Gas Tax Fight and Memories of 1978

With the state government of California sitting on a budget surplus that exceeds $50 billion, Sacramento politicians can’t bring themselves to return a few dollars to middle-class taxpayers.

While the cost of consumer goods and services is rising rapidly, due mostly to feckless government policies, it is the cost of gasoline that truly sticks in the craw of average Californians. Conservatives in the Legislature, mostly Republicans, have accused the Democrats of intentionally running out the clock on providing gas tax relief before an automatic increase goes into effect on May 1st.

That accusation is well-founded.

Nearly a year ago, Republicans in the state Senate pushed for a “gas tax holiday,” including a full suspension on state gas tax collection for the current fiscal year.

The suspension could have easily been backfilled by the state’s overflowing general fund, which would protect transportation funding.

Later, they offered amendments formally requesting the suspension of the state gas tax and postponing the pending increase.

In the Assembly, who can forget the Democrats’ ambush of Assembly Bill 1638 by Assemblyman Kevin Kiley, another gas tax suspension proposal?

Again, by refusing to even hear the bill the ruling political class is revealed as wholly disconnected to the concerns of average citizens.

That’s too bad because a one year suspension of the gas tax would have reduced the cost of fuel by 51.1 cents per gallon, providing instant tax relief.

It is also an elegantly simple solution that would have been easy for state bureaucrats to administer.

While the majority party in the legislature has slow-walked gas tax relief, Gov. Gavin Newsom at least put the issue on the table by introducing some gas price relief in his original January budget as well as his March State of the State speech.

But legislative leaders in both houses rejected his proposal, falsely claiming that transportation projects wouldn’t be fully funded.

Rather, they said they would prefer some sort of direct payments to taxpayers but weren’t clear on who would get the money.

Which brings us to today, exactly where we were a year ago except that now, both the price of gas as well as the gas tax are higher.

It is no surprise that a recent PPIC poll reveals that record percentages of voters believe they are overtaxed. What is surprising, however, is why a majority of our elected representatives in Sacramento are turning a blind eye to the problem and not taking any meaningful action.

If past is prologue, political foot-dragging on tax relief can be very dangerous.

Click here to read the full article at the OC Register

Just Say ‘No’ To No-Bid State Contracts

During the past two years, Gov. Gavin Newsom’s administration has paid billions of dollars in secretive no-bid contracts with little to no transparency. Now Newsom is deploying his same secretive approach to a growing number of other public contracts. All Californians, irrespective of party affiliation, should be deeply concerned.

Photo courtesy of DB’s travels, Flickr.

Especially troubling is the Newsom administration’s perverse penchant for no-bid contracts, many of which renew automatically. Since 2020, his administration entered into more than 8,000 no-bid contracts, many of which were valued at more than $25 million. By the end of 2020, the total amount was nearly $12 billion.

The latest example? Instead of simply suspending the state’s gas tax, Newsom wants to award a no-bid government contract to a yet-to-be-named third-party vendor to manage a process of providing rebates to Californians, a lot of busywork to distract drivers from the fact that he’s making them pay the state’s highest-in-the-nation gas taxes.

After the horrible mess the EDD made by distributing payment cards in 2020, one has to wonder, what could go wrong?

During the same period that cash and no-bid contracts were being handed out, behested payments on behalf of the governor surged. These are “donations” for charitable or governmental purposes that are specifically requested by elected officials, often from companies with business before the state. In 2020 alone, $227 million was “donated” at the “behest” of the governor, a huge spike compared to just $12.1 million in 2019. This even got the attention of the Los Angeles Times, which wrote that “many of the donors have other business before the governor, received no-bid government contracts over the last year or were seeking favorable appointments on important state boards,” which “creates the appearance of a pay-to-play system.”

Sub-par no-bid contracts risk the squandering of taxpayer dollars and renewing no-bid contracts without reviewing their merits not only wastes taxpayer money but is also a way of skirting California’s contracting process.

For example, in 2020, the Newsom administration awarded a $1.7 billion no-bid contract to the Valencia Branch Laboratory to process COVID-19 tests for the state. Less than a year later, we learned of shocking waste and fraud occurring in the lab. The truth came out thanks to selfless whistleblowers, one of whom is now being sued by the company operating the lab.

For months, Senate Republicans called for a full release of the state investigations on the lab. For months, the state stalled, ultimately complying only after the contract had already auto-renewed.

Because of this fiasco and the larger problem of no-bid contracts, one of the co-authors of this column, Sen. Scott Wilk, introduced three bills – which the Howard Jarvis Taxpayers Association supports – to bring accountability to the process: SB 947, SB 1271, and SB 1367.

SB 947 would empower employees of state government contracts to blow the whistle on fraud, waste or abuse by granting them whistleblower protections already afforded to state workers. SB 1271 would require no-bid contracts of $25 million or more to be subject to oversight of the Joint Legislative Budget Committee prior to renewal or extension of the contract. SB 1367 would prohibit a state agency from awarding a contract to entities that have provided behested payments on the governor’s behalf in the preceding 12 months.

Click here to read the full article at the Press Enterprise

Californians Don’t Get Much Bang for Billions of Bucks

The Howard Jarvis Taxpayers Association isn’t shy about its mission.

Named for the chief architect of California’s Proposition 13 property tax limit, the organization fiercely defends Jarvis’ iconic 1978 measure against those — public employee unions, particularly — seeking its repeal.

So far, Jarvis and its allied groups have prevailed for more than four decades, most recently fending off a 2020 ballot measure that would have removed some of Proposition 13’s limits from business property.

But HJTA, as it calls itself, also works on a broader front, opposing most non-property tax increases and criticizing what it regards as wasteful spending of tax dollars. The latter effort includes an annual report on “waste, fraud and abuse” — essentially a summary of reports from news organizations and independent watchdogs such as the state auditor.

This year’s version, called “Follow the Money 2021,” contains dozens of examples of how public funds have been squandered, embezzled or otherwise misused, plus situations HJTA says show politicians getting special treatment.

One could quibble with some of the examples, but in the main they indicate that taxpayers often are not getting as much bang for their bucks as they should.

So, one might wonder, how does California compare with other states in that regard? By happenstance, as HJTA was preparing its report, an organization called Wallet Hub was offering an answer.

In March, Wallet Hub, a website devoted to consumer finance, released a study of what it calls “return on investment,” merging tax burdens with quality of services to develop an index that compares states on how efficiently they spend public funds.

The factors included in the service side of the equation include schools, roadways, hospitals, crime, water quality and poverty. Minnesota is scored as having the best services.

Unfortunately — but perhaps not surprisingly — California does not fare well in its “return on investment” score. In fact, it’s the fourth worst overall, just ahead of Hawaii, New Mexico and North Dakota. New Hampshire scores the highest, followed by Florida and South Dakota.

In services, California ranks 34th, but its tax burden, one of the highest in the nation, pulls down its overall “return on investment” score. Arch-rival Texas, incidentally, has the seventh highest return.

The HJTA report and the Wallet Hub comparison underscore an irritating aspect of governance in California — the eagerness of political officeholders to create new projects and services and their reluctance to evaluate whether their pet programs are delivering the promised results and intervene when they are falling short.

One of the cases HJTA cites, a high-tech budget tool called FI$cal, is a prime example of the syndrome. Hundreds of millions of dollars have been spent on FI$cal over the last decade and a half and it’s still not working. The state auditor has issued 18 reports critiquing the project’s management and performance but governors and legislators continue throwing money down a rathole.

Many other examples are obvious, some particular projects such as FI$cal and some broader issues such as homelessness. It’s very near the top of voter concerns, as measured in polls and California taxpayers have spent billions of dollars on it. However, the problem seems to be, if anything, growing more acute as politicians and supposed experts debate what might work.

Click here to read the full article at the Press Enterprise

How California Taxpayers Weathered The Pandemic

While few Californians weathered the pandemic unscathed, taxpayers took a particularly heavy hit, getting stuck for the longterm cost of relief payments, bailouts and fraud while losing earnings during the “two weeks to flatten the curve” that turned into two years.

If we had known in early 2020 what we now know, it is doubtful we would have shut down the economy as tightly as we did, and we certainly would have taken greater caution about our response to school closures and educating our children. Only now are we starting to comprehend that damage to child development, socialization and learning.

Taxpayers also took a hit by having to pay taxes and fees for services not received. Local governments required restaurants to continue to pay various licensing fees even when they were forbidden to be open for business. Parks, libraries and other public venues were closed to the public while citizens continued to get the tax bill to support those same facilities. Efforts by taxpayers and businesses to seek temporary relief from government exactions were mostly met with open hostility, while members of public-sector unions continued to receive paychecks and, in some cases, got raises even when they weren’t going to work.

But by far the biggest hit on California taxpayers during the pandemic was the jaw-dropping levels of waste, fraud and abuse of taxpayer dollars. On Gov. Gavin Newsom’s watch, the Employment Development Department (EDD) failed to process a backlog of claims for hundreds of thousands of unemployed Californians while sending out as much as $30 billion in unemployment benefits for phony claims, including fraudulent claims paid to death row inmates.

Click here to read the full article at the Whittier Daily News

Proposition 13: Same Song, Different Decade

More than 42 years ago, California voters overwhelmingly enacted Proposition 13 in response to out-of-control property taxes.

Even with the passage of time, Prop. 13 remains very popular among citizens of all political stripes.

Nonetheless, many politicians and bureaucrats hate Prop. 13 because it prevents them from taking unlimited cash from the taxpaying public.

Photo courtesy of Wendy McCormac, Flickr

In response to Prop. 13’s passage, these tax-and-spend interests retaliated by trying to create loopholes in Prop. 13 to bypass voter-approved taxpayer protections and provisions enforcing more government accountability. This has necessitated additional taxpayer protection laws to close these loopholes via more recent initiatives such as Proposition 218 (1996), also known as the Right to Vote on Taxes Act, and Proposition 26 (2010) which sought to stop taxes from escaping limitation by calling them “fees.”

In this tug of war between taxpayers and government interests, the latter has been aided by an increasingly progressive California judiciary which, in a number of recent decisions, demonstrates open hostility to taxpayers. As just one example, Prop. 13’s long-standing requirement that a local special tax receive a two-thirds vote of the electorate has been virtually destroyed by the infamous Upland decision which gave tax-and-spend interests a template on how to impose new taxes that, for 40 years, were illegal.

Click here to read the full article at Pasadena Star News

California Is The Mad Scientist Of Bad Policy

If these United States are 50 laboratories of democracy, then California is the mad scientist of far-left policies. That was evident last week as some of the session’s most controversial bills tried to clear the Assembly and continue through the legislative process.

From a bill to impose “sector-wide minimum standards” for wages, hours and working conditions at fast-food chains (that unfortunately passed the Assembly and now heads to the Senate) to forcing owners of rent-controlled apartment buildings to stay in that business for at least five years — even if they were losing money (that fortunately failed to garner enough support), the Legislature’s radicalism was on full display. But those measure were small potatoes compared to Assembly Bill 1400, which would have required the state to provide health care coverage for residents, after abolishing all private health insurance and Medicare.

Fortunately, AB 1400 also failed to get enough support in the Assembly to move on, but we’re likely to see it again. The state’s Democratic Party has added single-payer health care to its platform, and the Progressive Caucus of the California Democratic Party has vowed not to endorse any candidate that opposes single-payer health care.

That’s why it’s important to make clear why such a proposal should never be considered again. First, the taxes necessary to implement such a program would be astronomical. The author of AB 1400 proposed raising taxes by $163 billion dollars a year, but the actual cost could be upwards of $391 billion per year, according to the staff report from the Assembly Appropriations Committee.

Click here to read the full article at the Press Enterprise

The Fight To Limit Taxation Continues

Regular readers of this column undoubtedly know what Proposition 13 is, but they may not know it does more than set property taxes at 1% of the home’s market value with a 2% cap on annual increases. It also imposed certain vote requirements for other kinds of taxes, including a requirement that local special taxes receive a two-thirds vote of the electorate and a state tax increase proposed by the California Legislature receive a two-thirds vote of each house.

Photo courtesy of Wendy McCormac, Flickr

Government hates these constraints on taking other people’s money, so they constantly try to find ways around them — and they have. In the early 80’s, they hit upon “benefit assessment districts,” which historically had been used legitimately to fund capital improvements that directly benefited property. But over time, bureaucrats began imposing assessments for general municipal services rendering them indistinguishable from property taxes. The sole reason for this transformation was to avoid Prop. 13’s voter approval requirements.

That’s why the Howard Jarvis Taxpayer Association put Proposition 218 on the ballot in 1996. It gave the people the right to vote on all local taxes and required taxpayer (or ratepayer) approval of assessments and property related fees. But just like when you squeeze a water balloon too hard, it tends to pop out somewhere else, so it is with government avoiding clear voter intent. That’s why state business associations and HJTA are supporting the Taxpayer Protection and Government Accountability Act initiative to close some new loopholes recent court rulings have opened in Props. 13 and 218.

While the initiative is still waiting for a circulating title and summary from the attorney general, the fiscal analysis by the nonpartisan Legislative Analyst’s Office was released last week and it’s instructive in explaining the tangled web of taxes our government weaves.

Click here to read the full article at the San Gabriel Tribune

Inflation Is a Tax On Us All

Pinned on my office wall is a Zimbabwe $10,000,000,000,000 note. (That’s 10 trillion for those of you tired of counting zeroes). The currency is real, although Zimbabwe’s default currency is now the U.S. dollar. The central bank of Zimbabwe issued these $10T notes during the last days of hyperinflation in 2009, and they barely paid for a loaf of bread.

Ironically, you can now purchase one of these bills for about $27 U.S. dollars because they serve as collectors’ items or, more importantly, as a physical representation of the evils of inflation. Every economics professor in America should own one to show to their students on the first day of Econ 101.

Milton Friedman explained that inflation is always “a monetary phenomenon in the sense that it is and can be produced only by more rapid increase in the quantity of money than in output.”

Inflation hits everyone, but especially the middle class and those on fixed incomes. Inflation is a threat to the middle class because price increases reduce purchasing power so that the things that the middle class could previously afford are now out of reach. This pushes the lower rungs of the middle class out of the picture.

The disproportionate impact of inflation on the middle class relative to the wealthy may seem counterintuitive because the inflation rate — projected now at over 6% — is the same for everyone. But while all suffer the same rate of inflation, those with lower incomes tend to have lesser means of adapting to the increases in consumer prices. The suggestion from Biden’s White House chief of staff Ron Klain that inflation is a “high-class” problem is insulting.

Click here to read the full article at the Whittier Daily News

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