Dems want to raise property taxes to fund government pensions

Pension moneyI guess I should use the old vaudeville line: Stop me if you’ve heard this one: the push to increase commercial property taxes is about government pension costs. Returning to this subject at this time (I wrote on the same subject for the Sacramento Bee last April) is prompted by the coming together of a couple of recent events.

There was the League of Women Voters and other groups hosting a meeting in Los Angeles this past weekend to “educate” people and advocate for a split roll property tax seeking to raise billions of tax dollars on the back of businesses. Also last week, Stanford University’s Institute for Policy Research issued a report by professor and former Democratic legislator Joe Nation describing the pension burden that is beginning to strangle state and local governments in California.

The services that are affected by both the split roll rally and the Stanford report are quite similar.

Supporters of the split roll say that raising taxes on commercial property will provide $9 billion a year needed for schools and services provided by local governments. Meanwhile, Joe Nation’s report says that because of pension contributions by employers (i.e. governments) increasing an average of 400% over the past 15 years, educational services, recreation, community services and others are squeezed for lack of money.

Many “core mission services,” as defined by the Stanford report, will be starved of money because of pension demands. The split roll advocates talk about the need for more money for local services. What they don’t tell you is that money for those services is being diverted to cover the pension requirements of state and local governments because these governments made generous promises to workers and accepted revenue projections to cover those promises that did not play out.

Instead of admitting that more money is needed to cover pension costs, split roll advocates create a false argument about business dodging its fair share of property taxes. They claim homeowners now pay a much larger share of the property tax burden than they did prior to Proposition 13. A Legislative Analyst’s Office report undercuts that false claim.

The report states in part, “Homeowners pay a slightly larger share of property taxes today than they did when Proposition 13 passed. Proposition 13 does not appear to have caused this increase. … In part, this may be due to faster growth in the number of residential properties than the number of commercial and industrial properties.”

The so-called grassroots activity seeking support for a split roll is backed by powerful public employee unions who support more revenues to cover the pension costs. Yet, you won’t hear anything from the split roll advocates about the pensions strangling local budgets or pushing some cities toward bankruptcies.

Meanwhile, the Stanford study makes it clear with numerous examples that pensions are absorbing greater and greater portions of local government budgets. The Stanford study states clearly there is “agreement on one fact: public pension costs are making it harder to provide services that have traditionally been considered part of government’s core mission.”

This piece was originally published by Fox and Hounds Daily

How Trump’s Paris Climate Agreement Decision Will Affect California Businesses

http://www.dreamstime.com/-image12155315The issue of how business will fare, respond to or be affected by President Donald Trump’s decision to pull out of the Paris Climate Change Agreement received much attention after Trump’s announcement yesterday. Responses to the move in California often highlighted the business issue in both supporting and opposing the president’s move.

Trump argued that his decision would help preserve jobs and businesses in the United States. But many business leaders, especially in California, opposed Trump’s move. The Wall Street Journal reported that many companies will not change strategies that are designed to reduce greenhouse gases because of the announcement. According to the Journal, these companies are responding to shareholder or customer demands to reduce greenhouse gases; are on the path to converting to renewable energies; or businesses in states like California are responding to state mandates to reduce their carbon footprint.

While some energy companies, particularly coal companies, applauded the president, other company leaders expressed disappointment. Business always likes certainty and many business leaders complained that they want to follow a consistent set of rules to face the challenge of climate change. One such company urging a consistent message was ExxonMobil, the country’s largest oil producer. General Electric’s chief executive, Jeffrey Immelt said, “Climate change is real. Industry must now lead and not depend on government.”

In California, both foes and advocates of the president’s decision used the business issue in commenting on Trump’s move.

Two prominent California based business leaders, Tesla and Space X head Elon Musk and Disney’s Robert Iger announced they were resigning from the president’s business advisory council because of Trump’s decision on the Paris accord.

Gov. Jerry Brown said California’s growing economy and new jobs were created under the state’s strong climate change mandates. “California, the sixth-largest economy in the world, has advanced its nation-leading climate goals while also growing the economy. In the last seven years, California has created 2.3 million new jobs – outpacing most of the United States – cut its unemployment rate in half, eliminated a $27 billion budget deficit and has seen its credit rating rise to the highest level in more than a decade.”

NextGen Climate president Tom Steyer went from the farcical calling Trump a “traitor” to urging “courageous action from American business leaders, who know clean energy is simply the better way to clean the air, protect our health and create jobs.”

California Manufacturers & Technology president Dorothy Rothrock said, “California has a new reason to provide meaningful leadership by adopting a market-based approach to reduce emissions that will protect manufacturing jobs and keep costs affordable for consumers.”

Majority Leader Kevin McCarthy (R-Bakersfield) said Trump made the right choice by relieving a burden on the United States and freeing private enterprise to create more jobs. “The American energy renaissance has been good for our country and the world. It created American jobs, freed the United States and our allies from OPEC price controls, and helped to reduce emissions at the same time…President Trump made the right call in leaving a deal that would have put an unnecessary burden on the United States.”

Jim Wunderman, CEO of the Bay Area Council business association, said California’s businesses will continue to pursue a clean-energy future. “Addressing climate change is not just an environmental or moral imperative, it is an economic imperative.”

ditor of Fox & Hounds and President of the Small Business Action Committee

This piece was originally published by Fox and Hounds Daily

What Exactly is the “Rule of Law”?

court gavelPart of the difficulty in finding common ground on the immigration debate in California is a different understanding of a basic governmental concept: the “rule of law.”

California officials have readily used the phrase when it comes to resisting the Trump Administration’s immigration policy.

Chief Justice of the California Supreme Court, Tani G. Cantil-Sakauye, admonished the administration for stalking courthouses looking for people in the country illegally when she told the state legislature in her annual speech on the courts, “I submit to you today that the rule of law is being challenged.”

California’s Attorney General, Xavier Becerra, in responding positively to a federal court’s injunction halting Trump’s executive order against sanctuary cities, declared, “This injunction is consistent with the rule of law.”

Yet, those opposed to sanctuary cities and California’s effort to become a sanctuary state ask that if people came into the country against the laws on the books, is not that a violation of the “rule of law”?

Some have even compared the efforts to ignore federal immigration laws to the nullification efforts future Confederate states used to challenge federal authority prior to the Civil War.

Differing views on what constitutes the rule of law intensifies the country’s political divide. Ultimately, the United States Supreme Court will determine the law.

Cases before that court on the issue of state sovereignty have occurred in the past, of course. One case cited that may influence the outcome of a new Supreme Court test is Printz vs. United States.

This 1997 case, dealing with the Brady Gun Law, said the state could not compel local officials to execute federal law. The 5 to 4 majority declared that the Tenth Amendment to the constitution allowed the state to ignore a federal mandate, in this case requiring local law enforcement to enforce certain gun laws, because the constitution did not address the specific issue covered by the law.

Interestingly, the court majority, lead by Justice Antonin Scalia, were the conservative jurists on the court. Liberals may now use this decision to argue the Tenth Amendment allows states to declare sanctuary despite federal immigration laws because the sanctuary issue is not in the Constitution.

However, the Printz decision may not cleanly cover the issue of sanctuary cities. The majority opinion in Printz argued that the Framers of the Constitution allowed for federal regulation of international and interstate matters but reserved internal matters for the judgment of state legislatures. It may be argued that border security between nations is an international matter.

Cities can choose to not enforce federal immigration law, but they cannot stop the federal government from enforcing it. This is where the denial of federal funds to sanctuary cities comes into play and will ultimately be tested in court.

Despite the legal battle, it seems a basic understanding of what is meant by “the rule of law” is in order for the on-going immigration debate.

The American Bar Association attempted to frame a discussion of “the rule of law” in a three-page document.

The Bar Association dialogue started with questions:

“The rule of law is a term that is often used but difficult to define. A frequently heard saying is that the rule of law means the government of law, not men. But what is meant by “a government of law, not men”? Aren’t laws made by men and women in their roles as legislators? Don’t men and women enforce the law as police officers or interpret the law as judges? And don’t all of us choose to follow, or not to follow, the law as we go about our daily lives? How does the rule of law exist independently from the people who make it, interpret it, and live it?”

The site contains differing views from two civil rights historical figures.

Elizabeth Cady Stanton, an American suffragist, social activist, abolitionist, and leader of the early women’s rights movement, is quoted: “It is very important in a republic, that the people should respect the laws, for if we throw them to the winds, what becomes of civil government?”

But one can respect laws and still resist, The Rev. Martin Luther King wrote in his Letter from the Birmingham Jail. “I submit that an individual who breaks a law that conscience tells him is unjust, and who willingly accepts the penalty of imprisonment in order to arouse the conscience of the community over its injustice, is in reality expressing the highest respect for law.”

The Bar Association comments, “The rule of law is intended to promote stability, but a society that operates under the rule of law must also remain vigilant to ensure the rule of law also serves the interests of justice.”

Strict adherence to laws on the books in relation to a concept of true justice reflects the current debate over immigration issues in this state. Yet, perception by the public of how laws are enforced is as an important part of this debate as is a finally sliced Supreme Court decision on the law. The public’s understanding of the “rule of law” is the tie that keeps in place the foundation of a civil society. So, it is incumbent on all sides of this debate to make clear what is meant in arguing for the “rule of law.”

Joel Fox is editor of Fox & Hounds and President of the Small Business Action Committee.

This article was originally published by Fox and Hounds Daily.

Don’t Rush Toward Gas and Transportation Taxes

LA-Freeway-Xchange-110-105The governor and legislative leaders came out from behind closed doors with a transportation tax and road fix plan and demand to pass the measure through the legislature in one week. Feels a lot like the federal experience with the health care reform bill. And, like that measure, despite one party controlling the executive and legislative branch, the bill might not find necessary support.

The campaign to pressure wavering legislators to get behind the bill kicked off yesterday in Concord with a lineup of Governor Jerry Brown, Assembly Speaker Anthony Rendon and Senate President pro tem Kevin de León teaming up with union members to visit Senator Steve Glazer’s district and convince Brown’s one-time aide to publicly embrace the tax increase.

I seem to remember unions opposed Glazer when he first ran because of his stand against BART strikes. Different time and different unions, perhaps, but Glazer is still behind that issue. There are indications that Glazer is holding out for a no-strike provision in the transportation bill before he decides if he will support it.

While Brown, De León and Rendon will play old-fashioned political hard ball with legislative members in attempting to secure the needed two-thirds vote to pass the tax increases, ultimately individual legislators are going to have to be satisfied that their constituents will swallow the tax increase.

Voting patterns and attitudes have changed since Gov. Gray Davis was kicked out of office in great part because he increased the vehicle tax. While just about everybody believes road repair is necessary for improving the state’s economy and for the general public’s mental health while driving congested highways, yet, the double whammy of an increased vehicle registration fee and 43% gas tax increase will be a hard sell. Especially, to less well-off constituents those who have to drive a long way to get to work.

The transportation issue and health care issue are different in many ways, but the idea of rushing through a measure that will pile new burdens on the public has a familiar feel to what happened recently in Washington.

The strategy behind quickly passing the two quite different bills is similar: Pass a measure before it gets tangled up in amendments. A lot of amendments can and should be had.

At the Concord news event yesterday, Gov. Brown said, “There is nothing more fundamental in the business of government than making sure the roads and bridges don’t fall apart, and they are falling apart.”

But if roads and bridges are a fundamental responsibility for government, why wasn’t attention paid to them when the state budget grew dramatically since Brown returned to the governor’s office?

Brown says if we don’t address the problem now it will only get worse—and more expensive to fix. Right on both counts. However, using current transportation related dollars that find the way to non-transportation services or including proposals that will allow for more cost efficient repairs would go a long way to convince voters that government is trying to get the job done right and give good value for their tax dollars. It might even convince voters to chip in a little more to get the job done.

Legislators like Glazer are independent and not so easily coerced. Legislators should hear  from their constituents before voting on the bill. Rushing through the transportation bill without sensible changes could result in the same fate as the health care bill.

This piece was originally published by Fox and Hounds Daily

To Prioritize Infrastructure, Consider All State Spending

Infrastructure constructionNotable in the reaction to Governor Jerry Brown’s Friday press conference outlining money for dam and water infrastructure, while declaring the need for California to tackle all its infrastructure backlog, was the response from one of the leaders of the fight for improved infrastructure. California Business Roundtable president Rob Lapsley issued a release echoing the governor’s call on structural improvements and cost, but focused on “the real issue at hand” — state spending.

Everyone agrees that California infrastructure needs repair and the money to make those repairs happen. The debate is over how to fund repairs and build projects.

Negotiations on reaching a deal on funding infrastructure improvements have been going on for some time and business community leaders have been deeply involved. Meanwhile, the more open debate on infrastructure funding continues with the capitol generally separated into two camps, one headed by Democrats who want tax increases and the other by Republicans who want to redirect current funding for infrastructure purposes.

However, Lapsley broadened the debate by discussing overall state spending as part of a larger fix for funding the state’s priorities.

Laplsey wrote, “California is one of the highest taxed states in the nation and, even after passing even more taxes through Prop 55 last November, the state is effectively out of money. We have record general fund and special fund revenues, but it has been decades since infrastructure investment was a priority in our state budget.”

While pledging to support the Brown Administration’s efforts to secure infrastructure dollars from Washington, Lapsley wrote, “we need an honest rational discussion in the Legislature on how to pay for state salaries, pensions and pension debt, health care, dams, flood control, roads, transit, schools and other infrastructure needs while expediting solutions through real regulatory reform that apply to all economically important projects, and not just the politically favored few.”

California’s infrastructure, as California Chamber of Commerce president Allan Zaremberg noted in a release tied to the governor’s press conference, “is a key component of maintaining and improving California’s economy for everyone’s benefit.”

Simply put, infrastructure improvements must be a priority of state spending because the improvements benefit all Californians economically and on safety issues.

Lapsley rightly points out infrastructure has been a low priority for California lawmakers for some time. That has to change.

The change will have to include discussing spending on all other programs in this high tax state. We must consider the spending on pensions and salaries and debt and all the issues Lapsley raised if we are to focus attention on the paramount needs of infrastructure. In the end, improving infrastructure would advance the economy, which in turn would benefit all the other areas funded by the state budget.

Editor of Fox & Hounds and President of the Small Business Action Committee.

This piece was originally published by Fox and Hounds Daily

Boycott the Oscars? Why Not Boycott Everything!?

oscarsThe focus of the political world will be on California Sunday when several political speeches are bound to take over the Oscars. According to one account, the Oscars broadcast, which lost viewers last year, could rebound over the expectation of hearing these political speeches. Or there could be a boycott of the broadcast in anticipation of speeches blasting President Donald Trump.

That would be in line with the current political strategy that seems to be capturing activists of all political stripes in this divided country: Boycott everything!

When Under Armour CEO Kevin Plank praised Trump’s business agenda, social media exploded with a hashtag to boycott the company.

With Elon Musk agreeing to serve on Trump’s business advisory committee, customers reportedly canceled auto orders.

Boycott campaigns were aimed at retailers such as New Balance, Macy’s and L.L. Bean because company officials said kind words about Trump’s business or trade policies.

Of course, there was the blowup over Nordstrom’s dumping Ivanka Trump’s fashion line which saw counter campaigns to either support or boycott Nordstrom’s over its decision.

The boycott strategy could also find itself in state law if Senator Ricardo Lara gets his way. Lara’s Senate Bill 30 would prohibit the state government from doing business with any individual or organization that assists in construction of a federal border wall along the California-Mexico border. Consider this a state sanctioned boycott.

I’ve tackled the issue of boycott before: In the free speech universe, boycotts themselves are a form of free speech, an individual expressing an opinion by choosing not to buy (or the obverse — to buy to support a business’ decision). On the other hand, boycotts can have a chilling effect on free speech by discouraging expression by business owners and others.

Of course, California business is not unfamiliar with boycotts. The boycott against grape growers organized by the United Farm Workers is well remembered. More recently, some Southern Baptists organized a boycott against Disney.

Boycotts to make political points have been encouraged by Martin Luther King, Mahatma Gandhi and President Jimmy Carter during the 1980 Moscow Olympics. A petition signed by supposedly 700,000 people called for a boycott against Target stores after the retailer announced transgender people are welcome to use the restrooms that they identify with the most.

What if all these boycotts were successful beyond the imaginings of their supporters? Some businesses would be shut down. Some voices would lack an audience.

But a major goal of boycotts is shut off debate and that is a dangerous thing. Our great civic divide would deepen because people are not talking to each other.

I still believe in the marketplace of ideas. Discerning good ideas from bad takes debate and discussion. Cutting off and threatening to cut off people or institutions that want to voice their opinion ill serves democracy.

ditor of Fox & Hounds and President of the Small Business Action Committee.

This piece was originally published by Fox and Hounds Daily

What Will the California Propositions Cost You?

MoneyAll statewide ballot measures receive an analysis from the Department of Finance and the Legislative Analyst’s Office as to the fiscal effects of the initiatives. That got me wondering what it would cost Californians if in the unlikely event an unrestrained electorate decided to vote Yes on all 17 measures.

Truth be told, it is more likely that the voters reject a larger share of the ballot measures. In fact, throughout the state’s history, two out of three initiatives that make the ballot fail. Still it is interesting to know what we could be facing if the unusual happens. After all, the Cubs won the World Series, so you never know if something unexpected happens. Maybe voters will vote yes on all. It wouldn’t be unprecedented. On the 1911 special election ballot, 22 out of 23 measures passed.

In trying to calculate the cost of ballot measures, even the experts at Finance and LAO have trouble. You’ll find the words “uncertain” and “unknown” and “depends” scattered about the fiscal effect sections attached to many of the propositions.

Some measures are easy to tabulate. The Proposition 51 school bond will cost $17.6 billion to pay the principal and interest, or $500 million a year for 35 years. The legislative transparency initiative, Proposition 54 will require a couple of million start up money for recording equipment and an on-going additional million for staff and storage of videos.

The tax measures can also be tagged with numbers, although Proposition 55’s take calculated between $4 and $9 billion depends on the economy. Proposition 56’s tobacco tax is expected to bring in $1.3 to $1.6 billion at first. However, a drop off is predicted when consumers react negatively to the additional tax on smoking products.

The marijuana legalization measure, Proposition 64, comes with a tax and the fiscal effect could be a billion dollars to the state and more to local governments that apply a local tax to cannabis. There are also regulatory and health service costs associated with legalizing marijuana along with the potential for cost savings with fewer incarcerations.

Proposition 61 dedicated to placing a spending cap on drug costs is specifically designed to save the state money. But hold on a second, say the fiscal watchdogs. Uncertainty is a watchword here. According to the fiscal analysis, “drug manufacturers would likely take actions that mitigate the impact of the measure.” The fiscal effects of this measure were officially summed up as “unknown.”

Also, pretty much unknown is the fiscal effect of Propositions 52 and 53. Prop. 52, the hospital fees for Medi-Cal matched by Federal money received its “uncertain” designation because there was no telling if the legislature would continue this fee on its own. Prop. 53, requiring a vote on revenue bonds, also was labeled “unknown” because not many projects would qualify as needing $2 billion in revenue bonds. If that were the case, the analysis suggested there would be ways around the $2 billion standard by breaking projects into smaller parts.

Increased court and law enforcement costs could run into the tens of millions of dollars under the new gun and ammo regulations offered by Proposition 63.

Elimination of the death penalty could reduce costs to the state about $150 million. However, one of those “depends” is applied to Proposition 62 — the dollars could be higher or lower depending on a number of factors such as whether the change in law would affect the murder rate and the need for prison construction.

Meanwhile, the counter measure to allow death penalty cases to limit appeals, Prop. 66, also got an “uncertain” price tag depending on how the state dealt with issues such as availability of attorneys, complexity of legal challenges and more.

Gov. Brown’s Proposition 57 parole changes could see net state savings by reducing the state’s prison population. However, county costs are projected to increase because more former prisoners will be supervised on parole and other factors, an estimated few million dollars increase annually.

The condom regulations of Proposition 60 would likely reduce tax revenue according to analysts because the adult film industry might pack up and leave the state. If not, new fees required of film producers would likely cover enforcement costs.

The referendum on banning plastic bags would have little effect on revenues, while its companion measure, Proposition 65 would increase state revenues by diverting the cost of carry out backs from grocers to a state fund.

The last two measures to discuss were not initiatives but put on the ballot by legislators. Proposition 58 would make changes to the English immersion education laws and Proposition 59 would advise elected officials to work to overturn the Citizens United court case. Here the legislators earn kudos for having little the fiscal effects. The English-only reform fiscal effect is considered minor. The prize goes to Prop 59 in which the fiscal effect summary reads in full: “This measure would have no direct fiscal effect on state and local governments.” No uncertainties here.

My intention was to go through the fiscal effect calculations and come up with a number after additions and subtractions if all the measures passed to see what taxpayers could be on the hook for or what state and local governments would take in. However, given all the “uncertainties,” “unknowns” and “it depends,” it is impossible to calculate.

Knowing the fiscal effects of the ballot measures seem to fall in line with Congresswoman Nancy Pelosi’s oft quoted line about the Affordable Care Act: “We have to pass the bill so you can find out what is in it.”

Or in this instance—what it costs.

This piece was originally published by Fox and Hounds Daily

New State Controlled Pension System – Will Taxpayers Have to Bail It Out?

retirement_road_signGov. Jerry Brown signed Senate Bill 1234 to establish a state supervised retirement fund called Secure Choice for private workers. One wonders if at some future time this action will be remembered much like Gov. Gray Davis’s signature on SB 400 of 1999, which put taxpayers on edge by driving public pensions into deep debt.

The bill Davis signed expanded public employee pension benefits putting in place an investment scheme that has not met the demands of pension liabilities. Many of the local taxes on November ballots will see revenue used to satisfy pension obligations, with local pensions increased along the lines of SB 400. SB 1234 by Senate Pro Tem Kevin de Leon has no provision for taxpayer involvement. However, skeptics believe, with good reason, that because of the state’s involvement, taxpayers will be backstop if the system falters.

Brown’s signature ended a four-year quest to establish a private worker retirement fund. There is no argument workers must save more for retirement. The question is should government oversee such a venture. SB 1234 would require employers to take a small percentage out of worker’s checks and deposit into a retirement fund unless the worker opts out. It is estimated than 7 million California workers would be covered by the plan.

The business community objected to the legislation until some late amendments were added to shield employers from liability and administrative burdens while making it clear that the employer is not the sponsor of the retirement plan. The California Chamber of Commerce and some local chambers pulled opposition and, in the end, stood neutral on the measure. Business will still have the obligation of enrolling workers into the system.

Still, taxpayers should be wary considering the history of promises made about the public pension system that expanded under SB 400. Supporters of that bill declared public pensions would be easily funded by investment revenue, even with employees taking retirement at earlier ages. It has not played out that way, with the state looking at billions in public employee pension debt.

As State Senator and financial expert, John Moorlach, commented after the governor signed SB 1234, “You can anticipate that this ‘secure’ investment has the potential to morph into a massive boondoggle.”

While a couple of other states are looking at a similar private worker retirement system, it should be noted that the drive for state controlled private sector pension programs might have a political connection to public pensions.

The term “pension envy” has been used to describe private workers distaste for the public employees superior benefit packages. Private workers have to save for their own retirement while funding the guaranteed public pensions through their taxes. While the creation of a system to establish a private worker fund would help those private workers in retirement, public unions hope to establish a connection between private workers and public pensions, making voters more sympathetic to the public workers if reformers attempt to reel in public pensions.

As I wrote on this site when SB 1234 first surfaced four years ago, “With the glare of the spotlight on public retirement debt, public unions want to change the focus and talk about private employees retirement.”

Thanks to the governor’s signature, Secure Choice is now in place. It will probably take a couple of years to get started. We’ll see a decade from now if echoes of the SB 400 criticism attaches to SB 1234.

This piece was originally published by Fox and Hounds Daily

CARB Threatens Greenhouse Gas Law Extention

carbon-tax-1The California Air Resources Board set a match to controversy this week suggesting that the board could push the cap-and-trade deadline for funding greenhouse gas reduction programs past its 2020 end date by executive fiat.

That’s not the way the law works, many Republicans cried, and they are backed up by an opinion from the Legislative Counsel’s Office.

According to the opinion, “The act does not authorize the governor or the ARB to establish a greenhouse gas emissions that is below 1990 level and that would be applicable after 2020.”

Republican Senate Minority Leader Jean Fuller called the ARB proposal “illegal” and admonished the executive branch, “Californians deserve better than a government that acts as if they are above the law.”

Many in the business community feel fixes are needed to the current program before any extension is contemplated. Dorothy Rothrock, president of the California Manufacturers and Technology Association said in a release following the ARB announcement, “Manufacturing investments and jobs have lagged other states in the US over the past six years by a large margin. Future climate policies must recognize this reality and be designed to protect California’s manufacturing jobs and economy.”

The cap-and-trade policy ARB wants to extend is subject to court action already, as business interests, including the California Chamber of Commerce, brought suit claiming the cap-and-trade formula is actually a tax requiring a two-thirds vote of the legislature. The law establishing cap-and-trade, AB 32 of 2006, was established by majority vote. While a lower court brushed aside the business complaint an appellate court is now considering the matter. Observers watching court action say there is a chance the lower court decision could be reversed.

There is another way for the legislature and the governor to extend the cap-and-trade end date and lower the greenhouse gases goal below 1990 levels. Pass legislation.

That is exactly what some in the legislature are trying to do with SB 32, that would extend the law lowering the acceptable greenhouse gas level 40% below 1990 levels by 2030.

The court case, however, raises doubt about whether the SB 32 needs a simple majority vote or a two-thirds vote.

In a Flash Report column yesterday, state Senator Andy Vidak said attempts are being made by Democratic leaders in the legislature to secure enough Republican votes to allow SB 32 to pass by two-thirds. If true, that is a strong indication that the Democrats are concerned the court will side with the CalChamber over the tax issue and brand cap-and-trade an illegal tax.

Yet, the politics over changing the greenhouse gases law do not stop there. Another consideration is one posed by L.A. Times columnist George Skelton who suggested California voters in November, reacting negatively to a Trump candidacy, might defeat Republican officeholders thus securing a two-thirds vote in both houses of the legislature for the Democrats.

In that case, the strategy for the Democrats just might be to bide their time. Then again, you might conclude that the politics don’t stop at that point, even with a two-thirds Democratic majority, because the politics of energy and its cost have split the Democratic caucus in the past and could do so again.

ditor of Fox & Hounds and President of the Small Business Action Committee.

This piece was originally published by Fox and Hounds Daily

Are Taxes the Solution to CA’s Homeless Problem?

800px-Helping_the_homelessApparently, politicians up and down the state think the solution to California’s homeless problem is taxes. In San Francisco, members of the board of supervisors want to tax the tech industry. In Los Angeles, the city council wants to raise property taxes on all property owners. On the state level, legislative leaders plan to shift income taxes from the rich paid to a fund to help those with mental illness to finance housing bonds for the homeless.

Homelessness is a complex problem and the solutions are not easy. As far back as 2001 a brief by the Public Policy Institute of California identified some of the reasons for a growing homeless population including the high cost of housing, debilitating personal habits and attributes of many of the homeless—alcoholism, crack cocaine addiction, and mental disorders— and income inequality. Its safe to say that since then the homeless situation has worsened.

But is raising taxes the solution?

In some cases it makes sense. Take the Proposition 63 income tax dedicated to help with mental illness. The fund was not being well spent according to an audit. The state effort to shift some revenue from that fund to a more useful function to finance bonds allows a foundation for helping the homeless across the state.

But the local solutions have less merit and again target business in large part as the answer to a problem.

In San Francisco, supporters of the tech tax blame the tech business for the homeless problem arguing that the booming tech industry is responsible for increased housing costs in the city. The tax would raise about $120 million a year.

Given that the city by the bay has been a haven for the homeless and downtrodden well before the boom in technology, it seems tech is being made a scapegoat. An attack on one industry could be an impetus for individual companies to pull up roots and find a friendlier business environment. The precedent setting idea of taxing one industry to solve a societal problem is dangerous for all sectors of the business community. The obvious question: Who’s next?

The Los Angeles approach is different but still questionable. The city council approved putting a $1.8 billion bond on the ballot, which will probably cost twice as much to pay off with interest and will be backed by property taxes. The council is also considering a parcel tax on all properties and may move forward with both plans until a final decision is made in August on which to put on the ballot.

The property taxes will fall heavily on residents who are struggling with the high costs of housing in the region. Homeowners, businesses and apartment owners will carry the burden. Renters covered by the city’s rent-control provisions will not have the tax passed on to them.

In both San Francisco and Los Angeles a two-thirds vote is required to pass the taxes.

Opposition from the business community and some local pols, including the mayor, are lining up against the tech tax in San Francisco. However, the mayor of Los Angeles has promised to find revenue for homeless issues and will support the final plan. Business reaction could be mixed, although the parcel tax, especially if the tax is calculated on a property’s square footage, will certainly bring out strong opposition from business.

One thing that is often ignored in looking for solutions to local problems is to improve the business climate, create jobs, and allow people to earn more. Admittedly, this is not a silver bullet solution for the homeless crisis but it should be talked about constantly instead of always falling back on the T-solution. Taxes.

This piece was originally published by Fox and Hounds Daily