Taxable Talk

Political theater occurred last night in Sacramento. The Assembly held a rare evening session, and the Democrats’ oil tax fell to defeat 45-30 (it needed a 2/3 vote to pass). The vote was party line, except for one. Assemblywoman Nicole Parra (D-Bakersfield) voted no.

The Democrats framed the issue as “Save our children, tax the rich low-taxed oil companies.” Republicans called it political theater. Democrats want to increase taxes; there’s no room in the budget to cut spending. Republicans want to cut spending; there’s no room in taxpayers’ pockectbooks to pay for additional taxes.

I think it’s well worth remembering these two themes as we vote this year. Over the last four years spending increased 44% while revenues increased 40%. I think that’s food for thought.

As expected, Assembly Democrats introduced AB9. It would add a 6% tax on oil drilling and a 2% tax on oil profits that exceed $10 million. Because it’s a tax the measure requires a 2/3 vote for approval—and it won’t get that.

Assemblyman Chuck DeVore (R-Irvine) told the San Jose Mercury, “It’s just bad political theater. If this bill ever made it into law, it would increase the cost of gas at the pump and . . . increase our reliance on foreign oil from places like Venezuela and Iran.”

Fortunately, Democrats don’t have the votes to pass this measure. You can follow the progress (or lack thereof) of this measure here. State Senator Tom Harman (R-Huntington Beach) has an excellent commentary on what truly ails California. I doubt the Democrats are listening.

The joy of being a Californian. The gas stations at Culver and Walnut in Irvine are having a price war—they’re seeing which station can reach $3.60 for a gallon of regular first. And if the Democrats in California’s Assembly have their way we’ll be paying even more.

Assemblyman Anthony Adams (R-Claremont) reports on the Flash Blog that Assembly Speaker Fabian Nunez (D-Los Angeles) wants to add a 6% tax on all oil from California and a 2% surcharge on oil companies that earn more than $10 million.

I wonder if Speaker Nunez has interests in office building in Nevada, Arizona, and Oregon. Why am I asking this? Because if I were running an oil company and I was faced with a gross profits tax I’d relocate as much as my business as possible out of California and into neighboring states.

And does Mr. Nunez understand basic economics? What does a tax do? It increases the price of a good or service. When a business is taxed it always passes the cost of the tax onto its customers. If this tax increase passes Californians will see a 2% to 10% increase on the prices of products from oil companies. That’s economic reality.

While the goal of Mr. Nunez’s proposal is laudable (the money would be used for education), I agree with Assemblyman Adams. “I guess the $60 Billion plus a year we spend on education isn’t getting the job done. Here’s a thought: Give the school districts back the money we already take instead of tying it up in countless layers of State bureaucracy and ridiculous ‘one-size-fits-all’ testing standards that force every teacher to teach to the test.”

California needs fundamental reforms in the bureaucracy. It may be painful, but the time has come to seriously confront the bloated workforce of government workers in this state. It’s time for limited government, and it appears that at least some in California’s legislature understand that. Unfortunately, Assembly Speaker Nunez doesn’t.

That’s the opinion of the Reason Foundation, a nonprofit 501(c)(3) organization dedicated to “advanc[ing] a free society by developing, applying, and promoting libertarian principles, including individual liberty, free markets, and the rule of law.” In an article titled “California Won’t Fix Budget Until It Cuts Spending” Reason notes:

“Despite what some lawmakers would like us to believe, this is a budget crisis borne of an addiction to spending, not a revenue problem. In the past four years, the state’s general fund revenues have increased approximately 32 percent. In fact, total revenue has grown steadily since the early 1990s, shortly after major tax increases were imposed under Gov. Pete Wilson’s administration…

“It is time for Californians and their elected representatives to undertake a serious re-evaluation of the proper role of government. Government has simply gotten too big and too intrusive. The casualty is individual liberty. Only when we rediscover the truth of the maxim – ‘That government is best which governs least’ – will we be able to restore any fiscal sanity to our state government.”

Any bets on our legislators listening? I for one am not hopeful.

The tax rebates (aka the stimulus payments) that will be issued beginning in May won’t be taxed by California. The Franchise Tax Board announced this last week. The FTB notes (as has the IRS) that in order to claim the rebate you must file a federal tax return. You do not have to file a California tax return in order to claim the rebate.

A few states will be taxing the federal tax rebate. Generally, those states give a deduction for federal tax paid. Alabama and Louisiana are two states that I believe will be taxing the federal tax rebates.

An interesting question is whether California government employees are overpaid. We can now find out. Thanks to the Sacramento Bee we can now find out. The Bee has a searchable database of California government employees so we can now find out exactly what our government employees actually make.