Prop 1A: The Taxpayers’ Paradox

Michele Steel
Orange County Supervisor (2nd District) and Former California State Board of Equalization Member

When King Henry VII faced an insurmountable budget deficit, his advisor John Morton devised an ingenious, albeit paradoxical solution. British subjects, who could afford to pay higher taxes, would be forced to pay higher taxes.

His tax affordability test classified people into two categories, those who spent and those who saved. Anyone who spent money proved their means because they had extra money to spend. Alternatively, those who saved money could also pay higher taxes because they had extra money saved.

Morton’s Fork forced everyone to pay higher taxes.

Governor Schwarzenegger and state legislators have resurrected Morton’s tortured logic and unfair tax paradox in crafting Proposition 1A, a phony spending cap that raises taxes by $16 billion. Voters have been told that we have just two choices in the May 19th Special Election. We can take an immediate tax increase in exchange for a long-term spending cap. Or, we can allow Sacramento‚s spending to continue unabated and inevitably pay for the spending with higher taxes.

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Crafting a Green Tax Policy

Michele Steel
Orange County Supervisor (2nd District) and Former California State Board of Equalization Member

“Think globally, act locally.”

It’s the most fundamental principle of the modern environmental movement. But, for all the big talk from green politicians, government continues to block individuals from taking the small steps that will ultimately save the planet. Nowhere is this problem better demonstrated than in the state’s tax regulations of bio-fueled vehicles.

Bio-fuels, which include even that leftover fryer grease from McDonalds, are one of the most promising carbon neutral alternatives to fossil fuels. The LA Times reports that as many as 250,000 vehicles nationwide run on used cooking oil. In Orange County, Beach Benz has capitalized on the idea by offering vegetable oil conversion kits for its customers. Last year, state and local media outlets profiled the environmentally responsible actions of Dave Eck, a Bay Area mechanic who converted his Hummer to run on used vegetable oil.

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Holiday Retail Sales Will Compound State Budget Problems

Michele Steel
Orange County Supervisor (2nd District) and Former California State Board of Equalization Member

Retail sales numbers announced this week didn’t bring tidings of comfort and joy this holiday shopping season. According to TNS Retail Forward, 2008 holiday retail sales are down 2.5% this year compared to the same data a year ago. The number is particularly bleak when you remove discount retailer Wal-Mart, the only major retailer to post an increase over last year. Some of the biggest names in retail are showing dramatic declines.

Abercrombie & Fitch down 28%. Nordstrom’s down nearly 12%. Even, Costco dropped 5%. A bad holiday shopping season will have a delayed but pronounced impact on California’s sales tax revenue, which in turn has an impact on the state’s budget deficit. Sales taxes generate nearly a third of our state’s revenues.

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Bake Sale Boogie Man

Michele Steel
Orange County Supervisor (2nd District) and Former California State Board of Equalization Member

Sometimes government can’t help itself. We pay some of the highest taxes in the nation and receive some of the worst in government service. So it should come as no surprise when government works overtime to prevent you from helping yourself.

At Davis Senior High School in Davis, California, the students have been doing what students throughout our country have done to raise money. They hold fundraisers. Many of these fundraisers are in the form of bake sales, pizza sales etc…The proceeds go to sponsor the myriad of students clubs and activities on campus. But no more.

The Sacramento Bee reports that the school district has prohibited food sales that weren’t prepared by a commercial enterprise. Commercially prepared food also has to be paid for with a check. As one student points out, “Who pays for a slice of pizza with a check?” She’s right. How many students are running around with checkbooks?

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Information Super-“Seaway?”

Michele Steel
Orange County Supervisor (2nd District) and Former California State Board of Equalization Member

Technology’s rapid innovation cycles force internet users to constantly upgrade their IT systems. Could this constant battle against technological obsolescence be so pervasive as to include even our internet metaphors?

Google has announced plans to store their supercomputers that power the internet on barges up to seven miles offshore. Ahoy! The information superhighway has set sail.

As The Times explains, “The “water-based data centres” would use wave energy to power and cool their computers, reducing Google’s costs. Their offshore status would also mean the company would no longer have to pay property taxes on its data centres, which are sited across the world, including in Britain.”

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Rising Costs of Emergency Response

Michele Steel
Orange County Supervisor (2nd District) and Former California State Board of Equalization Member

Tuesday’s 5.4 Chino Hills earthquake reminds us of the importance to prepare for emergencies and natural disasters. As the Orange County Register explains, “93% of Americans are not prepared for a major earthquake, fire or flood…it’s a good idea to put a kit together and make a plan.”

Everyone should heed this important advice, especially our state’s leaders. It may be unpleasant news for budget negotiators, but California must adequately account for the rising costs of emergency response in this year’s state budget. Moreover, state auditors need to find a way to reduce the state’s firefighting costs without jeopardizing public safety.

Wildfires have increased dramatically over the past decade, and so has the cost to taxpayers. The Los Angeles Times has an excellent five part series titled “Big Burn,” which examines the state’s recent increase in wildfires and response costs. (It’s this kind of excellent, in-depth reporting that will disappear with too many newspaper cutbacks.)

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Because Prop. 13 Worked!

Michele Steel
Orange County Supervisor (2nd District) and Former California State Board of Equalization Member

My fellow Fox and Hounds blogger Brendan Huffman asks in a post today, “Why is Prop 13 off limits?” The simple answer: because it worked. Prop. 13 continues to make property taxes predictable for both homeowners and policymakers. (It also keeps people from being taxed out of their homes.)

Because many readers may be unfamiliar with California’s property tax system pre-Prop 13, allow me to offer a brief refresher. Better yet, here’s a description from Joel Fox.

“Prior to Proposition 13, the tax rate throughout California averaged a little less than 3% of market value, and there were no limits on increases either for the tax rate or property value assessments. Some properties were reassessed 50% to 100% in just one year and their owners’ tax bills jumped correspondingly.”

Prior to Proposition 13, property taxes were left up to the whims of county assessors and uncontrollable fluctuations in the housing market. Homeowners were left in the dark as to what this year’s tax burden would be. Families could not plan or budget properly. How can you make a family budget if there is a giant question mark for your property taxes?

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Government agencies find creative ways to raise local taxes

Michele Steel
Orange County Supervisor (2nd District) and Former California State Board of Equalization Member

California is in the midst of its annual budget stalemate. The super-majority vote required is all that stands between higher taxes and the taxpayer. Now we settle in to the war of attrition between tax and spend liberals and the few remaining fiscal watchdogs in the Legislature.

So while we play this waiting game, government engages in substantially more creativity at ways to raise taxes then it spends trying to find ways to live within its means. Local tax proposals range from taxing text messages to taxing air. It just never stops.

The City of Sacramento is concerned too many of us aren’t using our home phones. It wants to tax text messages as a means of raising revenue. As if teenagers aren’t expensive enough. Parents will get stuck with a bill for their electronic communications.

The L.A. County Metro Transportation Authority would impose a “Climate-Transit tax”. Another tax would be added to gasoline and the revenue spent on public transportation to combat roadway congestion and global warming.

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Semantics may factor into proposed tax increase

Michele Steel
Orange County Supervisor (2nd District) and Former California State Board of Equalization Member

This past week, Senate Democrats called for a $11.5 billion dollar tax increase to help balance the budget. The Republican legislative delegation will hold strong against any new taxes or tax increases. Every Republican member, save one, has publicly taken the "No New Taxes Pledge;" it would be political suicide for a Republican member to break their promise on taxes.

However, taxpayers should be very afraid of the inevitable game of tax semantics, especially over a sales tax on services. The pro-tax lobby is already trying to frame the issue as "tax fairness" and "modernizing the tax code." A wide application of the sales tax to services could mean up to $45 billion in new taxes! That huge number gives the pro-tax lobby a wide variety of services to tax. 

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Congress must act on Korea FTA

Michele Steel
Orange County Supervisor (2nd District) and Former California State Board of Equalization Member

President Bush recently rolled out the welcome mat for South Korea’s newly-elected President Lee Myung Bak in his first presidential trip to the US with a two-day summit at Camp David. The trip was historic because it marked the first time a South Korean leader has been invited to the exclusive presidential retreat.

Congress can and should match the president’s historic gesture by bringing forward a vote on the landmark US Korea Free Trade Agreement. Every American business- from apple farmers to Apple computers- will benefit from this trade agreement’s elimination of tariffs, expansion of market access, and enhancement of intellectual property rights.

According to a report from the International Trade Commission, the US Korea FTA could boost our country’s GDP by nearly $12 billion, grant American companies unprecedented access to South Korea’s trillion dollar economy, and eliminate 95% of Korean and American tariffs within three years.

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