Author: Michele Steel

Voters refuse to solve the state’s financial problems with gimmicks or tax increases. That’s the clear and unambiguous message from the defeat of Propositions 1A-1E. Less clear- to voters or budget planners- is where we go from here. With borrowing and tax increases off the table, where do we find a solution to the state’s $21.3 billion budget deficit?

The latest copy of the Journal of Consumer Research. Where else?

In studying consumer spending habits, economists Priya Raghubir and Joydeep Srivastava discovered that people are more likely to spend money if they are given small denominations.

"We’ve done some studies with four quarters and a dollar, and we found that people were much less likely to spend the $1 note that they were given than the four quarters they were given," Raghubir explained to National Public Radio on May 12th.

Taxpayer amnesty…sounds good but then again, what is in a name? An elderly woman recently appeared before the Board of Equalization. Her crime? She received a refund erroneously. She even paid the money back. Sadly, that wasn’t good enough for the Board majority.

Our victim filed her tax return in 2002 with an anticipated refund. She received a check for roughly $4700 more than her anticipated refund and contacted the Franchise Tax Board to find out why the check was so much. No one at FTB knew. She held the check for three more weeks and deposited it. Her husband recently died so she thought it might have been a death benefit.

Roughly eight months later the tax man cometh wanting his money back. She promptly paid the money back. Was that good enough? Oh heavens no. FTB wants interest, a collection cost and recovery fee and an amnesty interest penalty.

When King Henry VII faced an insurmountable budget deficit, his advisor John Morton devised an ingenious, albeit paradoxical solution. British subjects, who could afford to pay higher taxes, would be forced to pay higher taxes.

His tax affordability test classified people into two categories, those who spent and those who saved. Anyone who spent money proved their means because they had extra money to spend. Alternatively, those who saved money could also pay higher taxes because they had extra money saved.

Morton’s Fork forced everyone to pay higher taxes.

Governor Schwarzenegger and state legislators have resurrected Morton’s tortured logic and unfair tax paradox in crafting Proposition 1A, a phony spending cap that raises taxes by $16 billion. Voters have been told that we have just two choices in the May 19th Special Election. We can take an immediate tax increase in exchange for a long-term spending cap. Or, we can allow Sacramento‚s spending to continue unabated and inevitably pay for the spending with higher taxes.

“Think globally, act locally.”

It’s the most fundamental principle of the modern environmental movement. But, for all the big talk from green politicians, government continues to block individuals from taking the small steps that will ultimately save the planet. Nowhere is this problem better demonstrated than in the state’s tax regulations of bio-fueled vehicles.

Bio-fuels, which include even that leftover fryer grease from McDonalds, are one of the most promising carbon neutral alternatives to fossil fuels. The LA Times reports that as many as 250,000 vehicles nationwide run on used cooking oil. In Orange County, Beach Benz has capitalized on the idea by offering vegetable oil conversion kits for its customers. Last year, state and local media outlets profiled the environmentally responsible actions of Dave Eck, a Bay Area mechanic who converted his Hummer to run on used vegetable oil.

Retail sales numbers announced this week didn’t bring tidings of comfort and joy this holiday shopping season. According to TNS Retail Forward, 2008 holiday retail sales are down 2.5% this year compared to the same data a year ago. The number is particularly bleak when you remove discount retailer Wal-Mart, the only major retailer to post an increase over last year. Some of the biggest names in retail are showing dramatic declines.

Abercrombie & Fitch down 28%. Nordstrom’s down nearly 12%. Even, Costco dropped 5%. A bad holiday shopping season will have a delayed but pronounced impact on California’s sales tax revenue, which in turn has an impact on the state’s budget deficit. Sales taxes generate nearly a third of our state’s revenues.

Sometimes government can’t help itself. We pay some of the highest taxes in the nation and receive some of the worst in government service. So it should come as no surprise when government works overtime to prevent you from helping yourself.

At Davis Senior High School in Davis, California, the students have been doing what students throughout our country have done to raise money. They hold fundraisers. Many of these fundraisers are in the form of bake sales, pizza sales etc…The proceeds go to sponsor the myriad of students clubs and activities on campus. But no more.

The Sacramento Bee reports that the school district has prohibited food sales that weren’t prepared by a commercial enterprise. Commercially prepared food also has to be paid for with a check. As one student points out, “Who pays for a slice of pizza with a check?” She’s right. How many students are running around with checkbooks?

Technology’s rapid innovation cycles force internet users to constantly upgrade their IT systems. Could this constant battle against technological obsolescence be so pervasive as to include even our internet metaphors?

Google has announced plans to store their supercomputers that power the internet on barges up to seven miles offshore. Ahoy! The information superhighway has set sail.

As The Times explains, “The “water-based data centres” would use wave energy to power and cool their computers, reducing Google’s costs. Their offshore status would also mean the company would no longer have to pay property taxes on its data centres, which are sited across the world, including in Britain.”

Tuesday’s 5.4 Chino Hills earthquake reminds us of the importance to prepare for emergencies and natural disasters. As the Orange County Register explains, “93% of Americans are not prepared for a major earthquake, fire or flood…it’s a good idea to put a kit together and make a plan.”

Everyone should heed this important advice, especially our state’s leaders. It may be unpleasant news for budget negotiators, but California must adequately account for the rising costs of emergency response in this year’s state budget. Moreover, state auditors need to find a way to reduce the state’s firefighting costs without jeopardizing public safety.

Wildfires have increased dramatically over the past decade, and so has the cost to taxpayers. The Los Angeles Times has an excellent five part series titled “Big Burn,” which examines the state’s recent increase in wildfires and response costs. (It’s this kind of excellent, in-depth reporting that will disappear with too many newspaper cutbacks.)