Author: Joel Fox

Dancing with the Stars begins tonight and the show should have reserved a spot for the nimble San Francisco Mayor, Gavin Newsom. His proposal to charge a fee on city retailers who carry soda neatly dances around the legal requirement that all local taxes receive a vote of the people.

Voter approval would be required if a tax was affixed to each individual can or bottle of soda. However, Newsom wants to avoid the voters having a say by slapping a fee on retailers who carry soda.

His ploy may not stand up against legal challenges, which the mayor, himself, acknowledges will come.

No word on how Newsom wants San Francisco to use the money. In the past when discussing a possible tax on soda, he has suggested funding an exercise and media campaign to warn about health problems that he says are associated with soda drinking.

Talk about a public private partnership – how would the issue of government reform fare if a chief architect of privately funded reform ideas holds one of the top constitutional offices in the state? It’s possible if Governor Arnold Schwarzenegger selects former Assembly Speaker Bob Hertzberg to be the interim Lt. Governor with a portfolio as the new czar for governance reform.

No one knows if the governor would select a Democrat for the post if it becomes vacant, but Hertzberg’s name is frequently mentioned as a possibility. It is hard to imagine Hertzberg wanting the post until you consider what he has been up to lately.

The effusive Hertzberg is co-chairman of California Forward, the foundation funded government reform project that is just now issuing ideas on how to reform California’s dysfunctional government.

There has been much speculation about whom Schwarzenegger would appoint to the Lt. Governor’s office should the current occupant of that office, John Garamendi, win a congressional seat in November.

Soon after taking over the position as Speaker of the Assembly, Karen Bass held a meeting at the Los Angeles Chamber of Commerce to discuss ideas to improve California’s desperate fiscal situation. I believe her plan was to convince members of the business community that more revenue was needed and to seek suggestions on how to go about getting it. In other words, which taxes can we raise?

I offered what I said would probably sound like a counter intuitive proposal: Cut the capital gains tax. In cutting that tax I suggested more revenue would come quickly into the government for the tax cut would convince holders of assets that this was a good time to sell their assets and receive the tax benefit. I said that capital gains cuts usually generated some quick revenue.

Another participant at the meeting challenged my statement saying that was not always the case. I turned to an economist who studies the California economy and asked for his opinion. In cautious terms his bottom line answer backed me up saying that, yes, the record shows that capital gains cuts usually boosted government revenue in short order.

The Legislature didn’t finish a water plan before adjourning the regular legislative session at the end of the week. Perhaps legislators will deal with water in a special session. The prison deal didn’t cover savings projected for the prisons in the recent budget agreement. Perhaps in a special session. The tax commission proposal will soon be presented and the governor wants to deal with it right away. In a special session. And education reforms? A special session is scheduled for that, too.

Taken together, the coming special legislative sessions are looking more and more like a regular session of the legislature. And these sessions hold no promise that they will be more productive than the regular session just completed.

Special sessions of the legislature are supposed to be few and far between. The idea is for the legislature to concentrate on a particular thorny problem and resolve it without the distractions a regular session provides.

But, if one special session is piled upon another, the special session is not special any more. Complex issues are subject to horse-trading and distractions are not minimized.

After yesterday’s session of the Commission on the 21st Century Economy it appears we are still a long way off from seeing a new, dramatically different tax plan approved for California. But when the plan does face a legislative vote will it need a majority vote to pass or a two-thirds vote required for tax increases?

Commissioners underscored the uncertainty of what a new Business Net Receipts Tax would produce in revenue. The BNRT is the key to the new tax plan. Revenue raised by the BNRT, which would include capturing taxes on services as well as goods, will be used to offset tax cuts in the proposal. The plan calls for elimination of both the corporate tax and the state portion of the sales tax and lowering the personal income tax rates.

The goal of this revenue-balancing act is to produce a package that is revenue neutral. The search for revenue neutrality is an important legal distinction because the legislature would mark the proposal as a majority vote bill.

The Commission on the 21st Century Economy debates and perhaps votes on the new tax plan it has shaped over the past nine months at a Los Angeles meeting today. I say “perhaps” because I suspect the final product won’t be agreed upon so quickly. There’s a lot to discuss in the proposal. Since a back-up meeting is set up for Monday just in case, the betting here is the Monday meeting will be called.

The plan’s ingredients have been bantered about for some time: A new Business Net Receipts Tax (BNRT), a form of a value added tax; elimination of the state corporation and franchise tax; elimination of the state sales tax; and reducing the number of personal income tax brackets to two at 6.5% and 2.75%.

You can read the outline of the plan here.

Many hurdles exist for the plan to become a reality, not the least of which is the reaction of taxpayers. Business taxpayers are not certain what the effects of the new business net receipts tax will be. One thing they do know, the BNRT started out with a tax rate of 2.77% when it was first drawn up, increased in later discussions to over 3%, and is presented in the committee documents at 4.2%.

Looks like there’s concern out there that the idea of a part time legislature has legs. It certainly seems to be a concern from those on the left and those that defend the legislature.

Yesterday, I suggested that we consider a debate on the part time legislature in the context of the mushrooming use of the initiative process since the legislature became a full time institution. I wasn’t advocating for the part time legislature, just raising questions and pointing out facts. Frankly, I haven’t even made up my mind, yet, although I think a part time legislature in one form or another is worth considering.

In the comments section after my piece, Steve Magviglio, who often speaks for the Assembly Speaker, listed a number of reasons that have hindered the legislature from doing its job more effectively and warned of the dangers of a part time legislature.

At the end of the legislative session, members of the State Assembly and Senate go on a mad dash to pass legislation before adjourning for the year.

It’s a great time to slip controversial items into “must-pass” appropriations bills, and the flurry of activity guarantees that some controversial items will make it into law without much debate.

One such item is a new and expanded tax – disguised as a “fee” – offered up by Assemblywoman Nancy Skinner of Berkeley. Skinner is trying to add an amendment to Assembly Bill 983 – a bill expanding after school activities – that would raise millions by doubling the California Redemption Value (CRV) on some beverages. It would also impose a CRV fee on larger juices, which currently are not subject to the fee.

Would a part time legislature lead to fewer initiatives?

I ask this question after pulling out an op-ed I had published in the Sacramento Bee over twenty years ago. In defending the initiative process in that piece, I wrote:

“The initiative remained popular with California voters in the 1920s and 1930s but slowly disappeared from common use. However, initiatives as an expression of voters’ frustrations came back in the 1970s – not coincidentally, soon after Californians approved a full-time legislature.”

What sent me digging into old files were observations made by Sacramento Bee political columnist Dan Walters at the recent constitutional convention town hall in Orange County last week. Walters argued that the 1966 reform, which created a full time legislature, did not bring the promised improvements in governance supporters across the political spectrum predicted at the time.