Will taxpayers trust the GOP again?

TaxesThe California GOP is rapidly approaching the edge of a black hole from which there is no escape. But rather than reverse course by appealing to the needs and aspirations of average Californians, the response by some Republicans in the Legislature is to rush forward to throw themselves into the abyss by supporting policies that punish the middle-class.

Only a quarter of California voters are registered Republicans, barely more than those declaring no party preference. In the Legislature, Republicans number less than a third of lawmakers in each house.

There was a time when even some Democrats in the Legislature supported a healthy economy, taxpayers’ rights and Proposition 13. If any still exist, they are hiding under their desks. Over the last two decades, that party has lurched to the left and those now in Sacramento are devoted to serving the interests of government (aka public sector unions), the ever-expanding entitlement class and the wealthy denizens of coastal enclaves.

For taxpayers, criticizing Democrats is almost too easy given how thoroughly they have abandoned the middle class. But Republicans have traditionally been held to a much higher standard when it comes to taxation and fiscal responsibility. The question now is the extent to which taxpayers can trust Republicans at all.

With Republican support, the California legislature passed several bills slamming California’s ever-shrinking middle class. First, there was perhaps one of the most unpopular bills in California history, Senate Bill 1, imposing $52 billion in permanent new gas taxes and user fees on California drivers. Next was the infamous “cap-and-trade” legislation, Assembly Bill 398. In a few short years, drivers could be paying a buck and a half a gallon just in taxes and climate fees when added to the already sky-high levies imposed by the state. Last, but certainly not least, is Senate Bill 2, part of the California’s ineffective and counterproductive response to the housing shortage. The bill would impose a $75 to $225 “recording fee” on all real estate transactions and generate as much as $258 million annually. Only in California and Monty Python movies would a tax on real estate be considered a rational response to a housing shortage.

Let’s be clear. Those legislators who best defend taxpayers are still Republican. But unfortunately, those faithful few are being smeared by association with those who bend with the wind, succumb to the next big campaign contribution or promise of some “juice committee” appointment or lobbying gig. Note that the reverse is true as well: Some Republican legislators who stood firm for taxpayers were punished by having their committee assignments revoked or banished to the smallest office in the Capitol.

Average taxpayers understand how painful these tax hikes are. But they probably don’t understand how politically incompetent the Republican leadership was in getting them passed. Republican support for tax hikes allowed targeted Democrats in marginal districts (those where a Republican has a chance of winning) to vote against the tax hikes. These Democrats can now seize the mantle of fiscal responsibility even though everyone knows that, had their vote for the hikes been necessary for passage, they would have voted yes. Time and time again, Republican support of tax hikes allowed the “lifeboating” of Democrats in swing districts. To use a phrase by one party leader, this was “felony stupid.”

Taxpayer advocates take no joy in the slow immolation of the Republican Party.

The loss of any effective opposition from a minority party is a loss to all Californians. A strong democratic process relies on the competition of ideas. Moreover, one party rule has led to an extraordinary abuse of power in several areas including campaign rules, shutting down debate and jerry-rigging agencies and commissions in ways to crush political opposition. The loss of a vibrant Republican Party in California will accelerate the state’s metamorphosis into a Venezuela-like banana republic.

In order to have a chance against the power and money of the Democrats, Republicans need to distinguish themselves on critical matters of policy. Unlike social issues — as important as they may be — the fiscal issues of economical government, reasonable taxation and protection of Proposition 13 have been the rock to which Republicans have wisely clung as California’s political skies have turned from purple to blue. A return to these principles is a necessary first step for the GOP to repair its damaged reputation.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

This article was originally published by the Orange County Register.

California Legislature abandons middle class

CapitolDoes anyone honestly think that the California Legislature’s complete abandonment of the middle class is unrelated to the state’s highest-in-the-nation poverty rate?

This past week presented a stark contrast in the Golden State. First, the controller reported state tax proceeds from all categories are exceeding budget projections. Specifically, the state brought in almost $9 billion in August, exceeding projections in the state budget by over $340 million. All three of the major sources of state revenue — personal and corporate income tax plus sales tax — were up over last year. While a substantial portion of this uptick in economic activity can be attributed to the Trump recovery, there is no denying that California remains an economic powerhouse in its own right.

However, about the same time as we were getting cheery news about state revenue, the U.S. Census Bureau reported that over 20 percent of Californians live in poverty. The “Supplemental Poverty Measure,” which takes into account California’s absurdly high cost of living, gives us the highest poverty rate in the country while the rest of the nation has shown improvement.

So how is it that the most economically powerful state in the union has a poverty level that would make even Mississippi blush? In large part, the answer lies in California’s toxic mix of crony capitalism with mindless pursuit of progressive policies. And both were on full display in the final week of this year’s legislative session.

Few bills moving through the last hectic hours at the Capitol could be remotely characterized as helping the middle class. For example, Assembly Bill 1250 is a complete sop to labor interests. It would prohibit counties from contracting out for services “customarily” performed by county workers unless 14 complicated requirements are met. This would drive up the costs of county government — ultimately paid by taxpayers — and would hurt nonprofits which provide low cost, effective services to county governments. Fortunately, it appears that AB1250 has been stymied this year but will be pushed into 2018.

On a more grand scale, little compares to the various bills moving through the Legislature to deal with the housing crisis. Special interests have formed a conga line outside the governor’s and legislative offices to get a slice of the public pie (baked, of course, with taxpayer dollars). First, is a massive housing bond. Keep in mind that a $4 billion dollar bond will likely incur $8 billion in taxpayer costs after interest and the cost of bond underwriting (Wall Street loves California debt). Second, labor once again wants any public dollars spent on housing to be subject to costly labor restrictions such as Project Labor Agreements or prevailing wage requirements. Who pays for the higher costs? Why, taxpayers, of course.

Overall, California’s housing policies being pursued are designed to reward special interests rather than increase housing stock in any significant way. It is totally lost on our elected leadership that the best housing policy would be for government to reduce regulations that stand in the way of housing construction rather than increase regulations. One bill, Senate Bill 35, does provide a little relief from burdensome CEQA requirements but it contains 18 separate provisions that developers must meet in order to qualify for the expedited permit process for residential development.

The only bill of which we are aware that would have significantly helped housing affordability was Assembly Bill 1100, co-authored by Assemblymen Phil Chen, R-Brea, and Matthew Harper, R-Huntington Beach, to increase both the current homeowners exemption (which provides homeowners with a scant $70 of annual tax relief) and the renters credit. This proposal would require no new government program nor impose new regulations, which probably explains why it lacked popularity in the Capitol. However, it would have put immediate cash into the pockets of all Californians who have to pay for the roof over their heads. That’s what we call middle-class tax relief.

Middle-class Californians have a choice. Stay in California and continue to be the piñatas for progressives and special interests or bail out to other states. Increasing numbers of California’s middle class are choosing the latter.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

This article was originally published by the Orange County Register

California attorney general failing to create fair and objective initiative titles and summaries

xavier-becerraThe attorney general of California has the responsibility of preparing the “title and summary” for ballot measures to be submitted to the voters. Pursuant to that authority, California Attorney General Xavier Becerra issued the title and summary for one of the most anticipated ballot initiatives for the 2018 election. Here is his description: “Eliminates recently enacted road repair and transportation funding by repealing revenues dedicated for those purposes.”

Confused? Try this excerpt from the ballot summary: “Eliminates Independent Office of Audits and Investigations, which is responsible for ensuring accountability in the use of revenue for transportation projects.”

If you have no clue that this is actually the initiative to repeal the gas tax you wouldn’t be alone. As drafted, the title and summary make every effort to hide the fact that the measure is targeting one of the most unpopular laws in recent California history. Though the words “gas” and “tax” are not in the ballot title, they do at least appear in the ballot summary. But they are followed by the suggestion that the initiative also acts to eliminate the Independent Office of Audits and Investigations — an office that does not yet exist.

This obvious effort at obfuscation, and ultimately voter confusion, flies in the face of a promise Becerra made during his confirmation hearing. Asked last January what he would do to ensure the objectivity of ballot titles and summaries, which is the constitutional responsibility of the attorney general to produce, Becerra testified that “the words I get to issue on behalf of the people of this state, will be the words that are operative to everyone.”

Becerra’s readiness, just months later, to depart from this approach in order to protect the gas tax — which was championed by his own party — is just the latest example of how attorneys general use their influence over the ballot to manipulate voters and advance the interests of their allies. To put an end to this damaging practice, Assembly Constitutional Amendment 3, by Assemblyman Kevin Kiley, was introduced earlier this year, a measure that would strip the attorney general of the power to write ballot titles and summaries, and transfer that authority over to the nonpartisan Legislative Analyst’s Office.

Unlike the attorney general, the Legislative Analyst is not a politician. A trusted source of impartial information since its creation in 1941, the LAO’s primary mission is to provide the state Legislature with reports on fiscal and policy issues. The office is also tasked with preparing the fiscal analysis for ballot initiatives, making it well suited for the responsibility of writing titles and summaries, too.

Since the introduction of ACA3, the Sacramento Bee, Los Angeles Times and Orange County Register have all endorsed the measure, arguing that, no matter the party in power, the temptation to manipulate a ballot initiative’s language is too great for an attorney general to resist.

Their concerns are supported by a long history of abuse that stretches back to at least 1966, when Attorney General Tom Lynch, tasked with describing the initiative to create a full-time Legislature, at first misleadingly framed it as a measure to raise legislative salaries. More recently, in 2013, Attorney General Kamala Harris drew criticism for describing public pension reform as the “elimination” of state constitutional protections for pensioners, using language that had been poll-tested by opponents of the initiative. Other examples abound, from both sides of the aisle.

The high stakes of the initiative process make any attempt at reform difficult, particularly when the party controlling the Legislature also holds the Attorney General’s Office. When ACA3 was brought before the Assembly Elections Committee earlier this year, the bill had the support of every major good government group in the state, including the Howard Jarvis Taxpayers Association, California Common Cause and the League of Women Voters of California. The only opposition was a representative from the Attorney General’s Office. Nevertheless, the bill failed 2-4 on a party-line vote, with one Democrat abstaining.

Initiatives are powerful tools of direct democracy, allowing the people of California to take direct control over the state’s political destiny when the Legislature has failed. But this is only possible when voters have an accurate description of what they are voting for. ACA3 would assure just that, and when it returns for consideration next year, we urge legislators on both sides to support this measure to redeem direct democracy in California.

Jon Coupal is the president of Howard Jarvis Taxpayers Association. Kevin Kiley represents California’s 6th Assembly District, which includes parts of El Dorado, Placer and Sacramento counties. You can follow both on Twitter @joncoupal and @KevinKileyCA.

This article was originally published by the Orange County Register. 

Raising property taxes for public pensions

PensionsSome California citizens who voted for Proposition 13 almost four decades ago may have forgotten that the drafters were in fact concerned about government spending as well as tax relief. A few still contend that taxpayer groups such as Howard Jarvis Taxpayers Association should focus only on protecting homeowners against rising property taxes and avoid issues like the costs of regulation, environmental policies or the cost of public employee pensions. But fortunately, most astute taxpayers understand that their tax burden is inextricably related to government spending and that there are tremendous risks in failing to engage on government policies that drive up public costs.

One Illinois town has learned that the hard way. The city of Harvey has been ordered by a state appellate court to approve a property tax levy specifically for its firefighters’ pension. That court order, however, may be difficult to enforce given that Harvey already has effective tax rates of 5.7 percent for residential and 14.3 percent for commercial properties. (Under Proposition 13, the maximum tax rate for all real property is 1 percent).

As stunning as this decision may be, residents of Illinois better prepare themselves because Harvey won’t be the last. Many of Illinois’ 600-plus local police and firefighter pensions are similarly underfunded which may explain massive flight out of the state by its taxpaying citizens.

The real question for California taxpayers is whether what is going on in Illinois could happen here in California. More specifically, could a California court order a city, county or special district to raise property taxes to cover unfunded public employee pension obligations? It’s possible, but it would be more difficult for those who seek such a move. First, Proposition 13’s one percent rate limit is in the constitution, so a state court would have to find — which it could — that the pension obligations were guaranteed under the United States Constitution. That is not an inconceivable outcome. Indeed, it is possible that a federal court might reach that conclusion more easily.

That a federal court might order a local property tax increase is not without precedence. In 1990, the U.S. Supreme Court ruled that federal judges may order local governments to increase taxes to remedy constitutional violations such as school segregation. The court took an expansive view of judicial power to actively manage institutions and activities usually within the power of states and localities.

If property owners need a reason to watch the entire controversy over public employee compensation, especially pension benefits, this is it. Don’t assume what happened in Harvey, Illinois couldn’t happen here.

Jon Coupal is the president of Howard Jarvis Taxpayers Association.

This article was originally published by the OC Register

Taxpayers pay for lobbying in Sacramento

Pension moneyThe latest lobbying reports are out in Sacramento, showing how much special interests are spending to influence lawmakers. After reading the reports, you can’t blame taxpayers for feeling like the man who has been unjustly condemned to the gallows and is compelled to pay for the rope that will hang him.

When asked who spends the most currying favor with members of the Legislature, many folks will say “Big Oil” or maybe drug or insurance companies. Not even close. Those who name government employee unions as the big spenders would be wrong, too, but at least they would be getting warmer. (Unions, which thrive on involuntary “contributions,” have a huge influence on the activities of the biggest spender of all).

Far and away, the lobbying champs are California’s myriad of local governments. Through the first six months of this year, cities, counties, schools and other special districts have spent $24.3 million on influencing Sacramento lawmakers. And it is a safe bet that these governments are not spending this taxpayer money to promote tax cuts for average citizens. In fact, in many cases, they are spending tax dollars to advance their objective of wringing even more out of already beleaguered taxpayers.

Local government officials use high-sounding rhetoric to justify not spending these millions of dollars on fixing potholes, hiring first responders or addressing other pressing needs of the local community. To best serve their constituents, they will argue, it is important that they have a voice in lawmaking that may impact local jurisdictions.

Closer to the truth would be that local governments want to make sure they get a share of the “spoils” in our very high-tax state. And sometimes they seek more than a share of state revenue, they want special exemptions to allow them to increase local taxes beyond what state law allows.

A number of jurisdictions have sought and received exemptions from laws limiting the local sales tax, and in one case, nine Bay Area counties asked for, and received, an OK to create a huge taxing district to impose a parcel property tax on all residents, even though some lived many miles from the improvements for which they are being charged.

However, one of the motivators that keeps local government officials constantly scrounging for more revenue is, just like their brethren in Sacramento, so many are beholden to the most powerful political force in California, the government employee unions. Just like many state legislators, they owe their election to union support. These unions provide campaign cash and boots on the ground in election season. So, when it is time to sit down and discuss pay, the unions are represented on both sides of the table and taxpayers, if they are considered at all, are an afterthought.

With this constant pressure to raise funds for pay, benefits and pensions for local government workers, it should come as no surprise that local officials are willing to spend millions in the hope that state government will funnel more money back into local coffers and smooth the way for increasing the already exorbitant taxes locals are paying. Of course, savvy taxpayers understand that debates about where tax money comes from — be it state, local or even federal dollars — are a ruse. Every penny comes from the same location, our pockets.

The question local taxpayers must decide is whether or not money that could be used to solve local problems should continue to be spent “wining and dining” the Sacramento politicians. Certainly, the government employee unions think that this investment in Sacramento by local officials is a good deal for them.

Jon Coupal is the president of Howard Jarvis Taxpayers Association.

This article was originally published by CalWatchdog.com

Increase the homeowners exemption to improve housing affordability

http://www.dreamstime.com/-image14115451California is in a housing crisis. The cost of housing — both for purchase and rental housing — is too expensive. Ineffective public housing policies and anti-growth policies that impede even reasonable development projects have choked supply in a high-demand market. California needs to start building homes and apartments as soon as possible. Recent estimates show that California must build 180,000 units of housing a year over the next 10 years simply to keep pace with demand. Currently, only about half of that amount is being constructed.

But in the meantime, a quick and effective way to provide financial relief to everyone in California with a roof over their head is to increase the homeowners exemption which has been stuck at $7,000 since 1972. A lot has changed since then. Mark Spitz won a then-record seven gold medals in the 1972 Munich Olympics. Atari released the PONG computer game and a gallon of gas sold for 36 cents. California’s population has nearly doubled from 21 million residents to 39 million residents today. And according to the California Association of Realtors, the median price of homes in California is well over $500,000 compared to $28,000 in 1972.

Because the average Californian earns $61,000, according to the U.S. Census Bureau, most are knocked out of the market before they even start. Only one-third of California residents can afford a median priced home.

In February, Assembly members Phil Chen and Matthew Harper introduced Assembly Bill 1100, the “American Dream Act,” which would increase the existing homeowners’ exemption on their property tax from $7,000 to $25,000, as well as raising the renter’s credit by using the mandated California Franchise Tax Board inflation adjustment. This will not only help current homeowners but this will help those aspiring to own a home. One-third of renters in the state spend at least half their take-home pay in rent, a statistic driving California’s record high 20 percent poverty rate.

Californians are paying some of the highest taxes in the nation, exacerbating the ability of ordinary citizens to afford a home. Even with Proposition 13, which has proven effective in limiting the growth of homeowners’ property tax bills, California still ranks in the top third of all states in per capita property tax revenue.

Moreover, high taxes and unaffordable housing are taking their toll on the California economy. In the last decade, California has lost more than 1 million people in net domestic out migration to other states. We all know at least a few people who have moved to Nevada, Texas, Oregon, Florida or Arizona to find a less expensive place to live.

In some welcome good news, in May, AB1100 passed a major hurdle by passing the Assembly Revenue and Taxation Committee with notable bipartisan support. This was the first time legislation of this nature got out of a legislative policy committee. Many had been attempted in years past but had failed.

When the Legislature returns from its summer recess later this month, affordable housing will be the leading topic of discussion. While there are many ideas being considered, including more bonds and taxes, ideas that provide direct relief for middle-class property owners have yet to rise to the forefront. They need to. Beyond the homeowners exemption, liberalizing the rules about taking one’s Proposition 13 base-year value to a new residence, the so-called “portability” issue, should also be part of a legislative proposal.

Any reform package must articulate that government can’t tax and bond its way out of a problem where it costs over $300,000 to build one unit of affordable housing. Addressing these regulatory burdens as well as providing tax relief for homeowners and renters will not only lead to future economic prosperity for California. It is also the right thing to do.

Jon Coupal is the president of Howard Jarvis Taxpayers Association and Phillip Chen is a member of the California Assembly from the 55th Assembly District.

This article was originally published by the Orange County Register

Republicans didn’t have to vote for cap and trade

Chad Mayes2Last month, eight Republicans in the California Legislature made the unfortunate decision to vote for an extension of cap and trade that will increase the cost of fuel by as much as 71 cents a gallon by 2031. The primary justification was that the market-based cap-and-trade solution was preferable to any option controlled solely by the powerful and hostile California Air Resources Board. While that argument can’t be discounted, it is nonetheless useful to speculate what would have happened if no Republicans supported the deal.

Historically, Republicans have been the primary defenders of California’s middle-class taxpayers. They almost always vote against any proposal to weaken Proposition 13 and for that they deserve our thanks. But there is no debate that the cap-and-trade legislation will increase gas prices. The only debate is over how much.

Republicans in the Legislature should also be thanked for providing the lion’s share of votes against the cap-and-trade bill. But now they are in a situation where they have to explain why eight of them voted for the bill which has created a significant messaging problem. Voters don’t understand cap and trade and they don’t understand what “saving them” from a $2 fuel price increase looks like because they’ve never experienced it. Compounding the messaging problem is the inevitable political fallout. Republican support gave Democrats and Gov. Jerry Brown acres of political cover. Democratic legislators in at least two marginal seats were protected against having to cast a vote for higher energy costs and Gov. Brown secured a relatively stable source of funding for high-speed rail.

So what would have happened if no Republican legislators voted for cap and trade? Conceivably, Gov. Brown could have demanded Democratic allegiance and, using both carrots and sticks, may have secured it. But that would put Democrats in marginal districts at tremendous risk. At a minimum, Republicans could have leveraged their opposition for policies that actually are friendly to citizen taxpayers including, but not limited to, a rebate or broad based sales tax reduction for consumers to offset the added cost of gas over the next decade.

Republican refusal to give in to the type of extortion reflected in the cap-and-trade bill may very well have forced the Democrats into approving a CARB-style bureaucracy with a simple majority vote — which, by the way, might still happen. The far-left of the Democratic Party may have cheered but, for Republicans, it would open up vast new demographics — working Hispanics, other ethnic groups and recent immigrants — for whom just a few more cents in a gallon of gas is a big deal.

Unfailing opposition to the deal by Republicans would have provided something else almost always absent from California politics — clarity and accountability. When gas prices go through the roof — which they surely will — there would be no doubt which party to blame.

But we’ll never know as it will be difficult, if not impossible, to repair the damage and restore the Republican brand. Thus the odds of Republicans gaining seats in any of the next four election cycles (thanks to redistricting in 2022) are now in doubt. And for what? So Republicans can now adopt the losing argument that they voted for increased fuel costs to save taxpayers from even higher prices? What ordinary voting taxpayer is going to buy that argument?

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

This article was originally published by the Orange County Register.

California Legislature abandons state’s middle class

taxesCalifornia’s middle class, who pay the bulk of all taxes in California, are constantly under attack from Sacramento politicians. Already this year, the Legislature approved Senate Bill 1, to add 19 cents per gallon to the cost of fuel beginning in October and an average of a $50 increase in the car tax. This translates into at least $400 in additional taxes for the average California family.

Now, Sacramento politicians have compounded the damage by imposing another fuel cost increase by extending the state’s cap-and-trade program, a market-based regulatory system for controlling greenhouse gas emissions. Under this program, impacted industries buy credits at auction which are then used to incentivize decreases in pollution levels.

Surprisingly, many industries forced into the “cap-and-trade” auctions supported the extension because they were threatened by Gov. Brown, environmental extremists and powerful regulators with an alternative program run completely by the government bureaucrats at the California Air Resources Board. And those were not idle threats.

Be that as it may, some legislators are using the “it could have been worse” argument to claim that they’ve won some sort of victory for taxpayers. Without cap and trade, they say, your fuel costs would have increased by nearly two dollars a gallon. Even if completely true — which is doubtful — cap-and-trade advocates won’t tell you the whole story. The non-partisan Legislative Analyst’s Office has said that under the legislation just approved, fuel prices could go up by 21 cents in 2022 and 71 cents by 2030. Only in the Alice in Wonderland world of Sacramento politics does a 71 cent fuel price increase constitute a victory for taxpayers.

So what’s the ultimate impact on working Californians? If the new legislation is added into April’s gas tax increase, consumers will see their price at the pump increase as high as 40 cents per gallon by 2022 and 90 cents by 2031. Overall household fuel costs will likely eventually increase by over $1,000 a year per household. And all this is occurring so that liberal Democrats can reach an arbitrary threshold of a 40 percent reduction in greenhouse gas emission levels by 2030.

While the handful of Republicans in the California Legislature — who make up less than a third of the members in each house — are usually the reliable opposition to the punishing policies inflicted on the middle class by the majority party, that did not prove to be the case last week. Eight Republicans voted for the extension.

But could they argue they received something in return which benefits their voting constituents? Nope. The vast majority of California taxpayers will receive no direct financial relief in exchange for their thousand dollars a year they will pay for goods and services. Perhaps it would be easier to share in the cost of climate change if California wasn’t going it alone on cap-and-trade in the United States, while we emit only one percent of the world’s greenhouse gas emissions.

The extension of cap-and-trade ensures one thing, that funding for high-speed rail will continue. The legislation dictates that at least 25 percent of the new funding will be spent on a train that a majority of Californians have made it clear they would reject if given another chance on a statewide ballot. Ironically, high-speed rail has proven to be a net increaser of greenhouse gas emissions. So much for trying to save the world.

A hollow victory at best is the suspension of the infamous fire tax against those living in rural unincorporated areas of California. Some 800,000 property owners will no longer have to pay this fee, which remains the subject of a class action lawsuit commenced several years ago by Howard Jarvis Taxpayers Association lawyers. While the suspension (not repeal) of the tax is welcome relief for rural property owners, it does not include any rebates for the millions of dollars already paid. For that reason the HJTA litigation will continue over the issue of refunds.

As is common with complex legislation that ultimately hurts the middle class, special interests suffered little or no harm and, in many instances, negotiated for a financial windfall. Most got a piece of the revenue from the higher gas prices that consumers will be paying. The governor got more funding for high-speed rail and corporations got significant tax breaks. But legislators couldn’t even fight to give citizen taxpayers a rebate for the higher gas prices they’ll be paying. Will any legislator fight for them? Is there anyone left in the Capitol who will put the middle-class taxpayer before their next political deal that results in another crushing financial burden? For the sake of this once Golden State, we hope so.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

This article was originally published by the Orange County Register

New tax on real estate docs adds hardships to most vulnerable

http://www.dreamstime.com/-image14115451Last week, the California Senate voted to pass Senate Bill 2 which would impose a new $75 tax on real estate documents filed with each county’s clerk recorder. If the bill becomes law, the projected revenue — over $250 million annually — would be dedicated to low income housing programs.

Like a recurring nightmare, this proposal to tax real estate transactions seems to come up every legislative session. Up to now, this regressive tax has failed to gain traction because of bipartisan opposition. Taxpayer and business interests hope that, once again, the bill fails to complete its journey through the legislative process.

Currently, certain real estate documents must be filed with the county in which the property is located.Recording fees are relatively modest, costing between $14 and $18 varying slightly among counties. The fees help defer the costs of administering the clerk/recorder’s office and, as long as the fees are low, they encourage people to record essential documents.

SB2 would increase that fee to anywhere between $89 and $93 per document; amounting to a tax increase of up to 1,250 percent. Anyone recording a property-related document would be required to pay the fee although sales transactions would be exempt. There is also cap of $225 on each transaction.

A flat rate tax on real estate recordings is highly regressive. For example, because actual sales are exempt, a person purchasing a multi-million dollar home wouldn’t pay the higher tax. But a widow recording an affidavit of their spouse’s death would. So would a contractor filing a mechanics lien for unpaid work or a senior citizen on a fixed income recording estate planning documents, including transfer upon death deeds. Moreover, the bill would make refinancing a home and loan modifications more expensive as those transactions would trigger the tax.

The biggest irony of SB2 is that it ignores basic economics. Think about it. A tax imposed on real estate transactions — obviously imposed only on those who own property — to pay for programs to make housing more affordable. This is like treating someone with a low blood count with leaches.

No one disputes that California has a housing crisis. It ranks 49th out of 50 states in housing units per capita. But SB2 only creates a different hardship as it attempts to alleviate another.

In a 2015 report by the California Legislative Analyst’s Office titled, “California’s High Housing Costs: Causes and Consequences,” the nonpartisan LAO said “the key remedy to California’s housing challenges is a substantial increase in private home building in the state’s coastal urban communities.” Furthermore, “considerable evidence suggests that construction of market-rate housing reduces housing costs for low-income households,” while government programs for affordable housing help only a fraction of low-income Californians. And expanding those programs would be “extremely challenging and prohibitively expensive.” In other words, a new tax or bond is not the way to solve this problem. Government programs cannot be the solution to fix problems created solely by government.

SB2 puts an excessive tax burden on families who have already achieved homeownership and is unnecessarily regressive. Lawmakers should reject SB2, as they have in the past, and work to remove regulations, lower building permit and impact fee costs and push for CEQA reform. Only then can we ensure that the American Dream of homeownership remains viable in California. Taxpayers should call their representative in the State Assembly and urge them to oppose SB2.

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

Why some cities won’t be paying Los Angeles’ new homeless tax

800px-Helping_the_homelessLos Angeles County’s sky-high sales tax will rise not once, but twice, this year.

In recent elections, Angelinos voted two new tax hikes upon themselves — one to fund transportation (Measure M) and the other to fight homelessness (Measure H).

As a result, the county’s 8.75 percent tax rate jumped to 9.25 percent on July 1. It’ll rise even further — to 9.5 percent — on October 1.

Of course, some cities in Los Angeles County have even higher tax rates. Seven of them — Compton, La Mirada, Long Beach, Lynwood, Pico Rivera, Santa Monica and South Gate — have rates of 10.25 percent that are among the highest in California, if not the entire nation.

Here’s where it gets interesting: Rather than increase their tax rates another quarter cent on October 1 like the rest of the county, those seven normally tax-loving cities will get a free pass — at least for now — in funding the fight against homelessness.

The seven cities will, of course, benefit from the estimated $355 million in annual tax payments the measure will raise but they will do so only by the courtesy of taxpayers in other cities. It’s a subsidy, plain and simple.

Why was Measure H drafted this way?

It appears to have been a rather clumsy attempt to dodge a state law capping local sales taxes. The law requires localities to limit voter-approved “district” sales taxes to 2 percent (on top of the state rate of 7.25 percent) unless they obtain specific legislative authorization.

Los Angeles County has received legislative approval twice in the past to increase this limit for transportation-related taxes. For some unknown reason, Measure H proponents didn’t want to bother with this step.

But the poor planning came back to bite them. Proponents claimed the new tax would take effect July 1, at the same time as Measure M. That would have been a lot simpler for everyone, including business owners who must now go through the trouble of reprogramming their registers twice to adapt to the rate increases.

Since the Measure H language was both unprecedented and legally questionable, the Board of Equalization rightly refused to collect the tax until the Legislature specifically voted to authorize it.

These delays have pushed back the start date of Measure H, resulting in lost funding for the fight against homelessness, and more confusion and headaches for taxpayers.

Even more troubling is the dangerous precedent this sets statewide. Will other local governments soon craft tax proposals that exempt politically-favored constituencies?

We believe the cap on local sales taxes exists to protect taxpayers and should be respected. Not every good cause merits a tax increase.

Governments are hungry for more taxpayer revenue, and seem increasingly impatient to add more and more taxes. They are also becoming more creative at disguising their efforts, and using public dollars to pay for them. The Fair Political Practices Commission, for example, is conducting an investigation into whether the county of Los Angeles illegally spent taxpayer dollars for political advocacy in its campaign for Measure H.

Before asking voters to approve more and more taxes, shouldn’t local governments identify and eliminate ineffective taxes that haven’t accomplished their promised goals?

If taxpayers are concerned about how local governments spend their money, then that question is certainly worth asking. If not, how else do we ensure taxpayers receive value for the dollars they are already paying?

George Runner is vice chair of the California State Board of Equalization. Jon Coupal is president of the Howard Jarvis Taxpayers Association.

This article was originally published by the Orange County Register