Can Taxpayers Be Grateful This Thanksgiving?

As inflation takes a bigger bite out of your turkey than you do, it may be hard to find reasons to be grateful. But the truth is we still have much to be thankful for this Thanksgiving.

Here’s a few reasons why.

In the Legislature, success is often measured not in how many pro-taxpayer bills are passed but by how many anti-taxpayer bills are stopped. And, in that regard, this past year was better than expected.

A bill that would create a California Universal Basic Income and proposed to pay for it either through a value-added tax, raising corporate taxes or implementing a tax on services died in committee. Another bill that would have created a wealth tax failed to receive a hearing before deadline. An attempt to raise the already highest in the nation income tax rate for Californians making over $1 million to as high as 16.8%, was held in its first committee. A bill to create a single-payer healthcare system, and double the state budget in the process, was tabled.

In all, eleven bills HJTA opposed failed to make it out of the legislature. Five bills we supported were signed by the governor. One bill we opposed was vetoed by the governor. Five bills we supported failed to get out of the legislature. Eleven bills we opposed were signed by the governor and one bill we supported was vetoed by the governor.

HJTA went 17 for 34 this legislative session. We batted .500. Not bad for a taxpayer group in California. For that, we should be grateful.

Click here to read the entire article at the Press Telegram

Do Progressives Support Gentrification?

Support is growing for the idea that parents can help their families climb the economic ladder by building generational wealth through property ownership. Surprisingly, this support has even been spotted in the opinion pages of the Los Angeles Times.

It’s surprising because the Times has previously taken a highly negative view of families being able to pass along intergenerational wealth in the form of real property. In a lengthy 2018 article about the effect of a voter-approved measure that allowed parents to transfer property to their kids without reassessment and a tax increase, Times reporter Liam Dillon focused almost exclusively on how the measure had benefited some very wealthy families. In particular, he objected to actors Jeff Bridges and Beau Bridges renting the Malibu home they inherited from their father, actor Lloyd Bridges.

The article complained that “The inheritance tax break . . . has allowed hundreds of thousands – including celebrities, politicians and out-of-state professionals and some of California’s most prominent families – to avoid paying higher taxes.” The article paid scant attention to the vast majority of property owners, ordinary people who inherited the homes their parents worked for 30 years to pay off.

The L.A. Times editorial board called for the elimination of the parent-child transfer protection, asserting that “there is no compelling public purpose or societal good in passing tax breaks through generations.”

Given its hostility to the constitutional protections that helped to preserve intergenerational wealth, we were surprised that the L.A. Times recently ran an op-ed piece with a very different view from their own columnist, Erika D. Smith. She wrote, “Now, all of a sudden, Black people who grew up poor or working class and managed to buy a modest home in the ’60s and ’70s — and, in some cases, pay it off — are finding that they own property that’s extremely valuable. In many cases, it’s a first for their families, this prospect of passing along real wealth to the next generation. After all, it’s one thing to inherit a house worth $350,000 that needs $100,000 worth of work. It’s quite another to inherit the same house, but it’s now valued at $1 million. There are only a few cities in the country where that’s even possible for Black people.”

Unfortunately, the children inheriting those million-dollar homes will receive a new tax bill along with the sympathy cards. The Times got its wish last November when Proposition 19 was narrowly approved, following an ad campaign that sold it as helping wildfire victims, disabled people and seniors. Many voters didn’t realize that Prop. 19 also repealed the parent-child transfer exclusion from reassessment that had been in the state constitution since 1986. Now, with only a few exceptions, property is reassessed to current market value when inherited.

That’s why the Howard Jarvis Taxpayers Association has put forward a ballot initiative, the Repeal the Death Tax Act, that would once again allow parents to transfer a home, and a limited amount of other property, to their children without triggering property tax reassessments.

Click here to read the entire article at the presstelegram.com

California’s budget process has devolved into a bad joke

Let’s face it. California’s budget process has devolved into a bad joke. The record amount of spending coupled with massive expenditures for wasteful, pork-barrel projects is bad enough. But the more insidious problem is the lack of budget transparency. This is not the way it is supposed to be.

As usual, Sacramento politicians are patting themselves on the back for passing an “on time” budget. True, the main budget bill was passed on June 13, two days before the constitutional deadline. But citizens would be mistaken to believe that the passage of the budget bill completes the budget process.

Ever since 2010, it has become common to enact politically motivated legislation as so-called budget “trailer bills” as a means to avoid meaningful analysis and public hearings.

What happened in 2010 that caused the budget process to be corrupted was the passage of Proposition 25, entitled the “On-Time Budget Act of 2010.”

Voters were told three things about Prop. 25: Budgets would be passed on time; it would increase budget transparency; and that legislators would forfeit their pay if the budget was not passed on time. All three were lies. Moreover, because the primary goal of Prop. 25 was to reduce the vote threshold for passage of the budget bill from two-thirds to a simple majority, it deprives the minority party of any meaningful input.

To read the entire column, please click here.

Healthcare tax for citizens, free healthcare for noncitizens

If there was any question whatsoever as to whether California has gone completely off the rails, proposals in the new state budget should remove all doubt.  Perhaps the most egregious of these involve changes in state law as they relate to health care.

As of this writing, those proposals have yet to be adopted by both houses of the legislature – which is constitutionally required to pass the budget bill by June 15th every year – but statements by legislative leaders have caused a great deal of angst among the taxpayer public.

First among the inexplicable ideas is the proposal to force citizen and legal immigrant taxpayers to pay a new healthcare tax in order to subsidize healthcare for California residents who are living in the country illegally. Yes, you read that right.  The tax that Gov. Gavin Newsom wants to impose is a penalty on all those who don’t comply with the “individual mandate.” If this sounds familiar, it should. The individual mandate was a key component of Obamacare at the federal level until the penalty was repealed by the Republican-led Congress in 2017.

If it passes, California would be one of only four states imposing a tax on those who won’t or can’t obtain the kind of health insurance coverage the government requires. The state-imposed mandate would parallel the federal mandate which, in 2016, amounted to $695 per adult or 2.5 percent of yearly household income, whichever was higher. The tax is projected by Newsom to generate about $1 billion over three years.

To read the entire column, please click here.

California May Be Reaching the Point of ‘Taxuration’


taxesThe phenomenon of “taxuration” occurs when taxpayers are so saturated with new tax-hike proposals that they start to rebel. According to a new poll, taxuration may have finally arrived in California, if hasn’t been here already.

Last week, the Public Policy Institute of California released the findings of a survey showing that a majority of likely voters in the state aren’t very happy with the tax burdens they are forced to pay. Most Californians say the state’s tax system is unfair, which is a reversal from the same question asked in March 2017. More importantly, a solid majority of likely voters in California think they pay more taxes to state and local governments than they should.

While perception is often not correlated with reality, it appears that Californians have a fairly realistic understanding of the tax burden in the state relative to other states. According to the report, “The public’s perceptions are somewhat in line with fiscal facts: California’s state and local tax collections per capita in 2015 were 10th-highest in the nation,” citing the left leaning Tax Policy Center. Note that another think tank, the Tax Foundation, ranks California even higher in tax burden.

It shouldn’t be surprising to anyone paying attention that citizens are reaching the breaking point on tax hikes. Every day seems to bring a new big tax-hike proposal emanating from the state Capitol. Just one example that popped up this week was a proposal to bring back California’s estate tax, which was repealed by voters in 1982. Other tax-hike proposals in the mix include higher income tax rates, a water tax, a soda tax, sales tax on services and a so-called “carbon intensity” tax. (Don’t ask.)

To read the entire column, please click here.

LAUSD’s Punishing Parcel Tax Proposal


LAUSD school busAmerica’s most dysfunctional school district has stepped in it again. The Los Angeles Unified School District (LAUSD), apparently coming to the shocking realization that there was no way they could pay for the horrible deal they just cut with the unions, has hurriedly placed on the ballot for June a new property tax that leaves no Los Angeles taxpayer unscathed.

That grassroots taxpayer interests would be opposed to the new levy is no surprise. But several business organizations, usually more tolerant of higher government spending — particularly for education — have had enough. Groups as diverse as the Howard Jarvis Taxpayers Association, the Los Angeles Chamber of Commerce, the Valley Industry and Commerce Association (VICA) and the L.A. County Business Federation (BizFed) have all announced their opposition. None of these organizations is anti-education. In fact, all are pro-education as long as there is demonstrable improvement in the education product we are all paying for. On this score, LAUSD falls way short.

At the core of the broad-based opposition is the abject lack of long overdue reforms at LAUSD.

The list of reasons to oppose the tax is long.

First, taxpayers would be wasting millions of dollars on a special election.

The LAUSD Board voted unanimously to put the tax increase before the voters in a special election to be held on June 4, 2019. The cost of the special election is $12.5 million.

The tax would add hundreds of dollars to tax bills and rents and would do so in a convoluted manner. Rather than a flat tax on every parcel — which would be bad enough — the proposed tax increase would be 16 cents per square foot of building improvements on properties within the district.

That’s $160 for every 1,000 square feet. Property owners (and tenants) should be sitting down when they do the math on this one.

Seniors are ostensibly exempt from the tax, but not from rent increases.

To read the entire column, please click here.

What Recent Pension Ruling Means for California’s Taxpayers


pension-2Last week, the California Supreme Court issued a ruling in Cal Fire Local 2881 v. CalPERS, a case involving public employee pensions. For taxpayers, the decision was a mixed bag. On the plus side, the court refused to find a contractual right to retain an option to purchase “air time,” a perk that allowed employees with at least five years of service to purchase up to five years of additional credits before they retire. Under this plan, a 20-year employee could receive a pension based on 25 years of contributions.

On the negative side, the high court left intact, for now, the so-called California Rule, which has been interpreted as an impediment to government entities seeking to reduce their pension costs. The rule, unique to California, provides that no pension benefit provided to public employees via a statute can be withdrawn without replacement of a “comparable” benefit, even as deferred compensation for services not yet provided.

The unanimous 54-page opinion by the Supreme Court resulted in a wide variance of headlines and social media posts. The Associated Press read “California’s Supreme Court upholds pension rollback.” Ironically, a conservative reform group sharply criticized the decision for failing to repeal the California rule outright while another conservative policy organization called it a “victory for taxpayers.”

So what was it?

To read the entire column, please click here.

Legitimate Lawsuit Against Trump? Or Political Posturing?


donald-trump-2The big news last week was the lawsuit filed by California and 15 other states challenging President Trump’s declaration of an emergency related to border security and the building of a physical barrier on the southern border. The reaction was a great deal of political hyperventilating from both sides of the political spectrum.

So, after everyone has taken a breath, what should rational taxpayers think about this lawsuit and the dozens of other lawsuits filed by California against the Trump administration?

Let’s stipulate that there are times when litigation is appropriate between states and the federal government. The United States is a constitutional republic with a political structure based on federalism. Brilliantly, our founding fathers (with some intellectual help from our founding mothers, no doubt) devised a system of divided government. Not only was the federal power divided into three branches, but substantial political power was reserved to the states via the Tenth Amendment.

Controversies between the federal government and the states have been bitter and, when one considers the Civil War, they’ve been violent as well. Fortunately, modern disputes between the federal government and the states involve lawyers, not bullets.

To read the entire column, please click here.

Don’t Derail the Bullet Train Derailment


Gov. Jerry Brown, Anne GustEven before California’s High Speed Rail bond proposal appeared on the ballot in November 2008, the Howard Jarvis Taxpayers Association commissioned a study in conjunction with the Reason Foundation because of deep concerns about the project’s viability. The study, published in September 2008, just prior to the election, confirmed our worst fears. Specifically, the executive summary of the nearly 200-page document warned:

“The CHSRA plans as currently proposed are likely to have very little relationship to what would eventually be built due to questionable ridership projections and cost assumptions, overly optimistic projections of ridership diversion from other modes of transport, insufficient attention to potential speed restrictions and safety issues and discounting of potential community or political opposition. Further, the system’s environmental benefits have been grossly exaggerated, especially with respect to reduction of greenhouse gas emissions that have been associated with climate change.”

In the ensuing decade, it became increasingly clear that every negative prediction about the project came to be realized. Even initial advocates of the project, including a former chairman of the High Speed Rail Authority, turned against the costly boondoggle.

The capstone of criticism came at the end of 2018 when California’s own state auditor issued a scathing report excoriating the project’s mismanagement, waste and lack of transparency. To understand just how damning the HSR audit was, just consider the subtitle: “Flawed Decision Making and Poor Contract Management Have Contributed to Billions in Cost Overruns and Delays in the System’s Construction.”

To read the entire column, please click here.

Changing Prop. 13 Could Worsen Housing Crisis


property taxFor four decades, Proposition 13, the property tax reform that passed in 1978, has been blamed for many of the ills that have befallen California.

Working with Howard Jarvis, a Proposition 13 co-author, and later running his taxpayers association, I have followed the multiple attacks on the measure, many silly and outrageous. Now the attacks are amped up along with a supposed, but flawed remedy.

In discussions of where new money would come from to solve the Los Angeles Unified School District labor dispute and teacher’s strike, a ballot measure designated for the 2020 statewide ballot to change to Proposition 13 often is mentioned.

The initiative promises to split the property tax roll between commercial and residential properties.

If approved, the split roll initiative would come with long-term problems and exacerbate issues that were raised during the teachers’ strike that would affect all of California.

Implementing a split roll would mean that commercial property would be taxed at market value. That would bring in more revenue to schools and local governments. But supporters of the split roll stop the discussion at that point, and fail to discuss the far-reaching consequences of undoing Proposition 13.

High housing costs were a constant refrain during the teachers strike. The lack of housing makes it more difficult for teachers to live near where they work, a curse for many middle class Californians.

Imagine what would happen if split roll were a reality. What do you think would happen when local governments would choose between green-lighting a commercial venture that would bring in gobs of new revenue for government as opposed to approving a housing project?

Just as taxpayers make adjustments to reduce their taxes, government officials embrace projects that will increase revenue. There are many examples of such behavior on both sides of the tax equation such as the infamous window tax of the 18th and 19th centuries in Europe.

In response, homeowners boarded up windows to avoid the tax. Tax collectors have similar reactions in the opposite direction. They will certainly okay revenue-producing developments ahead of housing projects.

Apparently there was no concession by the teachers’ union in the strike settlement to control pensions and health costs, two items that are driving the district toward insolvency, according to the Los Angeles County Board of Education and Los Angeles Unified School District Superintendent Austin Beutner.

Pension and heath costs are a big problem for local and state governments, just as they are for schools. The alternative is to turn to taxpayers to fund these generous benefits while taxpayers themselves struggle with their own retirement and health care situations.

But there is an element to the troubled pension situation that could be further damaged by a split roll. Many pensions rely on commercial properties to increase portfolios. With raised property taxes, commercial properties will be devalued and another debilitating weight would be added to government pensions holding business properties.

Under Proposition 13, property tax revenues have increased well beyond inflation and population growth. The property tax under Proposition 13 is the steadiest tax in the state because during economic downturns only recently purchased property is re-evaluated downward.

Under Proposition 13, most property taxpayers continue to pay the expected taxes due while both sales and income taxes reduce sharply in a recession.

If all commercial property tax rates are pegged at market value, and a recession hits, commercial property would be reassessed downward and local and school budgets will take a huge hit.

In addition to these problems, business owners forced to pay higher property taxes would pass those costs onto consumers, and that would diminish the state’s economy.

For residential property taxpayers there is another thing to keep an eye on. Is the move toward a split roll the first step to taking away Proposition 13 protections from homeowners?

At a recent speech to the Palos Verdes Chamber of Commerce, noted Los Angeles area economist Christopher Thornberg raised the issue saying he would flip the split roll, keeping Proposition 13 on commercial property and getting rid of it on residential property to help local governments fund services related to homes.

You can bet the idea of eliminating all of Proposition 13 is on the mind of those advocating more and more government spending and the split roll ballot fight will be the first test.

This article was originally published by Fox and Hounds Daily