Recent reports on the recent internal battles at the Commission on the 21st Century Economy have been greatly exaggerated (and in many cases, inaccurate). You would think, by reading the pessimistic commentary of Joel Fox and Dan Walters, that the commission has broken apart and is unlikely to produce anything of value. That’s pure nonsense.
Yes, there are ideological divisions among the group. Yes, commissioner Fred Keeley has been advancing an alternative plan after consultation with Democrats. And yes, two commissioners – Anaheim Mayor Curt Pringle and economist Michael Boskin – recently emailed their frustrations about Keeley’s activities.
But I’ve just re-read all the internal email and correspondence of the commission, which are posted on the panel’s web site. (Whatever you think of the commission, it has been great on open records). And what’s striking is how much the various commissioners seem to agree on the direction of tax reform. When you consider how divided Californians and their legislators are on such questions, it’s a remarkable level of consensus.
Another thing that’s clear from the correspondence: contrary to Walters’ reporting, the liberal dissenters haven’t coalesced around one blue plan. There actually are two blue plans. One is Keeley’s, which represents a bit of a departure from the direction the commission appeared to be taking. But the other blue proposal, from UC Berkeley Law School Dean Christopher Edley Jr., is consistent with the commission’s direction.
So here’s my unsolicited advice to the commission: chill out. Breathe deeply. And try to build on Dean Edley’s plan, which offers a road map to compromise. (One lesson: successful academic administrators may be the world’s most skillful politicians, because faculty politics are the most bitter and crazy form of politics human kind has devised). If commissioners can keep their cool and focus on the areas upon which you agree during Thursday’s meeting in San Francisco (and perhaps a follow-up meeting next week in LA), this commission will produce a strong series of recommendations.
Here’s where I see consensus in four major areas.
– Personal income and capital gains taxes. This is the area of the deepest disagreement. But there is still agreement on amending the income tax to reduce volatility. The chair, Gerald Parsky, and many of the commissioners seem to favor packages that would make the current personal income tax system flatter (either through a flat tax, or by reducing the number of tax brackets from 6 to either 2 or 3).
Keeley’s plan would leave income tax alone, create a rainy day fund, and allocate capital gains revenue in various ways to reduce volatility. Edley’s plan tilts in Keeley’s direction; he’s open to creating a rainy day fund, but only if the commission agrees to support constitutional amendments. He also supports a commission staff suggestion of how to allocate the capital gains revenues. A compromise would marry Edley’s proposal with a version of the package favored by Parsky that makes the income tax slightly flatter but not flat.
– State sales tax. There’s consensus on reducing – and perhaps even eliminating the state sales tax. Keeley supports reducing the state sales tax rate (while extending its reach). Edley is with the chair and the balance of the commission on supporting elimination.
– Corporation tax. Again, Keeley wants to reduce, but Edley and the commission want to eliminate it.
– The Business net receipts tax. Keeley wants to go slow – essentially by studying it further – but Edley and the rest of the commission want to adopt it as a way of replacing state sales and corporation tax. No one is against it. Again, that’s remarkable.
The correspondence reveals other differences on fuel taxes and on a split roll for property tax. A compromise might include some form of fuel tax while leaving Prop 13 alone (That’s a subject best left to voters). But just think about the areas of consensus: a tax reform that reduces or eliminate sales and corporation taxes, installs a business net receipts tax, and makes even modest changes in income and capital gains to reduce volatility would represent major, major tax reform.
It’s true that Keeley, who told me after the June meeting that he liked the direction of the commission (calling the leading package a “game changer”), has gone a little rogue here. But his email makes clear that he doesn’t want to blow up the commission. According to his email, he’s advancing an alternative at the direction of the senate’s top Democrat, Darrell Steinberg, and other top aides in the Capitol. While Keeley is creating trouble in the short term, he may be improving the commission’s chances of success in the end. By considering and perhaps incorporating ideas from Steinberg and others, the commission has a better chance of seeing its work bear fruit.
To get there, the commission would be smart to follow Edley. In a wise and funny memo (I doubt that Parsky is accustomed to being called “Comrade” and Boskin certainly isn’t addressed as “Brother Boskin” very often) to his fellow commissioners on July 12, Edley wrote:
“The Parsky Commission has an opportunity – excruciatingly fragile – to model good behavior for the folks in Sacramento. Most of those sad souls seem unable to reach across traditional lines of party and ideological orthodoxy, at increasingly serious grave cost for millions, and quite grave costs for many. I yield to no one in my passion for the cause of tax-and-spend liberalism, especially in a state that is so frighteningly broken. But when I agreed to serve, I did so intending to subordinate my passions if necessary in order to find a better path forward for California. Not a perfect path, not my path, but a pragmatic path of achievable progress.”
Amen. The commission is already on that path. Don’t stop now.