Author: Loren Kaye

While nobody is yet predicting the end of the California housing crisis, there are increasing signs that prices have stabilized and transactions have increased, which could signal the end of the three-year-long collapse of this vital economic sector.

California home prices rose in the second quarter for the first time in three years while logging a second-straight monthly increase in June, according to the S&P Case-Shiller home-price indexes.

Most of the attention on the Tax Commission is rightly focused on the package advanced by the chairman, Gerry Parsky: a slight flattening of the personal income tax and replacement of the corporate tax and much of the state sales tax with a new “net receipts” tax on business. Taxpayers, policy wonks and businesses are sifting for every scrap of guidance on what this new tax might look like, and its effects on California business and the economy.

While the debate over these changes will be vigorous, buried among the documents is a proposal that may represent the thin edge of a very long wedge that attempts to marry tax reform with environmental regulatory policy.

The only thing in Sacramento shorter than a budget “solution,” is the memory of the previous budget solution.

Here, what happened only a few months ago, becomes ancient history. Some would attribute that to short attention spans; others would say it’s a cynical attempt to reprogram the public debate. In any case, in the past few days with all the hoopla over the latest budget solution that “does not raise taxes,” it is clear that the spinners have amnesia. Taxes have been raised on Californians to historically high levels in the previous solutions. And California’s employers and investors – those who provide and hope to create the jobs that will ultimately pull us out of the recession – are already paying significantly higher amounts to the state, driving us off the charts in rankings of states with the worst business climates.

Over the past nine months, taxes have been increased or accelerated on California taxpayers by more than $20 billion. Increased revenues account for more of the measures to reduce the budget deficit than have measures to cut actual spending. The result? Alarmingly high tax rates for California.

Government employee unions and their liberal allies have mobilized to submit for title and summary a ballot measure that would repeal three tax incentives that bolster California’s competitiveness and improve fairness.

First on their hit list is an important change in how multistate companies calculate their taxes that will make California more attractive for growth and investment. The Legislature agreed to reward companies who invest in new facilities and jobs in California by reducing the weight that those two factors contribute to a company’s tax liability. Current law creates the perverse situation where companies that simply invest in more jobs or property here see their tax bills increase.

The second change conformed California law on tax losses to common practices by the IRS and other states. Taxpayers pay taxes on income (profits) and can write off losses. But for many, their business cycles do not match the arbitrary dates of a tax year. The IRS recognizes this fact of economic life and allows taxpayers to write off losses back two tax years and forward up to 20 years. (The latter is particularly helpful for businesses with long gestation periods, like biotech.)

An amazing story from Contra Costa County demonstrates just how far adults will go to protect classroom incompetence and prevent student and parent actions to uncover it.

Allison Moore says she and her 15-year-old daughter complained for months about the chaotic environment in a Clayton Valley High School math class.

"The students weren’t behaving," Moore said of the third period Introduction to Algebra class. "The teacher couldn’t control the students. They were making a ruckus everyday, making it difficult to learn."

By May 15, with less than a month left in the school year, the classroom atmosphere had not improved, Moore said. That morning, when students flicked the lights on and off and began a paper ball fight with no intervention by their teacher, Moore’s daughter caught the chaos on video with her cell phone.

Gridlock over the state budget, water policy and other pressing problems has led many to suggest California is ungovernable and our problems unsolvable. Out of this has come a lively discussion over revising the state’s Constitution. But among the two dozen biggest problems facing California, revising the state Constitution doesn’t crack the list. In fact, the debate over a constitutional convention is a dangerous distraction and time waster, shifting the focus of state leaders and opinion makers from higher priority problems that are actually solvable.

A Constitutional Convention is a process about process. As envisioned by its sponsors, from concept to execution, the course would take a minimum of three years, and at the end of that road would not have resulted in any budget being balanced, any program made more efficient, any tax increased nor any election term changed. Nobody’s life in California would have been improved, except perhaps the campaign consultants hired to push for or against the various proposals.

Public sector unions are in full-throated panic over proposals to cut state and local spending programs. The defeat of Proposition 1A (which many of them opposed) has created a broad political consensus that tax increases should not be on the table, and instead, billions in real program cuts affecting thousands of unionized state and local public employees are likely to be adopted within the next several weeks.

The unions have responded with a barrage of tax increase proposals:
·        The American Federation of State, County and Municipal Employees (AFSCME) proposed a six-page list of tax increases totaling more than $30 billion, demanding that Democratic legislators sign a pledge to support it.

·        The Service Employees International Union (SEIU) has launched a $1 million statewide television advertising blitz calling for new taxes to help balance the state budget.

Pundits and pols live to buzz about who will be the next big political thing, so a possible vacancy in the Lieutenant Governor’s office would excite endless speculation https://www.sacbee.com/walters/story/1907176.html> . While a special election has not yet been scheduled, Lt. Gov. John Garamendi is considered the front runner to fill the vacancy opened by the appointment of Rep. Ellen Tauscher to a State Department position.

But rather than feeding this frenzy, Governor Schwarzenegger can drive some of the politics out of Sacramento – and drive home his budget and policy priorities – by appointing … nobody. He should then propose to abolish the office altogether.

Nobody knows better than the Governor what a waste of resources (and in rare cases, talent) is the office of Lieutenant Governor. After all, last February the Governor’s only memorable exercise of his blue pencil was to reduce the Lt. Governor’s budget by 62 percent because he wanted “to ensure that sufficient resources are reserved for key programs within state government.”

If anyone needs further evidence that we are in the midst of a historic economic downturn in California, please consider the following charts. The fundamental drivers of the economy – employment, income and sales – are trending far, far below previous recessions. It’s no coincidence that these are also the economic engines driving state revenues, and provide another compelling reason why California residents and businesses simply cannot be asked to shoulder additional tax burdens to address the state budget deficit.

1. Since 1980, industry employment has never fallen more than five percent below previous employment peaks – until last month.

?