Assembly Speaker Karen Bass says California is a 21st Century economy laboring under a tax structure mostly built in the 1930s. She’s right. Improving the tax structure for the new era is the right thing to do.
Gold Rush era California economist Henry George had a saying about the tax structure that applies even today. "The mode of taxation is, in fact, quite as important as the amount. As a small burden badly placed may distress a horse that could carry with ease a much larger one properly adjusted, so a people may be impoverished and their power of producing wealth destroyed by taxation, which, if levied in any other way, could be borne with ease."
Speaker Bass said she will convene an independent commission to look at restructuring the tax system. Governor Schwarzenegger likes the idea and says he too will create a Tax Modernization Commission to make recommendations on better aligning the tax system to the modern economy.
I served in some capacity on four state commissions that dealt with California finances. From those experiences, my advice to those planning a new commission is to look at the big picture. That means consider spending formulas and government operations as well as tax structure. The tax system is not the only government function that needs to be modernized for the 21st Century.
Unfortunately, the work of the commissions I served on was never taken seriously by the Legislature or was scuttled by politics and poor timing. It’s not that I agreed with all the recommendations of these commissions. I even wrote a minority report on one commission. But, my sense was, to the legislators, the work of our commissions was no more than an academic exercise.
The Legislature ignored the recommendations of the Constitutional Revision Commission of 1996 the recommendations delivered in the heat of an election year.
Antonio Villaraigosa Speaker’s Commission on State and Local Finance was lost in the revolving door of the speakership. Current L.A. City Councilman Bill Rosendahl’s Commission on Tax Policy in the New Economy created by Governor Davis issued its recommendations on the day newly elected Governor Arnold Schwarzenegger was sworn in. Bad timing. The California Performance Review did not receive follow-though from the administration.
Politics played a role in undermining the efforts of many of these commissions. Of course, politics exists in all policy discussions. However, the Speaker and the Governor ought to get a commitment from Legislative leaders that work of the commission will have clear support and that the recommendations will get a fair hearing.
History tells us reports from commissions such as those now under consideration will end up on library shelves. Perhaps there is a new sensibility to the need for change and the endgame this time will be different, especially if both the tax and spend sides of the equation are considered. I wouldn’t bet on it, but that doesn’t mean we shouldn’t try.