Saturday, October 6, 2012

Reforms before Revenue Increases -- No on Prop 30

At the October 4th, 2012 debate between 66th Assembly Candidates Craig Huey and Al Muratsuchi, (sponsored by the Torrance Police Officers Association --TPOA), the moderator immoderately tipped his hand, first subtly then overtly promoting Proposition 30, a ballot initiative initiated by Governor Jerry Brown to raise the California sales tax by “only” 0.25% and the income tax on earners of $250,000 and above from “only”  10.3% to 13.3%. The revenue increases are supposed to help our schools and public safety programs, both of which are suffering huge annual cuts from Sacramento. One of the first questions of the TPOA debate, Prop 30 has received a comprehensive number of endorsements, including school districts, labor unions, and numerous media outlets, including the Los Angeles Times and the San Francisco Chronicle.

Education is important, and public education deserves all the support it can get from the public. The Huffington Post  has documented that local governments are bearing a greater burden for education funding. As a number of “Yes on Prop 30” commercials suggest, California ranks 47th in per pupil spending.

However, the RAND Corporation, an independent think tank which investigates policy issues like education and spending, asserts that money matters in education, but more importantly how the money is spent matters.  A second paper outlined that the power of school reform, not higher revenue, has helped raise test scores in different schools. A third study  argued that in spite of limited reforms to advance flexibility in school spending, much of which focuses on phasing out directed spending and categorical funding, California school districts still have not reformed how they spend their funding.

Where do most of our schools spend their money? According to the California Budget Project , four-fifths of school dollars go to salaries and benefits. That is an extensive expenditure, one which challenges the notion that raising revenue is about “the students”.

Instead of focusing on how much money schools receive, the voters  -- the taxpayers – deserve to know how the money is spent, a factor which needs greater attention from our political and media classes. Before asking for more money, Governor Brown needs to implement structural reforms to the data and distribution of taxpayer dollars to our schools. Collective bargaining reforms between school boards and public sector unions would give school districts more freedom to negotiate sky-rocketing pension and health care costs, a measure which would protect school staff salaries and our students while cutting costs and implementing greater efficiency into the system. Before the end of his tumultuous tenure, Former Governor Schwarzenegger  proposed laying off every school superintendent in the state, which in the wake of economic crises in corrupted Inglewood Unified  and fiscally mismanaged Poway Unified , sounds like a sure-fire way to staunch the waste and fraud overwhelming school districts throughout the state.

Raising taxes in a state with one of the highest tax burdens and one of the highest unemployment rates  in the country is a foolish idea. To foist higher taxes on already frustrated and frantic taxpayers, with the empty emphasis on “temporary”, sounds like the empty notion that a wolf can temporarily watch innocent lambs and not go in for the slaughter. The same fleecing will without fail fall on our state, our citizens, and our students following Prop 30’s tax increases.

Despite the TPOA moderator’s hinting that these minor increases would “only” raise the state sales tax by “0.25%” and raise tax rates on income earners of $250,000 and above, his classic argument ignores two glaring realities, still unseen to our political class. First, small businesses by and large file as individuals. Raising taxes on high income earners will hurt small businesses in California. Vice Presidential candidate Paul Ryan discussed this adverse effect  with media personality Chris Matthews. The Internal Revenue Service has also reported that Obama’s tax hikes on the rich will negatively impact one million small businesses. Such a model for state revenue is a recipe for disaster, with higher taxes passing on higher prices to the rest of the state, followed by less investment and more layoffs. Besides, increasing tax rates will not generate increased tax revenues. Democratic President John F. Kennedy cogently explained this “paradoxical”  phenomenon long ago. Before that, Republican President Warren G. Harding  reduced federal tax rates and government spending across the board, which ushered in a sharp recovery following the steep economic recession following World War I. Raising tax rates does not raise revenue, but will motivate high income earner to ferret away their earnings into tax shelters, where the money will be neither taxed nor invested.

Pro 30 will decrease tax revenues, diminish our business class, and delay comprehensive pension reforms, reductions in our state and country bureaucracies, and empowerment of our communities to manage the revenue which they receive already. Until Sacramento decreases and local accountability improves in our schools, there should be more tax increases. On November 30th, vote “No!” on Proposition 30.

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