Top 5 Taxes You May See on 2016 Ballot

March 13, 2015 By Joel Fox 1 Comment

Last June, I wrote a column forecasting from least likely to most likely the tax increase measures that might be on the November 2016 ballot given the conversations going on then.

Time for an update.

As is nearly always the case in the political world, situations and strategies change. What’s being discussed most heavily today is not necessarily what will be pushed to the ballot for voters to decide in 2016.

By measuring fact, rumor and innuendo I’ll offer my reading of the top five tax possibilities for the November 2016 ballot.

First, a word about those that did not make the list this time. Previously, a soda tax was on the list but that possibility seems to have faded for the moment. Instead, advocates are considering labeling sodas with more information about the sugar content.

There is a constant buzz about restructuring the entire tax system and that has been heightened by the introduction of a bill by Senator Bob Hertzberg that would re-do the tax system, cut some tax rates, and introduce a service tax. Hertzberg hasn’t developed the plan in full as yet. Both the left and the right have attacked the idea. However, he also is working closely with the Think Long Committee, which has the resources to qualify a measure for the ballot. As of now, the idea is not ready for consideration.

To the list, then:

  1. OIL SEVERANCE TAX. Previous Ranking #3.

Whether the oil severance tax initiative moves forward depends on one man – hedge fund billionaire Tom Steyer. He said he would rather work through the legislative process but the bill would unlikely pass the legislature. Steyer also is said to be interested in promoting an initiative that would require a two-thirds vote in local communities to approve fracking for oil. While he has the resources to do more than one measure, the odds are he would focus on just one, if any.

  1. SURPLUS! NO NEW TAXES. Previous ranking: Unranked

Okay, this is obviously not a tax increase measure. However, with the recent announcement of one billion unexpected dollars in the state treasury many experts predict that the state budget will have a surplus of two billion dollars or more. Under such conditions, some observers suggest new taxes won’t fly with the voters, so why try? A lot will depend on the fiscal situation heading into next year’s budget, but even if the economy holds steady and the budget is in good shape, it is hard to imagine there won’t be at least one tax increase measure on next year’s ballot. Still, the chances are more likely today than they were a year ago that a surplus could stall the tax increase movement.

  1. SPLIT ROLL. Previous ranking: #2

While there is still an on-going grassroots effort to promote a split roll property tax requiring business property to be taxed on a different basis than residential property, big players have yet to commit to funding such an initiative. Certainly, there would be big money spent to oppose such a measure so both sides are considering the issue carefully. The school establishment would have to step up to support a split roll and consider how a property tax on the same ballot with an extension of the Prop 30 taxes will play. Also, a school bond measure may be on the ballot attracting attention from the school folks. A couple of sources tell me a little air has come out of the split roll effort, so while it certainly hasn’t gone away, it drops to #3.

  1. CIGARETTE TAX: Previous ranking: #4

The possibility of a cigarette tax on the ballot has moved up simply because some of the items in front of it moved down in the rankings. There really hasn’t been a change in the emphasis of a cigarette tax by proponents. They will try the legislative route but if unsuccessful will consider going to the ballot where they were very close to passing a measure the last time they tried. No Lance Armstrong on their side this time, which is a good thing, although they’ll miss the money his group donated.

  1. EXTENSION OF PROPOSITION 30. Previous ranking: #1

No change here. Many insiders believe Proposition 30 would be the easiest tax to pass since it is already levied. Especially if the sales tax piece is removed, many voters would not directly feel the tax’s pinch. All the spending interests may not be happy since schools get most of the money, but extending Prop 30 still stands as the most likely tax measure to be on the ballot. The biggest question: What will Governor Brown say about continuing the “temporary tax?”

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

Follow Joel Fox on Twitter @1JoelFox1

Originally published by Fox and Hounds Daily

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Why Does Nobody Want to Vote in L.A.?

February 24, 2015 By Joel Fox 3 Comments

It seems Los Angeles County is testing the old philosophical question: What if they gave an election and nobody came? The most populous county in the state had the lowest percentage turnout in last November’s election.

While 42 percent of state voters turned out for the general election, Los Angeles County turnout was only 31 percent. The last mayoral city election in Los Angeles saw a turnout of a mere 23 percent.

The California Senate and Assembly election committees are chaired, respectively, by Sen. Ben Allen, D-Santa Monica, and Assemblyman Sebastian Ridley-Thomas, D-Culver City. The chairs called a joint oversight committee hearing on Feb. 20 to look for the reasons and solutions of the extremely low turnout in Los Angeles County. YouTube here.

The answer just might be a feeling of powerlessness among voters.

Loyola Law professor Jessica Levinson told the committee the low turnout in Los Angeles elections could be a case of voter apathy. Los Angeles is not a political town, she said. Everyone knows when the Super Bowl and the Oscars occur, but they don’t know when an election happens.

Many suggestions were made at the hearing on why there was a low voter turnout:

  • Voters believe their vote doesn’t matter;
  • The size of the county takes away the personalization of politics;
  • Lack of civic education in the schools;
  • Frequency of elections;
  • Lack of an interesting ballot;
  • Demographics in which the large minority populations which make up much of Los Angeles County’s potential voters have a history of not voting.

Major obstacles

All those items contribute to the low voter turnout. But are there really major obstacles to prevent voters from coming out if they cared to?

Some of those testifying to the committee seemed to think so. Common Cause’s Kathay Feng said the progressives who set up the rules for stand-alone local elections not only wanted a focus on local government, but they were also racist. They didn’t want certain people to vote and they were successful by setting up elections in off years.

Feng, who serves on the committee to move the Los Angeles city elections to coincide with national elections, a measure which will appear on the city ballot in March, said the convenience to the voters of combining elections will bump up the voting totals by as much as a third.

Still, Raphael Sonenshein, executive director of the Pat Brown Institute at Cal State, Los Angeles, may have touched on the reason citizens don’t engage in local elections. He argued that people believe the only election that really leads to change is the presidential election.

If that is so, then many of the suggestions made to increase the vote will probably only do so on the margins.

Change agents

Even if voting is made as convenient as possible — as Jessica Levinson suggested the time might come when everyone can simply vote by pressing some button on their iPhone — an important question remains: Do voters think those votes for local candidates create change?

Do citizens think they have the power through their votes to alter the direction of government? Or do they believe the institutions are so controlled and manipulated by insiders that voting is pointless?

There were higher turnouts in the past when it was arguably more inconvenient to vote.

The key to bringing voters to the polls, rather than constantly devising new systems to make it easier to vote, is for the voters to see themselves as important participants in governing.

Originally published by Fox and Hounds Daily

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10 Reasons to Support Mileage-based User Fees

February 5, 2015 By Joel Fox 11 Comments

The debate over gas taxes or mileage-based user fees to fund road construction and maintenance is heating up. Proponents of gas tax increases argue now is the time to proceed because lower gasoline prices would lessen the blow on consumers and blunt political opposition. In California, a commission to study road usage charges and establish a pilot program for mileage charges has begun meeting. Assembly Speaker Toni Atkins has revealed her quest for non-specific fees to pay for road maintenance.

Fuel taxes have been used as the prime method to fund roads since Oregon implemented a gas tax in 1919. Because fuel taxes are charged per gallon, the tax has dropped proportionately with the advent of electric, hybrid, and fuel-efficient vehicles.

Taxpayer advocates have complained that money for the roads has been used for other purposes, especially during the recession. Meanwhile, some electric car users say the gas tax should be increased as if there is no cost to the roads from electric vehicles even though electric car manufacturers and purchasers have received subsidies from the state.

Perhaps surprising to some, the idea of a mileage user fee is supported by the small government, libertarian Reason Foundation and one its founders, transportation expert Robert Poole.

Along with Adrian Moore, Poole produced a report last year supporting mileage based user fees for highways. While the study expressly deals with federal highways, the discussion over mileage base fees could also apply to state roads.

Poole and Moore list ten reasons why supporting a mileage user fee is the best way to fund transportation. As Poole summarized those reasons:

  • Reason 1: Per-mile tolling is a direct, rather than indirect, user fee. Motorists would pay for the amount of service they received; they would pay providers directly for providing that service; and they would know exactly how much they were paying and what they were getting for it.
  • Reason 2: Per-mile tolling is a sustainable long-term funding source for long-term infrastructure, which does not depend on the energy source used to propel the vehicles. Its transparency should help rebuild trust in the highway funding system.
  • Reason 3: Per-mile tolls can be tailored to the cost of each road and bridge, rather than being averaged across all types of roads, from neighborhood streets to massive Interstates; this ensures adequate funding for major highway projects like Interstate reconstruction and modernization.
  • Reason 4: Per-mile tolling reflects greater fairness, since those who drive mostly on Interstates will pay higher rates than those who drive mostly on local streets.
  • Reason 5: If per-mile tolling is implemented as a true user fee, it will be self-limiting, dedicated solely to the purpose for which it was implemented (and enforceable via bond covenants with those who buy toll revenue bonds).
  • Reason 6: Per-mile tolling will guarantee proper ongoing maintenance of the tolled corridors, since bond-buyers and other investors legally require this as a condition of providing the funds.
  • Reason 7: Per-mile tolling also provides a ready source of funding for future improvements to the tolled corridor.
  • Reason 8: Toll financing means needed projects, such as reconstruction and widening, can be done when they are needed, and paid for over several decades as highway users enjoy the benefits of the improved facilities.
  • Reason 9: A per-mile tolling system using all-electronic tolling can easily implement variable pricing on urban expressways to reduce and manage traffic congestion.
  • Reason 10: Per-mile tolling would be the first big step toward replacing fuel taxes with mileage-based user fees—something that most of the transportation research and policy community has concluded should eventually happen.

Concluded Poole: As this policy brief makes clear, the fuel tax was never an “ideal user fee”. It should be replaced with a direct charge for highway services that is sustainable, fair, efficient and—for major highways and bridges—tailored to the capital and operating cost of individual facilities. This system should not create privacy concerns by enabling governments to track where and when people travel, and should give motorists choices in how to pay for their miles traveled.

Others have argued that money for the roads should come from state surpluses or from re-directing revenues dedicated to the high-speed rail project.

The debate over road maintenance costs has begun in earnest.

Originally published by Fox and Hounds Daily

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Net Neutrality = Regulate My Competitor

January 13, 2015 By Eric Lindberg and Carlos Solórzano-Cuadra Leave a Comment

In a major development in the ongoing debate over net neutrality, President Obama announced his support for a strict regulatory regime to govern the Internet. The President framed the discussion around a good-faith need to protect innovators and entrepreneurs. Unfortunately, he has fallen for a cynical ploy that some Silicon Valley companies and advocacy groups are using to push an extreme regulatory agenda for the Internet.

Unfortunately, the innovative companies we take for granted to enrich our lives are not always the altruistic companies we think they are especially when it comes to exerting influence in Washington.

Take for example Netflix, who has transformed from a DVD mail order business to a dominant leader in streaming video. They have mastered the ability to provide almost any digital programming directly to smartphones, tablets, and TVs. What Netflix is not yet known for is the age-old practice many companies have come to rely on, known as “regulate my competitor,” or what economists call “rent-seeking.”

By hijacking the debate over network neutrality and conflating it with a regulatory arbitrage scheme to pad its bottom line, Netflix is putting its interest above all Internet users. The network neutrality debate has always been about treating all content on the Internet the same – no blocking or impeding traffic. Now, Netflix is trying to convince the Federal Communications Commission (FCC), to adopt a new proposal that would change the current bipartisan “light-touch” regulatory structure of today. Netflix and now President Obama want to “reclassify” broadband networks under 1930s rotary telephone laws that would make ISPs public utilities under the guise of no blocking or prioritization. However, making ISPs into utilities still won’t prevent prioritization, further revealing the “regulate my competitor” strategy Netflix has embarked on with other advocacy groups.

The Communications Workers of America recently noted that investment by the 11 largest publicly traded broadband companies rose from $56.5 billion in 2010 to $70.1 billion in 2013 while investment by content companies only rose from $9 billion to $13.2 billion in the same time frame. Clearly, the investments made by ISPs to expand Internet service dwarfs that of the content companies. ISP investments translate directly into good, U.S.-based union jobs, a situation not matched by the largely non-unionized global content companies.

It’s also important to remember that Silicon Valley’s giants rely on the investment that creates the robustness of these networks for their success. Public utility regulations will only dry up investment in networks – ultimately hurting the innovators the President and advocates claim to protect.

Analysts have noted that Netflix generates about 1/3 of all Internet traffic at peak times in the US. Traffic is so high it puts significant strain on the ISPs’ networks. To alleviate this strain, ISPs, for years, have made arrangements to connect directly with content companies in order to keep the Internet free from this congestion. These arrangements are a win for content companies, ISPs and consumers.

But these types of traffic routing arrangements, called “paid interconnection,” are not good enough for Netflix’s profit motives. Instead, by using the neutrality debate to try to force ISPs to deliver Netflix traffic for free over ISPs’ networks, subsidizing the delivery of Netflix’s massive content bandwidth. This would ultimately force all Internet users to subsidize Netflix’s bandwidth needs.

Instead of urging the FCC to regulate its competitors as public utilities, Netflix should be doing what many other content companies like Amazon and Google have done – make interconnection arrangements with ISPs or invest in their own networks to bring content closer to the end customer. This strategy will create high paying jobs in California and avoid age-old tactics like “regulate my competitor.”

This article was originally published on Fox and Hounds Daily

Eric Lindberg is Secretary-Treasurer Local 9423 and Next Generation Lead Activist for Communications Workers of America. Carlos Solórzano-Cuadra is CEO of the Hispanic Chambers of Commerce of San Francisco.
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Let’s Not Recount If Nobody Cares

December 7, 2014 By Joe Mathews 4 Comments

 

Assemblyman Kevin Mullin has received a good bit of publicity for his proposals for automatic, state-funded recounts in the event of very close elections in statewide races.

He’s probably right to do this. In very close elections — and Mullin is targeting those with margins of one-tenth of one-percent – the case is strong for having recounts should be automatic and full. The current system, with candidates forced to fund the counting and able to cherry-pick, doesn’t work.

But I’d add one big caveat – and amendment – to Mullin’s bill:

A turnout quorum for a recount.

Or in other words, don’t count if no one cares.

That’s right. To trigger a recount in a close race, there ought to be some evidence that people actually care about the election. There are far too many offices for which people don’t know the candidates. And there are many elections when turnout is painfully low.

So how could a turnout quorum work? I’d suggest a simple test: if fewer than half of registered voters eligible to vote in an election fail to turnout, then there can be no recount. If the public doesn’t care enough to show up and choose who represents them in an office, why should we spend the money on a recount?

Turnout quorums have been used in other countries—but in a different way. If not enough people show up, the election result doesn’t count. That’s problematic, but tying turnout to recount makes much more sense.

This would be healthy, for a couple reasons. It might create a small incentive for campaigns in tight races to turn out voters (and to be less reluctant to keep down the other guy’s votes). But any such effect is likely to be small.

More important, it would stir productive controversy. A few close, low-turnout races that don’t get a recount might force some focus on the fact that we vote on too many offices and on ballots that are too long. Maybe controversy would stir reforms. Like eliminating elections for statewide offices other than governor and secretary of state.

Most of us vote on the basis of party anyway. No normal person can learn enough to make informed judgments about so many candidates. And when we don’t know or care about the candidates, there’s no reason for a recount.

This piece was originally posted on Fox and Hounds Daily

Joe Mathews is a Connecting California Columnist and Editor, Zócalo Public Square, Fellow at the Center for Social Cohesion at Arizona State University and co-author of California Crackup: How Reform Broke the Golden State and How We Can Fix It (UC Press, 2010)

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“Unfinished Business”: Chuck Reed’s Just Getting Started On Pension Reform

November 18, 2014 By Heidi Siegmund Cuda 2 Comments

All Chuck Reed needs is $25 million, and that’s all he needs.

“For me, it’s unfinished business,” says Reed, the outgoing mayor of San Jose, California. “I’m stubborn, persistent, whatever you want to call it.”

He’s talking about his plans for a statewide pension reform initiative in 2016; the $25 million is the cost of taking the message to the streets. While some observers may have thought he’d abandoned reform after his abortive 2014 attempt, Reed says he’s just getting warmed up.

“The fight will continue,” he says. “I’m going to work on fiscal reform issues, on the state and national level.”

For Reed, it’s personal.

“The problem is still threatening my city,” he says. “Retirement costs continue to go up, and this year the costs ate up all my revenue.”

And this was after voters in San Jose passed pension reform.

Since 2005, the number of retirees in the California Public Employees’ Retirement System (Calpers) with six-figure pensions has tripled, and pension debt for local governments is expected to increase by as much as fifty percent over the next five years.

Reed says something’s gotta give.

“The legislature is not going to take action,” he says. “So the best approach is working at the local level to create political momentum with a statewide initiative, allowing voters to go over the head of the legislature.”

Although he’s still hashing out what the initiative will look like, he says the main thrust will be to give state and local governments authority to alter future pension formulas for current employees.

“The retirees are the last people who should be impacted because they’re already retired,” he says. “That’s why I focus on current employees, because they still have the capacity to earn. The younger employees understand that it’s something that’s not sustainable, and they are the ones who are going to get hurt.”

Among the members of Reed’s reform posse are Stephanie Gomes, a former vice mayor of Vallejo, who was also a member of its city council while it clawed its way through bankruptcy.

“Our elected officials have to get off their behinds and represent the people who elected them,” says Gomes. “I don’t have faith that’s going to happen, so it’s got to be the will of the people to get our fiscal house in order, to get it right for the taxpayers and the employees, who still deserve a pension. It has to work for both.”

Like Reed, Gomes is a Democrat who says she’s been painted “as a Republican, against working families.”

“The public sector labor unions have become what they were formed to fight,” she says. “It’s about them protecting their own interests and they were lucky enough to get those high pensions and benefits, and they’re not going to let them go without a fight.

“This fight is not about ‘R’ or ‘D,’ it’s about services that we’re not getting any more because of these high pensions.”

“Calpers is raising rates,” she says. “They can just hold our their hand and say ‘give it.’ Cities at some point are going to have to cry uncle. When they can’t pay Calpers, it’s all going to topple down, because cities are in a straightjacket.”

A spokeswoman for Calpers says they won’t speculate on the proposed ballot measure, but in regards to the 2013 initiative, Calpers commented “that any changes to pension benefit levels should be determined by the employer and the employees, and not at the ballot box.”

Gomes believes the only chance for change is at the ballot box. A turning point came for her during an all-time low on her time in city government.

“It was the night the Vallejo city council, in the middle of bankruptcy, still approved a new police contract that had raises for two years and free medical,” she says. “I’m in the minority and watching the lights go up, and it was the most painful moment of my career in public service. They were serving the special interests that paid to get them in office.”

Protecting the status quo is big business in California. Unions spent $85 million in 2012 to support Governor Brown’s tax hike and to defeat a measure that would have prohibited collecting union dues for political campaigns. Since 2002, the California Teachers Association has spent about $170 million on political campaigns, according to the National Institute on Money in State Politics. The CTA just spent $11.2 million on independent expenditures to re-elect State Superintendent of Schools Tom Torlakson against an education reform candidate.

Another California mayor working closely with Reed, Anaheim’s Tom Tait, says it’s about gaining the power to act locally.

“To even begin to fix an unsustainable system, California cities need the ability to locally negotiate future pension earning formulas,” says Tait. “It is clearly in everyone’s best interest to address this problem sooner rather than later. The longer the state delays, the fewer options there are, and none of them easy.”

Marcia Fritz, a pension reform advocate and Democrat who advised Governor Brown on his 2012 pension reform law known as PEPRA, says Reed and his team should be meeting with Brown now. In 2012, she helped convince Brown’s advisors the only way they’d get their Prop 30 tax increase passed is if they enacted pension reform.

Fritz says today, the song remains the same.

“Brown needs to give the voters something in order to get them to agree to extend the Prop 30 tax increase,” she says. “He may ask to make the tax increase permanent to keep teachers’ retirement funds solvent. So, he might just embrace Reed’s measure to get buy-in.”

She says the recent Stockton bankruptcy decision, where a federal judge declared pensions can be cut during bankruptcy, is spooking unions and that Reed can capitalize on this fear.

In a written statement, Calpers CEO Anne Stausball commented that the federal ruling is not legally binding on any of the parties in the Stockton case, and when Stockton got the greenlight to emerge from bankruptcy without cutting pensions, Stausball noted: “The judge recognized that the city’s employees and retirees have already made significant concessions.”

While Reed’s hitting the trail to raise the major funds needed for a statewide initiative, he’s got a few items of business to clear up. He’s waiting for a hearing date on a lawsuit against California Attorney General Kamala Harris over the description of a previous pension initiative. The lawsuit claims the initiative’s wording was fatally biased.

He also initiated a federal corruption probe into the San Jose Police Association, claiming its union president fouled up recruitment efforts. The SJPD counterpunched, initiating an investigation of Reed.

It’s all bare knuckle politics, and it all takes time, something California may be running short on.

Reed says he’s undeterred.

“The pain of doing nothing is worse than the pain of taking on the issue,” he says.

This piece was originally published at Fox and Hounds Daily

Heidi Siegmund Cuda is a Former Investigative Producer for Fox 11 News in Los Angeles and the Creator and Host of the Economic Series, “Saving the California Dream.” She is currently directing a film on the nation’s public pension crisis.

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