New Measure Would Limit Impact of Federal Tax Overhaul on Californians

TaxesGov. Jerry Brown will have to decide soon on whether to once again put California in direct conflict with the Trump administration – this time with a newly passed bill which has the near-unanimous support of Republican as well as Democratic state lawmakers.

It’s Senate Bill 539, by U.S. Senate candidate Kevin de León, a state senator from Los Angeles. The measure would limit the impact on affluent residents of the new $10,000 federal limit on deducting state and local taxes from federal tax returns by sharply increasing an existing tax credit for contributions to a college scholarship program already run by the state.

If SB539 is signed by Brown, families making more than $100,000 – especially homeowners – could potentially save billions of dollars with the new, much higher 75 percent credit. In 2015 – the most recent year for which statistics are available – 6.1 million California tax filers used the state and local tax deduction, with an average of $18,438, according to the Tax Policy Center.

This explains the bipartisan appeal of the measure, which passed the Assembly and Senate with a total of two negative votes – one Republican (state Sen. Jim Nielsen of Fresno) and one Democrat (Assemblyman Jim Frazier of Contra Costa County).

It’s not clear whether Brown will sign the measure. While he called the Republican tax overhaul approved last December “evil in the extreme” at the time it was being considered by Congress, he’s been reported to be skeptical that any state tax avoidance effort would be accepted by the Internal Revenue Service.

That’s the impression the IRS has sought to create since the state and local tax deduction was limited. And last month, the IRS proposed a 15 percent cap on deductibility of certain gifts, including to state programs like the one that would benefit from SB539.

IRS rule could reduce deductions for private tuition

The proposed IRS rule is so broad, however, that Gannett News Service reported on Aug. 24 that it could affect laws allowing for state and local tax credits for charitable contributions in 34 states. In several Republican-dominated states, these credits are available for private school tuition.

This generated a sharp reaction from EdChoice, an Indianapolis-based national nonprofit organization that’s devoted to encouraging alternatives to traditional public schools.

“The IRS chose to adopt a new rule after New York and a few other states who overtax their citizens at the state and local level had the audacity to create federal tax-dodging schemes,” EdChoice told Gannett. “These tax-dodging schemes do not compare in intent or purpose to the charitable programs created years ago to help children access K-12 education where they fit in and can learn.”

Treasury Secretary Steven Mnuchin, however, disputed the idea that the proposed IRS rule would have a heavy impact on donations to private schools and to school choice advocates.

In July, four states – New York, New Jersey, Connecticut and Maryland – sued the federal government over the deduction limit, saying it amounts to unconstitutional “double taxation.” The Tax Foundation says those states and California are the five where taxpayers will face the biggest hit.

But most tax experts think the lawsuit is unlikely to win, given the long-established primacy of Congress in setting tax laws and of the IRS in interpreting them.

California has already sued the Trump administration more than 50 times – but not, so far at least, over the tax deduction change.

This article was originally published by CalWatchdog.com

New Proposed “Voluntary” Tax on the Water You Drink

Drinking waterAnother new tax is headed for your water bill, as if it wasn’t high enough already.

Gov. Jerry Brown has been trying to push through a statewide tax on drinking water, the first ever in California history, and as you might imagine, it has been a challenge for him.

People are fed up with new taxes. That was demonstrated very convincingly in the June recall of state Sen. Josh Newman, D-Fullerton.

All the political tricks that were employed to save him — delaying the election, allowing voters to withdraw their signatures on petitions, lifting the cap on campaign contributions from other politicians — failed to prevent voters from firing the politician who cast a critical vote in favor of a huge increase in gas and car taxes.

That tax hike will face its own reckoning in November, when voters will have the opportunity to repeal it by passing Proposition 6, a ballot measure that also mandates voter approval of any future attempts to raise those taxes.

But despite the clear anger of the voters, or perhaps because of it, the trickery continues.

The water tax proposed in Senate Bill 845 would be “voluntary.”

Here’s the trick: Unless you opt out of paying it, you’ll pay it.

How do you opt out? It will be up to each “community water system” to figure that out, but you can bet the cost of the new paperwork will be added to your water bill some other way.

The purpose of the drinking water tax is to provide clean water for about a million rural residents in areas where the groundwater is contaminated.

That’s certainly important, and you’d think the state would fund that priority with some of the tax money Californians already pay.

You’d be wrong. California’s not run that way. Instead, you pay the highest state taxes in the nation, Sacramento spends all the money on things voters would never approve, and then for anything voters think is important, Sacramento insists on a new bond or tax.

Read your ballot this fall. Politicians are pleading for billions more to pay for water, veterans’ housing and children’s hospitals. No need to ask for more money to pay for state salary increases and Caltrans featherbedding — that’s covered already.

Connected to the proposed water-tax legislation is SB844, which would impose fees on dairy producers and companies that manufacture or distribute fertilizer.

The money would be deposited into the same “Safe and Affordable Drinking Water Fund” set up by the bill that imposes the water tax.

But the dairy and fertilizer producers get something extra for their money: protection from pesky regulators at state and regional water boards

SB844 prohibits certain enforcement actions for “causing or contributing to a condition of pollution or nuisance for nitrate in groundwater.”

The Agricultural Council of California and the Western United Dairymen are in support of these bills, as are the various environmental justice groups that are sure to receive grants from the new pot of money.

The Association of California Water Agencies opposes the legislation.

Nobody asked the water customers for their opinion, but if you’d like to give it to them, call your representatives in the state Assembly and Senate. You can look up their names and contact information at findyourrep.legislature.ca.gov. Don’t delay.

In Sacramento in August, legislation moves like you-know-what through a goose.

olumnist and member of the editorial board of the Southern California News Group, and the author of the book, “How Trump Won.”

This article was originally published by Fox and Hounds Daily

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

Cell phones, landlines could be taxed more to pay for 911 upgrade

Distracted driving

After raising prices at the gas pump last year, Gov. Jerry Brown wants to increase taxes on Californians again to overhaul the 911 emergency services system.

The Brown administration is asking the state Legislature to erase an existing tax on in-state phone calls in exchange for a flat fee on cell phone lines, landlines and other connected devices capable of contacting 911. The tax, estimated to start at a monthly rate of 34 cents per line, is expected to generate $175.4 million in the first calendar year — more than double the current tax — with the possibility of ballooning to over $400 million based on need in later years.

“It is an increase in an existing surcharge to modernize an antiquated system that is critical to be able to provide timely emergency information to Californians,” said H.D. Palmer, a spokesman for the California Department of Finance. “This falls into a fundamental purpose of government, which is protecting public safety.”

There’s little disagreement that 911 technology desperately needs an upgrade in California. The system dates back to the 1960s and the state admits it’s failed in times of crisis. Five years ago, the California Technology Agency reported that many of the network’s radio parts had been discontinued by the manufacturer. …

Click here to read the full article from the Modesto Bee

Tax Hike Drives Millionaires Away From California

leaving-californiaAccording to new research released by Charles Varner, associate director of the Stanford Center on Poverty and Inequality, California lost an estimated 138 high-income individuals following passage of the Proposition 30 income tax increase championed by Gov. Jerry Brown (D) and approved by Golden State voters in 2012.

This new research by Varner updates a previous paper released six years ago that looked at domestic migration to and from California following a 2004 income tax hike.

“One reason we wanted to update our previous paper is that this tax change in 2012 is the largest state tax change that we have seen in the U.S. for the last three decades,” Varner said.

Prop. 30 raised the state’s top income tax rate by more than 29%, increasing it three percentage points from 10.3% to 13.3%, which is now the highest state income tax rate in the nation. Prop. 30 also hiked the tax rate on income between $300,000 and $500,000 by two percentage points (a 21.5% rate increase), and raised the rate on income between $500,000 and $1,000,000 by three percentage points (a more than 32% rate hike).

In 2016, California voters extended the Prop. 30 income tax increases, which were originally scheduled to expire in 2019, until 2030. There will be an effort to extend those income tax hikes yet again prior to their expiration in 2030; book it now.

Varner’s new research examined taxpayers who were and were not hit by the Prop. 30 rate hikes. He found that in the two years before the Prop. 30 tax hike was imposed (2011 and 2012), net in-migration for both groups “was positive and roughly constant.” Yet following 2012 and the passage of Prop. 30, net in-migration dropped for households that were facing an effective tax increase of 0.5 percent or more. The reduction was greatest for households facing the highest effective tax hike, according to Varner and his coauthors.

This isn’t surprising for those who are familiar with other attempts to soak the rich with punitive state income tax hikes on high earners. Take what happened in Maryland after Martin O’Malley, the former Democratic presidential candidate and governor, imposed a millionaires tax hike a decade ago. …

Click here to read the full article from Forbes.com

Patrick Gleason is vice president of state affairs at Americans for Tax Reform, and a senior fellow at the Beacon Center of Tennessee. Follow Patrick on Twitter: @PatrickMGleason

Taxpayer Victories in an Anti-Taxpayer California Legislature

CA-legislatureRonald Reagan once said, “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” With a record $130 billion budget, we know that California state legislators are adept at all three practices, but none more so than taxes.

Democrats in Sacramento spent 2017 jamming three separate tax and fuel-cost hikes into law. They renewed the cap-and-trade program, continuing a multi-billion-dollar increase in fuel costs that brings in state revenue to fund high-speed rail. They invented a new tax on recorded documents that is supposed to fund affordable housing. And of course the SB 1 gas and car tax increase was said to be needed to fund road repair, even though billions of dollars have been diverted away from maintenance over the last decade. In the midst of an $8 billion surplus, Sacramento was steadily increasing taxes.

But fortunately, 2018 hasn’t been as dreadful for taxpayers as 2017. Here’s a sample of the proposals that, for now, have failed to pass:

Senate Bill 794 would impose a new three percent tax on fireworks at the point of sale. The abuse of illegal fireworks is a matter of statewide concern, and as such, it is totally appropriate to spend existing General Fund revenues on enforcement and safety. Instead, by taxing the sale of fireworks, Sacramento would be hurting all the non-profit organizations that raise a sizable share of their annual revenue from firework stands.

Assembly Bill 2497 would impose an as-yet-undefined tax on guns and ammunition to fund school resource counselors and police officers.

AB 2303 and AB 2560 would create a new tax of up to ten percent on small business vendors who contract out either with private prisons or with the California Department of Corrections.

Senate Bill 623 would establish a precedent-setting tax on residential water use. For now, local water agencies have joined with taxpayer advocates to vigorously fight this levy.

Assembly Bill 2486 would impose a $100 million tax on opioid manufacturers and distributors to fund prevention and treatment programs. Ultimately, this tax will be passed onto consumers, especially to patients who use opioids appropriately to manage pain. As an issue of statewide concern as well as a legitimate public health issue, opioid treatment should also be financed out of the General Fund. …

Click here to read the full article from the Riverside Press-Enterprise

California bans local soda taxes until 2031

SodaA new push by the beverage industry is slowing the expansion of soda taxes in California and elsewhere.

California cities pioneered soda taxes as a way to combat obesity, diabetes and heart disease, but the Legislature and Gov. Jerry Brown on Thursday bowed to pressure from beverage companies and reluctantly banned local taxes on soda for the next 12 years.

It follows similar bans recently passed in Arizona and Michigan. Voters in Oregon will decide on a statewide ban in November. The American Beverage Association, which represents Coca-Cola, PepsiCo and others, has backed the moves after several cities passed taxes on sugary drinks in recent years.

California’s ban is part of a last-minute maneuver to block a beverage industry-backed ballot measure that would make it much harder for cities and counties to raise taxes of any kind. The ABA said in a statement the legislation is about keeping groceries, including drinks, affordable.

Lawmakers approved the proposal despite deep reluctance. …

Click here to read the full article from ABC7 News

Gas Tax Repeal is Now Officially on the November Ballot

Gas TaxSetting the stage for a major statewide battle over how to pay for an estimated $67 billion backlog in highway, bridge and road repairs, a ballot measure to repeal California’s recently enacted gas taxes and registration fees officially qualified Monday for the November ballot.

Already, Gov. Jerry Brown and a powerful coalition of chambers of commerce, law enforcement, unions, firefighters, local transportation agencies and cities and counties have vowed to fight it.

“I will do everything in my power to defeat any repeal effort,” Brown said in a statement shortly after the Secretary of State’s Office announced the effort had qualified for the ballot. “You can count on that.”

John Cox, the Republican candidate for governor, didn’t waste any time, either, to voice his support for the repeal. …

Click here to read the full article from the San Jose Mercury News

After all these years, liberals are still wrong about Proposition 13

Howard-JarvisForty years ago this week, California voters began the modern tax revolt movement that spread across America like wildfire. The idea that citizens could take back control from an overreaching government helped to propel Ronald Reagan to the presidency. Reagan, who had a close friendship with Howard Jarvis, took his message of limited government to Washington and his message of freedom to the world.

Proposition 13 cut property taxes, put limits on their rise, and toughened the requirements for passing other tax increases. It passed overwhelmingly in June 1978, and ever since, liberals have failed to acknowledge how wrong they were about it — both in terms of politics and policy.

Two months before the vote, California’s then Gov. Jerry Brown (version 1.0), was quoted in the New York Times as saying “I don’t think there is one credible observer who thinks Proposition 13 will endure over the long period.” Forty years later, it’s Brown who is heading into the political sunset while Proposition 13 continues to protect grateful California taxpayers.

So-called “experts” were also wrong in their dire predictions about the harm that would be inflicted on California if Prop. 13 were to pass. One of the TV commercials run by the well-funded opposition campaign featured a doom-saying UCLA economist who predicted that California would be plunged into a deep recession if voters approved the measure. But in the years immediately following passage, California had an extraordinarily booming economy.

Progressives like to perpetuate another falsehood about Prop. 13 in their ceaseless efforts to divide and conquer the taxpayer coalition that supports the law. They seek to target the owners of business properties who, like homeowners, benefit from predictable taxes under Prop. 13. A false argument is advanced that during the 1978 campaign, voters weren’t told that Proposition 13 protections would be extended to business properties as well as homes.

This simply isn’t true.  The opponents of Prop. 13 themselves repeated that fact throughout the campaign and, specifically, in the official ballot pamphlet.

Perhaps the granddaddy of all lies about Proposition 13 is how it “destroyed education” in California. This falsehood is repeated so often and with such vigor that it is accepted as established fact by liberal elites and mainstream media. For example, just a couple of weeks ago, Sacramento mayor and former Senate leader Darrell Steinberg blamed Prop. 13 for “years of cutbacks to arts funding in public schools.” This despite record revenues being pumped into education. …

Click here to read the full article from the L.A. Daily News

Tax break for undocumented immigrants pushed by California Democrats

The California state budget could extend a tax break to low-income families of undocumented immigrants.

Assembly Democrats want Gov. Jerry Brown to expand the state’s Earned Income Tax Credit in such a way that people who do not have Social Security numbers can apply for it.

The proposal is meant to help poor Californians recover some of their state income tax. Last year, a household with two children and an adjusted gross income of up to $22,309 would have been eligible for a tax credit. The maximum credit for a family of that size is $2,467, according to the Franchise Tax Board.

The Assembly plan would expand eligibility to people with Individual Taxpayer Identification Numbers. They’re tax-processing numbers the IRS uses to collect tax from people who do not have Social Security numbers. …

Click here to read the full article from the Sacramento Bee