to increase bridge tolls. Attacks on the initiative process are another common theme highlighted in the scorecard.

Given the policy breadth of the bills listed above, it should come as no surprise that the 2017 scorecard was nothing short of abysmal. A record 79 legislators failed the scorecard while only 24 got a grade of “A.” Ten legislators received the coveted and difficult to get perfect score in 2017: Assembly Members Travis Allen, Brian Dahle, Vince Fong, Jay Obernolte and Jim Patterson. They were joined by State Sens. Joel Anderson, Patricia Bates, Jean Fuller, Mike Morrell and Jeff Stone. These legislators should be commended for their diligence on behalf of taxpayers. …

Click here to read the full article from the Orange County Register

Trick or treat, your property tax bill is here

property taxWhich is scarier showing up in your mailbox — Halloween movies from Netflix or your property tax bill? For homeowners, even “The Exorcist” can’t compare in terms of pure fright as the annual envelop from the tax collector’s office. Fortunately, however, homeowners are still able to count on Proposition 13 for protection.

While progressives in the California Legislature continue to target the struggling middle class for ever higher taxes, they have been unable to break Proposition 13. That landmark 1978 initiative limits increases in a property’s assessed value to 2 percent annually and provides most property owners a good idea what their tax bill will be even before opening the envelope.

This predictability in taxation allows homeowners to budget for their taxes and provides assurance against a sudden increase that could result in losing their home to the tax collector. Whether you purchased your property last week, or 30 years ago, Proposition 13 is maintaining a reasonable limit on annual hikes in your property tax.

Still, homeowners need to examine their property tax bill carefully because mistakes can happen. Taxpayers should understand the various charges and make certain that they are not being assessed for more than they are legally obligated to pay. The best way to check a tax bill is to have your previous year’s bill handy for reference.

For most California counties, the property tax bill will show three categories of charges. They are the General Tax Levy, Voted Indebtedness and Direct Assessments. …

Click here to read the full article from the Orange County Register