California Lawmakers Want More Dollars from the Middle Class

TaxesBlue collars in California are once again being targeted by lawmakers with a multitude of new taxes on the energy industry that will trickle into their pocketbooks.

Our current slate of lawmakers are aware from the California’s Legislative Analyst’s Office reports that personal income tax liability is concentrated among its top earners. Shockingly, almost 70% of the general fund comes from less than 5% of the population. The Governor’s budget summary for 2019-2020 reflects this scary trend.

The State has 40 million residents and relies on less than three percent or just over one million of its wage earners for most of the revenue allocated to the general fund. It’s enlightening to know that there are more than one million millionaires in California in the “basket” to help with the funding.

For more dollars and diversity, our lawmakers definitely need to be more creative in procuring attaining a great share of tax revenues from blue collar to support all the government programs. These extra costs on blue collar residents will “ensure” that California continues to suffer the highest percentage of people in poverty, homeless and welfare crisis that’s so acute it shocks the world.

A few of the creative new tax actions by our lawmakers for 2019 and 2020 under serious consideration are:

  • SB-246 Oil and Gas severance tax
  • AB-40 Zero-emission vehicles: comprehensive strategy
  • Property Tax Initiative on “Split Roll” to assess commercial and industrial properties at fair market value while leaving homeowners’ Proposition 13 protections in place

 

The 95% of the residents not contributing significantly to the General Fund, and most likely not able to afford an EV, will start picking up a higher percentage of the revenue directed to the General Fund and help subsidize grid infrastructure, charging technology, and the endless list of government programs that are now principally funded by the 5%.

The California Energy Island is a huge energy user requiring 60 million gallons of fuel manufactured daily in-state to meet the energy consumption demands of airlines, trucks and cars.

The extra costs imposed on the manufacturers are ultimately passed on to the consumers, a major reason that Californians already pay almost a dollar more for fuel than the rest of America, and more for the cost of electricity, that are both increasing with each new “tax “and additional regulation.

To manufacture those fuels out-of-state or out-of-the-country and ship them into California ports would be even more expensive to the consumer, and increase emissions to the world as no other location on earth has the same environmental controls than California.

Our lawmakers are getting votes by constantly attacking the energy industry, but the industry is not going anywhere. The industry’s just passing those additional costs onto the consumer, and wrongly absorbing the heat for raising the cost of fuel!

The unintended consequences of more taxes on energy is that the lifestyles of all 40 million residents of California that rely on the fuels and the products manufactured from those deep earth mineral/fuels, would result in blue collar folks contributing a greater portion to the General Fund than they now do. On the contrary, with no new taxes on the energy sector, the State can ensure that the top earning 5% continue to contribute 70% of the dollars to the General Fund.

ounder and ambassador for Energy & Infrastructure of PTS Advance, headquartered in Irvine, California.

5 bills target consumption of sugary drinks

SodaThe California Legislature’s determination to lessen the amount of sugary drinks consumed by state residents may never have been greater than now – at least if the metric used is the number of bills introduced. This session, five will be taken up, and more may be on the way.

For the third time, Assemblyman Richard Bloom, D-Santa Monica, has introduce a measure that would tax soda and other beverages sweetened with sugar.

The first two times, Bloom’s measure didn’t get out of committee after it faced intense, well-funded opposition from the American Beverage Association.

But Bloom told his hometown paper, the Santa Monica Daily Press, that the tax was urgently needed to nudge people to stop consuming so many unhealthy drinks.

“Everyone would acknowledge that health care costs are skyrocketing,” he said. “Diabetes and obesity are ongoing health-care crises and we need to get serious about prevention.”

Revenue from the tax – which has not been established yet but which was 2 cents per ounce in Bloom’s previous bills – would pay for programs meant to reduce diabetes and obesity. Bloom said 9 percent of state residents are diabetic and nearly half are at risk of developing diabetes.

Measure would ban Big Gulp-size sodas

Bloom’s bill will have plenty of similar company this year.

Assemblyman David Chiu, D-San Francisco, proposes a ban on soda servings of larger than 16 ounces in seal-able cups sold at restaurants and grocery stores. A similar ban in New York City was thrown out by New York state courts – but not for a reason that has relevance in California. Judges repeatedly held that the New York City’s health board overstepped its powers in imposing the ban and should have deferred to the New York state Legislature.

Assemblywoman Buffy Wicks, D-Oakland, hopes to end the common practice of displaying sodas near the checkout stands of food, convenience and other retail stores.

Sen. Bill Monning, D-Carmel, is for the fourth time proposing that sugary drinks sold in California have labels warning of their health risks. Monning said if tobacco products’ health risks are made plain with warning labels, so should the risks of soda.

Assemblyman Rob Bonta, D-Alameda, is touting a bill intended to prevent beverage companies from offering stores special deals with lower prices for sugary drinks.

Studies split on effect of Berkeley soda tax

Soda foes got good news on Feb. 21 when the American Journal of Public Health published a study saying that soda consumption plunged 52 percent in Berkeley in the first three years after the city adopted a soda tax.

But other research into Berkeley’s soda tax is far less encouraging, according to University of Southern California professor Michael Thom. He told the Santa Monica newspaper there was no evidence that residents reduced their caloric or sugar consumption and asserted there is little, if any, proof that soda taxes have a positive effect on human health.

A Harvard Business Review study based on an analysis of millions of transactions at California stores by Duke University professors Bryan Bollinger and Steven Sexton was also skeptical of claims of success in Berkeley. Published in January 2018, it noted that since most residents worked outside of Berkeley, they could readily buy cheaper soda elsewhere. The study also pointed to a factor not mentioned in any recent newspaper coverage of soda taxes:

“We found that much of the cost of the tax is not being passed along to consumers,” Bollinger and Sexton wrote. “Fewer than half of supermarkets changed the price of soda in response to the tax, and prices at chain drug stores did not change at all.”

This article was originally published by CalWatchdog.com

Is it time for California’s taxpayers to go on strike?

Tax reformAround California, public school teachers are on strike seeking more pay, better benefits and less competition from charter schools. They are also demanding that the rest of us pay higher taxes. Indeed, as part of the agreement that ended the strike in Los Angeles, teachers forced a concession out of the school district to officially support the partial repeal of Proposition 13 as it applies to business properties. That would have the effect of raising California property taxes as much as $11 billion annually and would surely accelerate the well-documented business flight out of California.

It’s not as though Californians are currently under-taxed. With the highest income tax rate, the highest state sales tax rate and second highest gas tax in America, it’s tough to make that argument.

So, I’m curious as to what would happen if, in reaction to the teachers’ strikes in L.A., Oakland and Sacramento, taxpayers decided to go on strike? The media seems obsessed with large, public demonstrations of crowds wracked with angst and victimhood. School districts lose millions of dollars when teachers go on strike because it impacts the Average Daily Attendance figures that provide the basis for disbursing tax dollars. But if taxpayers went on strike, how much more would they lose?

The reaction to a taxpayer strike would surely invoke claims that taxpayers are greedy, anti-education heathens. But, in reality, the vast majority of taxpayers are very much pro-education. They just don’t like the product they’re forced to pay for.

Let’s first dispel the urban legend that Proposition 13 “starved” education in the Golden State.

To read the entire column, please click here.

New Tax Proposals Hurt the Middle-Class

TaxesNo one disputes that California has a big budget surplus. According to the Office of the Legislative Analyst, California has budget reserves in excess of $18 billion. Our budget reserves exceed the entire state budget of eighteen other states.

One would think that the funds available for discretionary spending would chill any appetite for higher taxes. But this is California.

Despite the highest income tax rate, the highest state sales tax rate and the second highest gas tax, both our newly elected governor and our extremely progressive legislature desire to impose yet even higher taxes.

The most surprising thing about two of the new tax proposals is that they hurt the very groups the majority party claims that it is trying to help.

During his tenure as governor, Jerry Brown succeeded in shepherding through several tax hikes. However, he was unsuccessful in pushing a new 911 surcharge and a precedent-setting tax on water.

But as is common in California, new tax proposals never really die and these two have been resurrected in Gov. Newsom’s proposed budget.

To read the entire column, please click here.

California Legislature Shouldn’t Tax Innovation

TaxesWhen it comes to innovation and job creation, let’s keep the gold in the Golden State.

The role of private equity in funding the growth of many bread-and-butter, consumer-based firms that call California home – companies such as Peet’s Coffee and El Pollo Loco – is in serious jeopardy due to the possible re-emergence of faulty legislation in 2019.

Last year in the Legislature there was a proposal (Assembly Bill 2731), borne of understandable but misguided frustration over federal tax policy, that would have pushed the private funds financial services industry to other states. Fortunately, that proposal did not advance. Lest California lawmakers think again about cutting off an economic engine in a self-destructive over-reaction, the idea should be permanently shelved.

California is the earth’s epicenter for innovation, attracting entrepreneurs and talent from across our state and around the globe.  It’s blessed with world-class universities, robust markets, and it’s been a pace-setter in emerging industries. All of this is made possible by one essential element – access to capital.

Data from 2016 shows that the Bay Area is the number one market in the nation for venture capital, generating an impressive $23 billion in investment; more than three times that of New York sitting at number two.

A proposal like AB 2731 would put a chokehold on venture capital in the state by creating a 17 percent add-on income tax on the private funds financial services industry. The tax would apply to so-called “carried interest income” earnings – but interestingly enough only in the financial services sector, not in other sectors such as real estate, oil and gas development in which such earnings are also common.

An economic impact analysis of the proposal conducted by a professor at USC’s Marshall School of Business understandably concluded that the tax would be “so impactful that the industry will likely move out of state.”

The consequences of such a flight from California would be devastating. The industry directly employs more than 100,000 workers and pays a combined $2 billion a year in state and local taxes.

The American Investment Council estimates that private equity companies invested $66 billion in 583 California companies in 2017 alone. Those companies combined provided more than 400,000 jobs. In addition, an estimated 5,200 California-based companies now with more than 250,000 workers relied on venture capital funding to get off the ground.

To push back against federal tax policy by even considering a large, state-only tax increase on an industry that fuels economic growth and job production is destructive folly. Jobs would be lost, economic growth would be diminished and there would be a net loss in state and local tax revenue as a result of industry flight from California.  This proposal failed last year, and should not be reconsidered this year.  There is never a good time for a bad idea.

resident & CEO, Silicon Valley Leadership Group

This column previously appeared in the Sacramento Bee

A Crackdown on Misuse of Taxpayer Money

TaxesAlthough state law specifically prohibits public officials from using taxpayers’ money for political campaigning, they have been doing exactly that throughout California.

Local governments hire “consultants” to poll voters on what tax and bond measures they would find acceptable, to draft those proposals accordingly and, finally, to run so-called “information” campaigns to persuade voters to approve them.

It’s so blatant that firms seeking lucrative contracts openly boast of their successful campaigns, eliminating any doubt that they are truly political operatives.

The practice has ballooned because local prosecutors and the state attorney general’s office ignore complaints about its illegality. Indeed, local district attorneys often benefit from the higher taxes.

Finally, however, we may be seeing some effort to sanitize this very stinky phenomenon which, if left unchecked, will only become more commonplace.

Last month, the state Fair Political Practices Commission took a potentially significant action against the Bay Area Rapid Transit District for doing what it and other local governments have been doing.

The FPPC voted unanimously to impose a $7,500 fine on BART for failing to report its spending on a bond issue as a campaign contribution. It also asked the attorney general and Bay Area district attorneys to prosecute the transit district for violating the law prohibiting the use of public funds for political campaigns.

“It’s not the total (amount) of what was used; it’s the concept of misusing public funds,” FPPC chairwoman Alice Germond said at the commission’s December meeting. “We want to send a warning and not create a precedent that it’s a minor, ‘slap on the wrist’ kind of thing.”

The action stems from a proposed $3.5 billion bond issue, Measure RR, that voters in the three-county district approved two years ago by a 70 percent margin. The “information campaign” for the bond included a video, featuring Golden State Warriors player Draymond Green, that the FPPC said was acceptable, while concluding that two other videos and text messages to voters were clearly advocacy.

BART paid a public relations firm, Clifford Moss LLC, $99,000 to craft its measure before the item was placed on the ballot, and the same firm then directed the supposedly independent campaign for the bond measure.

The FPPC acted on a complaint from Jason Bezis, a Lafayette attorney. It’s similar to complaints that have been filed about other local bond and tax measures, including those in Los Angeles County, by taxpayer advocacy groups.

After the FPPC acted, a BART spokeswoman, Alicia Trost, told the Bay Area News Group that the campaign errors were “accidental.”

“We have been and will continue to be committed to following the law,” Trost told BANG. “We accept their finding.”

While state law allows agencies to publish accurate information about their proposals, they are not allowed to advocate their passage, and that’s the line that BART and other agencies have obviously and arrogantly been crossing.

If they use public money for campaigns, they will, the FPPC implies, be treated like other financiers of political campaigns and be required to file reports. If they file such reports, however, they will be admitting, in effect, that they are violating the law prohibiting such spending.

That’s where the prosecutors should come into the picture. They should do their duty, enforce the law and seek personal fines from the officials involved. And the Legislature could, and should, invalidate any local measure that’s passed when those officials ignore the law.

olumnist for CALmatters. 

California Abandons Plan to Tax Text Messages

TaxesCalifornia regulators no longer plan to tax text messages.

The California Public Utilities Commission said a new FCC ruling prevented the state from levying a tax on text plans. The state hoped to add new monthly fees onto wireless customers’ bills to increase funds for programs that bring connectivity to underserved residents. Regulators were scheduled to vote on the measure on January 10, 2019.

The FCC put the text tax’s future in doubt when it issued a new rule on December 12 determining text messages constitute an “information service” — not a “telecommunications service.” CPUC commissioner Carla Peterman withdrew the text tax propsal “in light of the FCC’s action.”

Proponents of the FCC’s new rule say it will give carriers the ability to crack down on spam messages, and critics say it could lead to carriers censoring messages. The FCC did not immediately respond to a request for comment Sunday. …

Click here to read the full story from CNN

California Legislators Want to Tax Text Messages

Text messageA California regulator’s plan to tax texts in order to fund cellphones for the poor hit a snag Wednesday after a Federal Communications Commission ruled text messages aren’t subject to the utility agency’s authority.

The decision by the FCC, which categorized text messages as “information services” on par with emails and not “telecommunications services,” came in an effort to combat robo-texts and spam messages. The California Public Utilities Commission now faces an uphill battle ahead of a scheduled vote on the measure next month.

Those opposed to the planned tax hailed the FCC decision a victory.

“We hope that the CPUC recognizes that taxing text messages is bad for consumers,” Jamie Hastings, senior vice president of external and state affairs for CTIA, which represents the U.S. wireless communications industry, told The Mercury News. “Taxing this service would burden those who rely on and use this service each and every day.”

The CPUC has not yet commented on the FCC’s decision. The group is scheduled to meet next on Jan. 10 in San Francisco. …

Click here to read the full article from Fox News

Sacramento Tax Increase Proposal Represents Statewide Trend

TaxesThe Sacramento City Council vote to place a tax increase on the November ballot is representative of what we’ll see around the state in many localities: a call for more taxes to maintain basic services when in reality the money is needed to meet pension obligations.

In one sense the argument that the money is needed to maintain services is correct. Because greater pension costs will eat into the general funds of local governments, services provided by government will be cut because of reduced revenue. The problem is that officials promoting the tax won’t talk about pensions. 

What’s needed is transparency.

In Sacramento, the city council placed a 1-cent sales tax on the ballot to offset a ½-cent tax that is soon to expire. The new tax will be permanent. The tax is projected to raise $100 million, twice what the temporary tax now brings in. The new money is purportedly for specific projects but money is fungible and can be used where the city needs it—and the city needs to deal with rising pension costs.

(UPDATE: The current tax take from the 1/2-cent tax is actually $36 million. The $50 figure came about because of carryover money from previous year. A full penny is about $72 million. Thanks to Dan Walters at CALmatters for the correct information.)

The city budget speaks of the long-term difficulty Sacramento faces dealing with pension obligations. “The pension cost (normal cost and unfunded liability combined) in the General Fund alone is projected to be $134 million in FY2024/25 when the rate change is completely phased in. This reflects an increase of more than $66.9 million over the eight years which is a 99.6% cost increase from FY2017/18 to FY2024/25.”

Sacramento’s General Fund has increased about 25% from the 2009/10 budget to now from $385.9 million to $484.4 million. Even that steady increase cannot match what is needed to keep pace with the expected pension demands.

A tax increase is a way to meet the obligation but you won’t hear much about that when a campaign is mounted for the tax increase. At the council meeting approving the tax there was talk of maintaining basic services and supporting a plan that would confront multiple problems including homelessness, neighborhood investments, and job issues.

This formula is not exclusive to Sacramento. Many local governments must face pension costs that are burdening their General Funds and are turning to taxpayers for relief. By paying more in taxes the taxpayers have less to contribute to their own retirement costs.

The debate over these taxes should be truthful about the pension monster that is devouring local budgets. Once that happens more attention will be focused on how to deal with the problem.

ditor and Co-Publisher of Fox and Hounds Daily

This article was originally published by Fox and Hounds Daily

Taxing California: Highest in the nation and unstable, too

California’s major revenue sources have shifted over time. Until 1995, the biggest was property taxes. Today, it’s personal income taxes.

And California ranks fairly high in overall taxation: 10th highest both per capita and as a percentage of personal income, based on the latest available data from the U.S. Census.

In 2015, state and local governments collected $228.7 billion in taxes, including property, sales, personal and corporate income levies and a few others, according to the census. That’s in a state with more than 39 million residents and personal income worth nearly $2 trillion that year.

California’s taxes have risen in ranking partly because of voter-approved increases. In November 2012, the state passed a temporary hike in sales taxes of 0.25 percent and raised personal income taxes on the rich. Four years later, voters extended the income tax increase for 12 more years.

State tax

Gov. Brown and lawmakers also approved a 12-cent gas-tax hike in 2017 to help raise $5 billion a year for aging infrastructure. The measure includes increasing the annual vehicle fee between $25 and $175, depending on the vehicle’s value. …

Click here to read the full article from the Los Angeles Daily News