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Tax Reform and the No Tax Pledge

Joel Fox
Editor of Fox & Hounds and President of the Small Business Action Committee

Since the left is already angry at me for pushing opposition to the Prop 30 tax increase and support for the Prop 32 political reform, I guess its time to get the right angry by writing a few words in defense of Assemblywoman Kristin Olsen’s decision to refuse to sign the No Tax pledge.

My opinion is driven by my belief that California needs major spending and tax reforms. The pledge may be an obstacle to such reforms, as Olsen notes, because of how it is interpreted.

Olsen wrote in a Sacramento Bee opinion piece that she did not intend to sign the No Tax pledge that she has signed in the past. Blaming California’s dysfunctional government on “divisive partisanship, short-term ideas, and allegiance to pledges and special interests over constituents,” she wrote interpretations of what is covered by the pledge is often misconstrued and defies logic.

Defenders of the pledge were quick to pounce. Flash Report publisher Jon Fleischman skewered Olsen for not mentioning that she already broke her pledge when she voted to continue an expiring car tax in the most recent legislative session.

I take a longer view on the No Tax pledge and how it might relate to state tax restructuring, something the state desperately needs. Lowering tax rates and expanding the tax base will encourage economic growth. In turn, economic growth spurred by these actions will enrich state and local government treasuries.

Yet, achieving major tax and spend changes might run afoul of the No Tax pledge. Following are a couple of examples in which I believe the No Tax pledge could scuttle tax reform efforts.

Determining whether tax restructuring will be done in a revenue neutral way, while the ideal situation, is not an exact science. So, if hurdles to achieve a tax restructuring are in place but a critic charges that the tax code change means some revenue increase, legislators who took the No Tax pledge would be expected to oppose. Even if the plan brings reforms that could solve the state’s fiscal problems. I am not referring to major revenue increases in exchange for tax restructuring. However, the possibility that some immediate revenue increase might accompany major revisions to the tax code that encourage business and economic growth should not be stymied by the No Tax pledge.

Another example in which the No Tax pledge served as an obstacle to possible reforms occurred during Governor Brown’s first year in office when he attempted to put a tax increase on the ballot. Some argued that even voting to put a tax increase on the ballot violated the No Tax pledge. But what if, as I suggested at the time on this site, that the tax increase proposal were accompanied by proposals for pension and spending reforms? I trust the voters would make good decisions when faced with those measures, whether served up in a package or as individual propositions. However, strict adherence to the No Tax pledge, in the eyes of some supporters of the pledge, would have prevented such a solution to find a spot on the ballot.

Let’s be clear, California’s current tax structure is not working for the state. The tax burden is too high on the state’s taxpayers and hurts the economy.

My record is pretty solid on opposing taxes, as I am now doing, but I’ll be clear on another point as well — I have supported a tax here and there given the circumstances and the opportunity for reform.  One example was Prop 1A in 2009, two-year temporary taxes attached to a rainy day fund plan. Another instance– a Los Angeles school bond, the first passed in decades in the 1990s, because a taxpayer oversight committee was included as a check to see that the work the taxpayers were buying was done correctly and the money spent properly.

It’s always difficult to understand the complexity of government and devise solutions for problems. Prohibiting legislators from considering all solutions is not wise.

I’ve admired the words of Edmund Burke, who angered his colleagues in the British Parliament by speaking up for the American cause at the time of the American Revolution. Burke, sometimes called the Father of Conservatism, gave a speech to his constituents in which he argued that while constituents’ wishes “ought to have great weight” in a representative’s decision making process, “Your representative owes you, not his industry only, but his judgment; and he betrays, instead of serving you, if he sacrifices it to your opinion.”

In thinking about the restriction of the No Tax Pledge, I’m reminded of General Dwight Eisenhower’s comment: “In preparing for battle I have always found that plans are useless, but planning is indispensable.” Applying this message to elected government service, you must have a plan which could include promoting economic growth and resisting taxes, but once in the heat of battle, with an opportunity to accomplish important reforms that achieve gains for the state and your constituents, you might have to change plans.

Chained by a No Tax pledge prevents a representative to adjust to circumstances and the possible opportunities to reform government for the benefit of the taxpayers in California, who are certainly suffering under our present tax structure.

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