Biden’s Proposed Capital Gains Tax Rate Would be Highest for Many in a Century

The Biden administration is proposing to tax long-term capital gains at ordinary income rates for high earners, which will bring the top federal rate to highs not seen since the 1920s. Taxing capital gains at a lower tax rate than ordinary income is partly a feature of savings-consumption neutral taxation.

The highest capital gains tax rates in history date to the 1920s, when capital gains income was subject to a maximum rate of 77 percent. Those high rates were reduced starting in 1922 due to concerns about decreasing capital gains tax revenues, and going forward, long-term capital gains have mostly been taxed at lower rates than ordinary income.

Biden’s proposal would reverse that—raising the top rate on capital gains up to 43.4 percent when including the 3.8 percent Net Investment Income Tax (NIIT). While not as high as the rates seen in the 1910s and 1920s, a 43.4 percent top rate would be the highest in modern times. (Of note, some taxpayers experienced a top rate of 49.875 percent in 1978 due to other tax interactions.) …

Click here to read the full article from the Tax Foundation.

California Poised for Massive State Budget Spending Increases

Viewers of President Biden’s speech to Congress last week may have been struck by size of the trillions in new federal spending the President outlined in his speech.  In advance of the President’s speech, Democrats in the California Legislature had a message for Washington – hold my beer!

Assembly and Senate Democrats recently outlined their respective spending priorities in advance of the release of the Governor’s May Revise budget proposal.  As the competing plans show, the two houses are trying to one-up one another in seeing how many tens of billions they can spend.

Lawmakers currently estimate California’s budget windfall at $15 to 20 billion.  Speaker Rendon’s budget advisor Jason Sisney tweeted that this could be in addition to the $15 billion windfall projected by Newson in January.  None of these figures count the estimated $26 billion California stands to receive from the Biden stimulus plan.

In their “Build Back Boldly” plan, Senate Democrats say they are “embrac(ing) the once-in-a-generation opportunity to make bold transformative progress for the people of California.”  In this case, transformative progress means massive spending increases.  Here are some highlights:

  • The plan “takes a major first step and lays the groundwork for universal care and education for children ages 0 to 3.” The Governor’s Master Plan for Early Learning and Care estimates that its similar plan would cost between $2 billion and $12 billion.  As PRI’s Lance Izumi and Kerry McDonald wrote of universal government pre-school, “data do not support the call for increased taxpayer investment in government preschool.”
  • Launching a “$20 billion, five-year commitment to end the crisis and reduce homelessness” largely by increasing spending on acquiring motels and other new homeless housing. Wayne Winegarden, co-author of PRI’s new book No Way Home says that “instead of just throwing more money at the problem,” government “funding should be focused supporting non-profit organizations nationwide that are doing a much more effective job of addressing the individual needs of those living in homelessness than government ever can.”
  • It “makes a major $2 billion commitment to address and mitigate the impacts of drought,” but fails to include funding for water storage. As Steven Greenhut wrote in his recent PRI book Winning the Water Wars, lawmakers should prioritize “creating water abundance, rather than on having political fights over a declining water supply.”
  • The Senate Democrat plan would also “expand access to Medi-Cal to all income eligible Californians regardless of immigration status.” When previously considered by the Legislature, it was estimated to cost $163 million the first year, and $255 million the following year.  As PRI’s Sally Pipes told CALmatters in 2019, “it would make it even harder for those on the program to find a doctor and get care.”
  • It would also expand the state’s effort as car salesperson, it would “provide-up front funding to help the state reach its goal of 1.5 million ZEVs on the road by 2025” through “$175 million per year for three years to support the state’s Clean Vehicle Rebate Program.” As Wayne Winegarden documented in his study “Costly Subsidies for the Rich,” 79 percent of taxpayer-funded electric car subsidies are claimed by households making more than $100,000 per year.

Assembly Democrats call their plan a “budget of opportunity,” and outline four priorities:  preserving by restoring past budget cuts to favored programs, responding to the ongoing Covid-19 pandemic, protecting those most impacted, and “target(ing) stimulus to help Californians rebuild the economy.”

Signaling their willingness to reverse former Gov. Jerry Brown’s longstanding rule rejecting one-time funds for new, ongoing programs – a trend continued by Gov. Newsom – Assembly Democrats aim to “provide multi-year funding packages with one-time federal and state funds.”

The Assembly Democrat plan makes “affordable housing” a priority, which PRI’s Kerry Jackson says is “a distraction.” Arguing that what California needs most are homes of all types, he cites research from the nonpartisan Legislative Analyst’s office showing that building new market-rate housing indirectly increases housing supply for all Californians, including low-income residents.

Gov. Newsom will put his stamp on the 2021-22 budget on May 10 when releases the May Revise, officially kicking off the sprint to pass the budget before the June 15 deadline.  Whatever form it takes, California is on track for the largest increases in both one-time and ongoing spending in recent memory as the final budget takes shape.

Tim Anaya is the Pacific Research Institute’s senior director of communications and the Sacramento office.

This article was originally published by the Pacific Research Institute.

There’s No Denying The California Exodus

With human migration, there is something called the “gate test.” If a nation opens its gates, do people come in or do they flee? With the Berlin Wall, it was obvious. Once the wall fell, there was a rush of humanity from East to West, not the other way around. The “gate test” applies to states as well.

The California gates are open and people are going, well, elsewhere. That fact was made abundantly clear this past week when Census results were announced and California lost a congressional seat for the first time in the state’s history.

As Assemblyman Kevin Kiley put it on Twitter, “We just lost a seat in Congress. If the California Exodus is a myth, apparently the Census Bureau is in on it.” In the last decade, 1.3 million more people left California than came in from other states. And, it’s accelerating. Half a million people have left for other states in the last two years alone.

Boosters of the status quo were quick to point out that California’s population actually grew overall, it just didn’t grow as fast as other states. But that misses the point.

Net domestic migration is a measure of movement among states. Unlike population, it ignores international migration as well as number of births over deaths. Two decades ago, policy leaders and the media started paying attention to the fact that California was trending toward net domestic outmigration. Governors from other states, most notably Rick Perry from Texas, were openly poaching businesses from California arguing, correctly, that their states were better for businesses as well as the people they employ.

To read the entire column, please click here.

San Francisco Set To Approve Reparations Task Force

The San Francisco Board of Supervisors is slated to approve a 15-member African American Reparations Advisory Committee on Tuesday, which would make the city the first of its size to take such a concrete step to explore what reparations could look like for its Black residents.

Over the next two years, the committee plans to explore possible financial compensation and other recommendations for the descendants of enslaved people. It would examine how slavery, segregation, redlining, predatory financial practices, and other social and political ills contributed to the mistreatment and subsequent wealth gap and other disparities affecting Black people in the city.

In January 2020, District 10 Supervisor Shamann Walton announced legislation calling for reparations for Black people whose ancestors were enslaved and those who were discriminated against under Jim Crow laws enacted at the state and local levels to enforce segregation. …

Click here to read the full article from the San Francisco Chronicle.

Biden’s Plan To Have IRS Audits Target The Wealthy

President Biden has a straightforward idea to help pay for his massive infrastructure and economic reform package: Give the Internal Revenue Service more money to collect the taxes the government is owed.

On Wednesday, Biden proposed giving the IRS $80 billion and more authority over the next 10 years to crack down on tax evasion, especially by wealthier Americans and corporations.

The revenue recouped would be the largest source of funds for his $4-trillion infrastructure and jobs plan to help the economy recover from the effects of COVID-19 shutdowns.

Why is this a big deal? Doesn’t the IRS already do audits?

Not as much in recent years. You’d be surprised. …

Click here to read the full article from the L.A. Times.

California Democrats Propose $3.41 Billion Drought Spending Plan

Senate Democrats proposed a $3.41 billion spending plan on Thursday to fight the growing drought crisis in the state.

The drought, caused by lower precipitation this year, the mountain snowpack half what it usually is, high demand for water, and the state wasting many water resources, has spurred Governor Gavin Newsom to issue emergency drought declarations and has led to increased worry from urban residents, farmers, and environmentalists alike.

However, due to budget precautionary measures made in response to the COVID-19 crisis, California has brought in $16.7 billion more than expected so far this year. Combined with the $26 billion sent by the federal government, lawmakers decided that some of the money should be spent on the drought emergency.

“We live in an unprecedented time and I think we shouldn’t have unprecedented patience,” explained Senator Toni Atkins (D-San Diego) on Thursday. “That’s very clearly happening throughout communities in California because we understand what’s at stake. We really have an opportunity now and we should take advantage of it.”

According to the proposal, the largest portion of the spending, around $1 billion, would go towards paying off the COVID-19 recession-caused accumulated debt of unpaid water bills in California. Around $500 million would go into trucking emergency water supplies and the building up of the water system to help connect different water systems to avoid droughts happening in different areas. Communities could get grants for as much as $5 million under the plan if they were tied to water reliability, water quality, and increasing water supplies.  Another $500 billion would go toward grants for homeowners and cities to replace grass lawns and medians with natural landscapes that don’t use as much water, as well as farm irrigation upgrades.

$600 million would go to ancillary water efforts, with $400 million of that to be spent on recycled water projects and stormwater management, with the rest going towards increasing the water supply through efforts such as groundwater recharge projects and ground water banking improvements. Fish and wildlife protection would get $285 million under the proposal, with much going into state water buyback programs to replenish the Sacramento and San Joaquin river valleys to save fish in those areas. Other funds would go to salmon monitoring programs.

Additionally, $350 million would go towards starting up Sustainable Groundwater Management Act (SGMA) endeavors that would reduce groundwater pumping while also removing up to 1 million acres of farmland from being used because of the restrictions, with $75 million into technological water sensing improvements for better water and drought predictions in the future.

A $3.41 billion proposal

The $3.41 billion proposal would be funded from several different sources. $1 billion would come from federal COVID-19 relief funding, $145 million would come from reallocated California Water Commission funds that were intended for dam upkeep, and the rest coming from state tax dollars.

Governor Newsom and Assembly Speaker Anthony Rendon (D-Lakewood) both indicated willingness to work with the Senate on their proposal through their own spending proposals that will be revealed in the next few weeks.

And, despite being received well by different organizations, such as the California Farm Bureau, many others have blasted the plan for putting much of the burden and sacrifice on the backs of farmers.

“We’ve been begging for more water for years,” explained Central Valley farmer Roscoe Flanagan to the Globe on Thursday. “They want to limit groundwater usage while also diverting even more water back into rivers. While  the irrigation improvement are a good step forward, the rest of this not only puts us two steps back, but it knocks us on our feet.”

“We need water, pure and simple. While money is nice to have, water is key here not only for our survival but for agriculture to survive as a whole.”

“A lot of this state’s fresh water is wasted. This bill doesn’t change that fact. Not the way I see it.”

The Senate drought proposal will likely be negotiated on in the coming weeks following the release of Governor Newsom’s budget proposal for next year.

Evan V. Symon is the Senior Editor for the California Globe. Prior to the Globe, he reported for the Pasadena Independent, the Cleveland Plain Dealer, and was head of the Personal Experiences section at Cracked. 

This article was originally published by the California Globe.

Dozens of Arrests in EDD Jobless Fraud Cases

A California task force formed five months ago to investigate fraudulent unemployment claims involving incarcerated people said that there have so far been 68 arrests and that it has opened 1,641 other inquiries.

The report last week by the statewide task force comes after local prosecutors warned that potentially tens of thousands of fraudulent claims have been filed involving people in prison and jail that could total $2 billion.

Gov. Gavin Newsom announced in November that he was asking state officials to form a task force with federal prosecutors and county district attorneys who had already begun investigating improper claims filed in the names of people behind bars, including those on death row.

The Newsom administration released an update on its investigations April 26, shortly after Secretary of State Shirley N. Weber reported there were sufficient signatures to qualify for the ballot an effort to recall the governor. …

Click here to read the full article from the L.A. Times.

Newsom Recall Helps Orange County Republicans

Photo courtesy of DonkeyHotey, flickr

Heading into the 2020 election, Orange County Republicans had about 2,000 volunteers helping to knock on doors and make phone calls for GOP candidates.

Today, party chair Fred Whitaker says his party is on the verge of tripling that army, and that some 6,000 people have contacted the local GOP asking how they can help.

In terms of political engagement, 2021 should be an off year. Instead, the effort to recall Democratic Gov. Gavin Newsom has been a shot in the arm for the Republican Party of Orange County, which clawed back two House seats in November but has otherwise been losing ground for years as the county has become more diverse, more Democratic, and less supportive of Donald Trump-brand Republicanism.

GOP leaders believe the energy that’s boosting the Newsom recall effort will extend though next year and help Republicans hold or win back House, state and local seats in the 2022 midterms. …

Click here to read the full article from the OC Register.

San Francisco’s Substance-Abuse Crisis

The most important walk you can take in San Francisco is not to the grand Golden Gate bridge, down crooked Lombard Street, or to the brightly painted Victorians in Alamo Square. It’s to the city’s large and gritty sixth district, which contains the Tenderloin, Civic Center, and South of Market neighborhoods. What you’ll find there will shatter any preconceived notions about homelessness you might have heard from activists, city departments, and elected officials. You’ll realize that San Francisco doesn’t have a homeless problem—it has a substance-abuse crisis. And Project Roomkey, California governor Gavin Newsom’s hotels-for-homeless plan that he’s touting as a model for the rest of the country, won’t help any more than a band-aid will cure a cancer patient.

Block after block, you’ll see thousands of people who are barely alive. Some are alone; others are piled on top of one another, running into traffic, or standing slumped over, unconscious. They’ll be injecting or smoking heroin, fentanyl, and methamphetamine in front of you, unaware or unfazed by your presence. Scabs cover their faces and bodies, limbs are swollen red and blue, often bloody and oozing pus. You’ll notice the garbage, rotting food, discarded drug detritus, and feces surrounding them. A shocking number are mere teenagers, but many are old or have aged well before their time.

Your immediate reaction will probably be grief and horror. How can we treat our fellow human beings so cruelly, and how did we, as a society, allow things to get this bad? If we can’t admit these individuals into hospitals today, we should at least erect mobile hospitals to deliver critical medical, psychiatric, and addiction treatment before it’s too late.

Yet Newsom has declared that with programs like Project Roomkey, the United States can solve homelessness. To see the results of the program is to know what a bizarre claim this is. While a small portion of the unhoused are healthy enough to shift into and benefit from such housing, the vast majority are not—and their troubles won’t be alleviated by a hotel room.

San Francisco launched Project Roomkey last year, ostensibly as a way to thwart the spread of Covid-19. At last count, approximately 8,000 people live on San Francisco’s streets, and starting in April 2020, a few thousand were routed to leased “shelter-in-place” (SIP) hotels and motels. However, since so many were living outside as a direct result of substance use (or mental illnesses associated with or exacerbated by it), lethal drug activity flourished in and around the buildings.

Then came the body count. In 2020, San Francisco saw 713 fatal drug overdoses, mostly from fentanyl. Nearly three-quarters perished while isolated inside the hotel rooms and supportive housing provided by the city. Six died in the Hotel Whitcomb, a designated SIP hotel, in a single month.

The reason: Project Roomkey hotels offer no addiction-recovery treatment or mental health care. Nor is there a sobriety requirement. Residents do, however, get plenty of fresh needles, fentanyl foil, and other drug supplies, courtesy of the harm-reduction teams. As Dr. Hali Hammer of San Francisco’s Department of Public Health admitted in an April 2021 New York Times story on the city’s epidemic of drug fatalities, “What we as the public health department are responsible for is preventing death by giving people the resources they need to use safely.” The entire system erodes the desire and willpower to accept detox and rehab. It’s easier and less painful, at least in the short term, to use in a hotel.

Crime has also surged around the SIP motels and hotels, as people score from dealers just outside the lobbies. Shootings, robberies, and car break-ins have become commonplace, as have open-air drug use and sexual acts performed in broad daylight—an alarming change for neighborhoods like the Marina, which not long ago did not have a high population of unhoused, addicted people.

Now Project Roomkey is transitioning from leasing rooms in hotels and motels to purchasing buildings and converting them into permanent housing for unsheltered individuals. Funds are suddenly flowing for the program. FEMA offered partial funding, but earlier this year President Biden signed an executive order directing the federal government to reimburse program costs fully.

Newsom and San Francisco officials are aware that Project Roomkey does nothing to heal homelessness because the absence of a home isn’t the real sickness. The self-described experts will continue to blame income inequality, lack of affordable housing, or class and racial disparities. They won’t admit—at least not publicly—that the problem is almost entirely driven by addiction.

Meantime, the tide of people coming into the city, drawn by easy access to cheap, potent narcotics, will continue unabated. Some may get a hotel room, but most will become fixtures on the streets. Few, if any, will get better. Based on current projections, more than 1,000 people will die from overdose in 2021. Their descent will be both agonizing and inhumane.

It doesn’t have to be this way in San Francisco, in California generally, or across the United States. Funds allocated to programs like Project Roomkey should go toward providing vital medical, psychological, and addiction treatment to those in desperate need. Go ahead. Call it a pipe dream.

Erica Sandberg is a widely published consumer-finance reporter based in San Francisco. As a community advocate, she focuses on homelessness and crime and safety issues.

This article was originally published by City Journal Online.

Medicare for All Would Put Even More Strain on Doctors

Medicare for All is back on Congress‘s agenda. More than 100 House Democratsled by Reps. Pramila Jayapal of Washington and Debbie Dingell of Michigan, are behind a bill that would outlaw private insurance and enroll every American in a government-run health plan within two years.

They’re joined by a surprisingly large share of health care professionals. National Nurses United, Physicians for a National Health Program and the American College of Physicians—the nation’s second-largest doctors’ group—have all come out in favor of a government takeover of the country’s health insurance system.

Doctors have moved leftward. More now identify as Democrats than Republicans, according to Gallup. But they may want to think twice about embracing Medicare for All, which would slash their pay, wrap them in red tape and lead to worse care for their patients.

Under Medicare for All, physicians would have to accept Medicare’s rates for every single patient they see. Those payments would be much lower than what doctors currently receive from private insurers—40 percent lower, according to an analysis of a previous bid for Medicare for All championed by Sen. Bernie Sanders (I-Vt.) that would’ve put everyone onto government health care within four years.

That would have significant downstream effects on the supply of doctors. Smart young people won’t go into medicine if there are more remunerative opportunities elsewhere. Practicing doctors, meanwhile, might leave the workforce for better-paying gigs in, say, pharmaceutical research or the corporate world. Those near retirement might hang up their stethoscopes earlier than they otherwise would have.

One study estimates Medicare for All would lead to a nationwide loss of more than 44,000 doctors by 2050.

Our communities can ill afford to lose doctors. Already, there is expected to be a shortage of up to 139,000 doctors by 2033, according to the Association of American Medical Colleges.

Medicare for All would wallop hospitals, too. Nine in ten would run consistent deficits under single-payer, according to research from FTI Consulting. Staffing cuts, consolidation and outright closures would follow.

People in wealthier locales might be fine. But patients in rural or traditionally underserved areas might lose the only health care facilities they have.

As demand for care outstrips supply, patients will suffer. An analysis published by the nonpartisan Congressional Budget Office last year predicted “increased congestion in the health care system—including delays and forgone care” under single-payer.

The experiences of other developed countries with government-run health care should serve as cautionary tales.

For years, the United Kingdom’s National Health Service has been plagued by a chronic shortage of health professionals. Even though the government set a goal in 2015 to increase the number of general practitioners by 5,000 by 2020, the workforce actually shrank during that period.

Those still practicing within the U.K. health system are overworked. A recent survey found that one in ten physicians see 60 patients each day, twice the recommended limit. Three of the country’s leading health think tanks assert that, thanks to the shortage of clinicians, patients will have to turn to pharmacists and physiotherapists for care they used to get from doctors.

Medicare for All would dragoon doctors into the service of the state, which would expect them to work longer hours for less pay. Patients would be collateral damage.

For themselves, and those they care for, doctors would be wise to reject single-payer.

Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). Follow her on Twitter @sallypipes.

This article was originally published by the Pacific Research Institute.