Responding to Mr. Mathews’ Bargain
Yesterday, Joe Mathews challenged me on this site to accept
a bargain that would eliminate the two-thirds vote on taxes and fees for a
guaranteed referendum by the people on all tax measures. He asked the question:
"Should a majority of voters in one election be able to overturn the votes of
2/3 of their elected representatives?"
My answer is: Yes, voters should have the power to make the
final decision on taxes if they choose.
As I made clear in the piece
that prompted this debate, just because voters choose legislators who lean
toward supporting taxes does not mean the voters themselves support such an
action. I offered numerous examples when this was so: Proposition 13’s property
tax reform (1978), Proposition 218’s right to vote on taxes (1996); and
Proposition 26’s two-thirds vote on fees (2010).
Political Fallout from the Amazon Tax Referendum
A potential
split within the business community over Amazon.com’s referendum on a new sales
tax law could have larger repercussions for business entering an unpredictable
election year. The referendum, should it qualify, would likely be on the June
primary ballot, which will be the first, full-blown test for the top two
primary system. The tax issue and the primary candidates make an unstable
mixture.
Amazon.com filed a referendum to overturn the newly signed law requiring that
online sellers collect sales tax on products sold to Californians. Should the
referendum qualify for the ballot, it will set up a business versus business
campaign battle, with state retailers who must collect sales taxes versus out
of state online sellers who do not collect sales taxes and their California
affiliates. The split in the business community could affect candidate races
during the 2012 primary election.
The California Retailers Association supported the law requiring that taxes be
paid on online sales, as they put it, to level the playing field. Sales taxes are
added to the cost of their products making similar products purchased online
that much less expensive. The sales tax could increase the total cost of an
item up to 10% in some jurisdictions.
FIRST, They Want to Go After Business Property Taxes
Here’s the word and the sentence that stood out to me in
Steve Lopez’s Los Angeles Times weekend
column on Proposition 13: It would
make the most sense to go after commercial property taxes first, Villaraigosa said, since business has gotten the biggest
break.
Underline and circle the word FIRST in that statement by the
Los Angeles mayor. Seems to me the intent is to change the property tax system
for all property owners. They just want to do it in pieces and begin with
business property.
And, don’t fall for the idea that business got a bigger
break than homeowners under Proposition 13. A study from
a couple of years ago by former state Legislative Analyst Bill Hamm and
economist Jose Alberro stated:
Vernon’s Texas Campaign
With
Speaker John Perez’s success in getting his bills on Vernon’s disincorporation
to the Senate floor, the question is: Will Vernon’s "Texas campaign" intensify
or is it just a negotiating ploy? Looking at the situation, it appears real.
Competition
between states for businesses and jobs was ratcheted up a notch when Texas
Governor Rick Perry took the unusual step about a month ago of writing to some
disaffected Vernon businesses frustrated with the Speaker’s effort to fold the
industrial city into Los Angeles County. Perez proposes to make Vernon a Community
Services District in an effort to end government corruption there.
Vernon
businesses and labor argue jobs will be lost if the Perez bills become law and
the city’s business friendly advantages are threatened.
A Constitutional Change Taxpayers and Businesses Should Pursue
As
taxpayers and businesses consider the political landscape during and after the
coming election year, they might want to think about making a small but
powerful change to the state constitution. Article 2, Section 9 (a) grants the
people referendum power to challenge bills passed by the legislature and signed
into law by the governor. However, the constitution prohibits the use of
referendums for tax levies. Excising that prohibition from the constitution
would add an important taxpayer protection by potentially giving voters the
final say over taxes.
In the next election cycle, a major push will be made to get enough tax
friendly politicians elected to the legislature to scale the two-thirds vote
barrier required to levy taxes. Democrats think that capturing two-thirds of
both houses of the legislature is possible in the next election. They may be
right.
According to Allan Hoffenblum, editor of the respected Target Book,
which follows the California electoral scene, "It appears that redistricting may
be favoring Democratic candidates, which could give the Democrats an
opportunity to capture two-thirds of both houses in 2012."
On top of that, the Service Employees International Union has made
no secret that it plans to use its influence in Republican leaning
districts to elect Republicans who may be more tax friendly.
A Telling Sign on the Road to an Initiative War
Here’s a telling sentence by Michael Mishak and Anthony York
from an LA
Times recap of the last minute budget dealings:
"In his cabinet room,
Brown was negotiating with Democratic leaders and members of the state teachers
union…"
What do we make of this? That the teachers union just
happened to be taking their turn discussing the budget at that moment, or that
members of the most powerful public union in the state were in with the
governor and Democratic leaders when final budget decisions were being made?
I suspect the latter.
The Times’ account gives even more credence to the argument
that unions played a decisive role in budget negotiations. In the end, tax
extensions and spending and pension reforms did not end up on a ballot. It was
clear that the unions did not want the reforms on the ballot, and, watching the
poll numbers for taxes slip, they were not eager about a tax vote, either.
Do elections matter?
Those involved in the political world often repeat the
refrain that elections have consequences. Who wins or what measures pass will
determine the direction of government until the next election.
However, a number of people involved in the 2010 November
election might wonder about that statement. Putting aside the beef some might
have with elected officials who acted differently than some voters anticipated
once in office, let’s concentrate on ballot measures, which do not have the human
quality to change a mind.
According
to the League of Cities, Proposition 22 on the November 2010 ballot explicitly
prohibited the governor and legislature from abolishing redevelopment
districts, but the governor signed the bill. See you in court says the League
of Cities.
Proposition 26 set a new standard requiring a two-thirds
vote for fees. Yet, the budget contains majority vote fees on property owners
in certain fire districts and a new Department of Motor Vehicles fee. Are these
really fees for service or are they disguised taxes that require a two-thirds
vote? The Howard
Jarvis Taxpayers Association says they are making that determination and
may go to court.
The Unpredictable Mr. Brown
Jerry Brown had his chance at political revenge last night
but to his credit he sidestepped that opportunity. On the day the Democrats
passed an alternative budget to Brown’s original plan with no cooperation from
Republicans, Brown vetoed the controversial union supported ‘card-check’ bill
that had reached his desk on partisan votes, Democrats for, Republicans
against.
Rumors flew around the capitol that Brown was using the
card-check bill as a bargaining chip in his budget negotiations. If some farm
area Republican legislators would vote to put tax extensions on the ballot,
Brown would veto the bill, the rumors implied. No Republican openly supported
the tax extensions and the tax extensions were not part of the final budget.
Yet, Brown vetoed the card-check bill, anyway.
So much for capitol rumors.
On the Budget: “We’re All Supply-Siders Now”
In another time of economic distress, President Richard Nixon famously said, "We’re all Keynesians now," referring to his turn toward the government stimulus policies espoused by economist John Maynard Keynes, usually rejected by Republicans like Nixon. Given the budget plan put forth by Governor Jerry Brown and the Democrats in the legislature you would think we are all supply-siders now. Or we better be if this budget is to succeed.
Supply-side economics suggests that tax cuts will stimulate the economy through increased consumer spending, resulting in increased revenue to government.
The Democrats new budget estimates $4 billion in new revenue. The failsafe is a trigger to cut education and other services if the revenue does not live up to projections.
Is this real money or more gimmickry to claim a balanced budget? Indications are that revenue is above projection for May and June so the prognosticators may be on to something.
A Reckless Threat Against Prop 13
Governor Jerry Brown told an audience in San Francisco
yesterday that if he doesn’t get his tax plan on the ballot he expects labor
groups will file an initiative to change Prop 13 to raise property taxes on
business. Brown is trying to scare the business community into pressuring
Republicans to support his tax plan. But, many in the business community are
tired of the so-called "split roll" threat. They are preparing for battle.
In a business environment with the value of commercial
properties down about forty-percent and unemployment hovering around the
12-percent mark, an increased property tax is about the worst formula one can
imagine. Not only would business owners probably cut jobs to pay the tax, or
not hire the next employee to pay the new obligation, but small and minority
owned businesses, the very engine to drive the economy forward, would be hurt
and stalled because of the property tax increase.
Ironically, Brown made the statement at a meeting of 250
apartment owners and developers. The question authors of a split roll
initiative have to face is do they include apartments on the commercial side of
the roll or are apartments residential? Excluding apartments from the tax
increase cuts dramatically the revenue proponents of the split roll hope to
take in. Including apartments means a rent hike for renters.