Tuesday, May 19, 2015

George Skelton: Say No to Prop 30 Extension

LA Times columnist George Skelton

George Skelton of the LA Times shared some well-placed conservative wisdom this week.

The only problem is that he is reporting these economic verities three years after the fact, when fiscal watchdogs and taxpayer advocates had pointed out the potential fallout from Prop 30's tax hikes.

In the May 18 edition of the LA Times, Skelton's article "Tax hike once made sense" makes economic sense not just for letting the increases expire, but also for why introducing them in the first place was never the right idea to solve the Golden State's long-term structural debt and financial woes.

If Gov. Jerry Brown's revised budget plan proved anything last week, it is that his 2012 tax increase should quietly fade into history as he promised.

There's no justification for continuing to sock the highest income earners — the people who can most easily move to a low-tax state — when Sacramento is wallowing in surplus money.

As CA GOP Chairman Jim Brulte asserted many times to supporters and willing participants seeking to restore fiscal and moral solvency to the Golden State, the most conservative political figure in Sacramento with any power is. . .Governor Jerry Brow.

Scary thought, and scarier still that he is the only politically viable stalwart against extending the Prop 30 tax hikes.

Now, a couple of corrections are in order.

First of all, the revised budget should be cutting spending and reforming expensive entitlements, a la Scott Walker's Act 10, which limited public sector union collective bargaining to the rate of inflation, along with enacting paycheck protection and mandatory annual recertification for the same bargaining units.

Brown's pension reforms have not been the panacea which tax advocates and fiscal watchdogs expected either. As for the reams of regulations, when will anyone in the legislature stop putting all these burdensome demands on the shrinking business class?

Furthermore, the argument that Sacramento is "wallowing in surplus money" is misleading. The wall of debt remains, and the hundred-billion dollars of pension liabilities loom large over a state top heavy with well-connected political power and a growing base of middle class/working class poverty. By the way, the money comes from the pockets of taxpayers, and thus belongs to them. Why not allow California residents to wallow in their own money?

Skelton reminds readers who is behind the Prop 30 extension:

Yet, the teachers union and some liberal Democrats — not Brown — are plotting to extend the tax hike that was advertised to voters as temporary.

The teachers union and "some" liberal Democrats, another stunning tautology. The teachers unions and the California Democratic Party are practically synonymous. Who rules who is no longer a question in Sacramento. State Senator Ben Allen admitted as much when he advised me that promoting local control for communities of interest depended on the support of the CTA. "Plot" is a perfect word to describe what these liberal interests do to public education and private citizens.

Skelton brings up a larger issue, one which has aggravated the fiscal crises in the state for decades:

And with surplus money rolling in, good luck trying to make a case for keeping those tax rates in the stratosphere without the governor's support.
Brown's budget revision also made another thing clear, or should have: There's a pressing need for real tax reform. We need a more stable tax system, one that doesn't exaggerate the natural ups and downs of the economy.

California government is too dependent on the unreliable super-wealthy and their seesawing investments, plus an outdated sales tax that exempts the new economy: services.

The boom and bust of the economy has boomed and busted California's revenue streams, and the volatile nature of this up and down can end when taxes like Prop 30 die out and never resurrect. After the 2012 hikes, not only did the not-so merry-go-round of California funding persist, but the otherwise reliable sources of tax revenue, small businesses, pulled out of the state. Nineteen companies announced their move within weeks of Prop 30's passage: Nineteen!

And the business flight has not ended. Three major companies here in Torrance, CA are leaving the state for better economic climates, including Toyota and Panasonic. No doubt Prop 30 made the move easier to make.

The last few remarks deserve more consideration, too:

The governor added that when people see the income gap between rich and poor, and there's talk of lowering the highest tax rates while burdening "the ordinary folk out there, that may be logical [to] some green-eyeshade accountants, but I don't know from a political point of view that it's very viable."

This argument is a non-starter. Lowering taxes on "the wealthy" means just that -- lowering taxes on people who have money and make money. There is nothing immoral about that. Why not discuss scrapping the income tax altogether, or expecting everyone to pay a nominal flat tax? Yes, that would mean low and working class residents would pay something, but one could combine this flat tax with an elimination of the sales tax.

Bob Hertzberg

The final remarks from state senator Bob Hertzberg and Skelton were priceless:

Here's what Brown needs to get, Hertzberg added: In 2008, California's domestic product fell 3.7%. But state tax revenue plummeted 23%.

Yes, and why? Precisely because of the tax hikes. When Hertzberg understands what Brown gets, then legislators will move on solutions to the funding problems and the unfair tax structure in the state.

"Come on, guys. We have to fix that problem," the former Assembly speaker said. "I'm trying to find an honest, realistic way to run a government in this new economy."

But that would require political courage. And there's rarely a surplus of that in Sacramento.

Wow. How true that is. Political courage is in short supply, to put in mildly. Who has it? So far, the minority Republican caucus, and their numbers have only increased enough to prevent easy tax hikes. Will Californians offer the opposition more help and increase their numbers in Sacramento in 2016?

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