Taxable Talk

Proposition 1A is the last of the six initiatives that Californians will vote on next Tuesday. The title of this initiative states, “STATE BUDGET. CHANGES CALIFORNIA BUDGET PROCESS. LIMITS STATE SPENDING. INCREASES “RAINY DAY” BUDGET STABILIZATION FUND.” If only it were really true.

Let’s note that there’s some slight truths in the title. The budget process will change…cosmetically. The “Rainy Day” fund will increase…but given that it’s been raided time after time by the legislature and nothing in the new legislation will stop that, I consider the change worthless to California’s taxpayers.

Now, what you may not be able to easily figure out from the title. The tax increases approved by the legislature in February will be extended for two additional years if this measure is approved.

The Legislative Analyst calls the impact of the measure “…particularly difficult to assess.” Well, I’ll give it a go. I believe that if the measure is passed California will see additional tax increases. The measure does nothing to stop further revenue increases…those are called tax increases by us.

What California really needs is to cut spending to a level commensurate with revenues. Indeed, I read a recent commentary on what the state should do:
– Determine the amount of revenue California will take in;
– Match the budget to the prior California budget that was used; and
– Change the laws so that it’s legal.

In the commentary I linked to, Ray Haynes thinks that California will take in $74 billion, and that’s about the 2002-03 budget amount. So just re-adopt that budget for 2009-2010. The unions will go nuts; the liberal media will go nuts; the special interests will hate it.

But it would work. And, as Mr. Haynes notes, it would be understood by Californians.

Do I think that will happen? No. But next Tuesday Californians are poised to throw cold water on the tax and spend ideology of the legislature.

Bill Leonard, who I just linked to, is one of the five elected members of the Board of Equalization. The BOE directly administers California sales taxes, and hears appeals of various tax rulings.

A few years ago a gentleman declared bankruptcy. He thought he owed (through his corporation) the BOE, so he listed the BOE as a creditor. He wasn’t sure of the amount, so he listed about $100,000 owed. The BOE never responded.

Fast forward a few years to today. It turns out the corporate debt to the BOE was about $7,000. Add in interest and penalties and the sum is now over $44,000. The man is out of luck (the law is on the BOE’s side) but Mr. Leonard is upset over a dispute that should have been resolved years ago…but wasn’t.

In the YouTube video below, Mr. Leonard pointedly asks BOE staff members why they didn’t respond years ago to the request. The audio quality is poor, but the content is worth watching (and listening to). It shows, unfortunately, the California bureaucracy at work.

At least the title isn’t deceiving. And that’s about the only good thing to say about this measure.

The impartial analysis by the Legislative Analyst notes, “Because there is uncertainty over how the Constitution would be interpreted in its current form, it is unknown how Proposition 98 funding would work in the future under current law. As a result, it is difficult to know how this measure would change the state’s finances.” And it also depends on Proposition 1A (my analysis of that measure will appear tomorrow).

The Legislature and Governor can also overrule Proposition 1B, and fund less or more than the limits in Proposition 1B.

This measure is a complex mishmash designed to appeal to the education industry’s proponents. While education is good, spending run amok isn’t and that’s where California is today. This measure, in my view, does not lead toward a solution of California’s fiscal problems. I’ll be voting against it. If you’re a Californian, make sure your vote is heard on Tuesday, May 19th.

If any of the ballot initiatives pass this month—and that’s not likely—expect lawsuits challenging the wording of the initiatives. The language used is supposed to be non-partisan, neutral, and to accurately represent the matter being voted on. By far the worst of the bunch is Proposition 1C.

If you looked at the title you’d think it’s a measure that would change how the lottery works. “Maybe the equipment is being modernized” would be a reasonable guess.

It’s a lie.

The reality is that this measure is really all about borrowing up to $5 billion from the lottery to be used to help balance the budget. There have been such ballot measures in the past, and they’ve all fallen to defeat. This one deserves the same fate.

When the lottery was first passed in California it was supposed to be additional funding for the schools. While all lottery funds are used for education, whatever is raised through the lottery is removed from the general budget. More smoke and mirrors out of our legislature.

Additional borrowing and debt isn’t the way to solve the crisis. California needs to cut programs on a large scale, cut and/or restrict pension plans, and cut all spending so that it matches revenues. The 15% cut in spending passed in February was a 15% cut in the rate of spending increase, not a cut in spending.

Proposition 1C does nothing to solve the crisis. I believe it should fail. No matter if you agree or disagree with me, remember to vote on May 19th.