Governor’s Executive Order Will Create Commission To Propose New Tax Model

David Crane
Lecturer and Research Scholar at Stanford University and President of Govern for California

All across the country, states are facing declining revenues as a result of our troubled economy. Yet, California is uniquely burdened because our revenues swing from extreme to extreme – boom or bust – more than other states. For example, the state of Washington is projecting a revenue shortfall of less than 1%, while our state may face a shortfall of nearly 10%. The difference is that our state’s tax revenues reflect Wall Street’s economy more than California’s economy.

This is because more than 50% of California’s personal income tax revenues come from the just 1% of taxpayers (fewer than 150,000 taxpayers), and that 1% of taxpayers gets a substantial amount of their taxable income from Wall Street investment gains. When there are big investment gains, California’s budget picks up revenue. When there are no investment gains, California’s budget suffers even if California’s economy is still growing.

For example, during the last economic slowdown in 2001, the economy in California grew 1.1% but tax revenues fell 17%. On the other side of the coin, when the economy grew 8.7% in 1999, tax revenues rose twice as fast. Simply put, our tax revenues are too decoupled from our economy and too volatile for our state.

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Damn the Economy! Full Taxation Ahead!

Jon Coupal
President of the Howard Jarvis Taxpayers Association

These are creepy times for taxpayers — the creepiest in memory.
Between the state and local ballots, there are hundreds of measures
that would increase the burden on taxpayers. If all or most of these
tax increases and bonds pass, it will be Halloween every day as
taxpayers are compelled to dole out big dollar treats to our
political class.

Much of the cause of this tsunami of tax increase proposals is due
to the Obama phenomenon. Political consultants have told their
clients in government that this is an ideal time to put tax measures
on the ballot because the presidential candidate is driving
low-income voters to the polls who will be inclined to support
higher taxes for those they see as more prosperous than themselves.

Cynical politicians have gleefully taken the advice, and are
proceeding with a policy that can best be summed up as — with
apologies to Admiral Farragut — "Damn the economy! Full taxation
ahead!" How else can they ignore the fact that our state is in a
recession and taxpayers are in a vice?

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Sick to my Stomach

Joe Mathews
Connecting California Columnist and Editor, Zócalo Public Square, Fellow at the Center for Social Cohesion at Arizona State University and co-author of California Crackup: How Reform Broke the Golden State and How We Can Fix It (UC Press, 2010)

Watching TV in California these days is enough to make you physically ill. The problem? The ads for and against Prop 2, the initiative to regulate farm animal confinement. The Yes ads, produced by the Humane Society of the United States (perhaps the leading practitioner and defender of ballot initiative campaigns in the country), have — in a small box on the screen (the full screen was deemed too disturbing for viewers) — video of farm animals in distress.

The no campaign warns about salmonella and other diseases if Prop 2 passes and animals are free to walk around. The yes campaign has responded to this by saying that the current use of caged animals actually contributes to salmonella. So, both sides are talking about salmonella.

It’s enough to make me wonder whether every campaign really should be fought on the issues. In any event, if there’s anyone out there in the scientific community who might be able to evaluate these competing claims about salmonella, please post here. In the meantime, I can’t wait until the election is over, and the most stomach-turning thing on California television is the Lakers’ defensive rebounding.

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CA Treasurer Bill Lockyer backs Redistricting Measure

Chandra Sharma
Political Communications, Redistricting and New Media Strategist

After gaining mention yesterday by announcing his opposition to the lottery proposal in this year’s budget deal (first reported here on F&H by Joel Fox), CA State Treasurer Bill Lockyer made waves earlier today by announcing his support of Proposition 11, the Schwarzenegger-backed redistricting measure.

Lockyer spokesman Tom Dressler is quoted by Capitol Alert as saying, "allowing the Legislature to set its own district boundaries presents an untenable conflict of interest, and on that principle he supports Prop. 11."

Although the measure has gained the backing of a handful of Democrats, most notably Governor Gray Davis and former State Controller Steve Westly (who blogged about his support for the measure here on Fox&Hounds in June), Lockyer has become the first statewide elected Democrat to endorse the measure.

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Governor Schwarzenegger’s positions added to Endorsement Grid

Chandra Sharma
Political Communications, Redistricting and New Media Strategist

Governor Schwarzenegger’s recently released positions on the election’s twelve ballot measures have been added to the Fox&Hounds Endorsement Grid. Positions taken by the San Diego Union-Tribune editorial board have been added as well.

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Assembly Democrats going for a Supermajority?

Allan Hoffenblum
Publisher of the California Target Book and owner of Allan Hoffenblum & Associates

For Democrats to achieve a veto-proof “supermajority” in the state Assembly come next Tuesday, they must pick up six seats currently held by a Republican, while holding on to AD30, which is the sole Democratic held seat that is being seriously contested.

Last August, the California Target Book put out it’s Assembly Target List, listing six Republican held districts that the editors believed would be the Democrats’ best opportunities to pick up seats: Assembly District 10 (suburban Sacramento), AD26 (Central Valley), AD15 (East Bay), AD37 (Ventura County), AD78 (inland San Diego County), and AD80 (Imperial County).

From the get-go, the Assembly Democratic leadership and/or independent expenditure committees supporting their agenda put big bucks behind their nominees in four of the above mentioned districts: ALYSON HUBER in AD10, JOAN BUCHANAN in AD15, MARTY BLOCK in AD78, and MANUEL PEREZ in AD80.

Now, it appears they are going after all six.

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Fixing the Budget

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

The governor’s call for a special session of the legislature to deal with the budget problem served as a perfect backdrop for the budget panel at the Milken Institute’s annual state of the state conference yesterday in Beverly Hills.

The budget hole the governor and legislature have to deal with may get bigger if state Treasurer Bill Lockyer has his way. As reported on Fox and Hounds Daily yesterday, Lockyer said at the conference he would join Senator Dianne Feinstein to oppose the piece of the recently signed budget deal to securitize the lottery. That provision is supposed to provide $5-billion for the state coffers but must be approved by the voters in a special election that the governor will call next year. If it is defeated at the polls, the budget hole will be that much deeper.

The panel, moderated by Los Angeles Times columnist George Skelton, consisted of Republican Senate Leader Dave Cogdill, former White House Chief of Staff Leon Panetta, Senior Advisor to the Governor David Crane, newly appointed Legislative Analyst Mac Taylor, as well as Treasurer Lockyer.

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Rate This

David S. White
Principal of the Law Firm of David S. White & Associates, West Los Angeles, specializing in litigation, arbitration and mediation of real-estate-related disputes and litigation since 1977;

According to Gretchen Morgenson’s piece in the October 24, 2008 NYT Op-Ed Page, (“They’re Shocked, Shocked, About the Mess”), this is an actual email between:

“(t)wo analysts at S.& P. speaking frankly about a deal they were being asked to examine.

“Btw — that deal is ridiculous,” one wrote. “We should not be rating it.”

“We rate every deal,” came the response. “It could be structured by cows and we would rate it.”

First, some background, so we can all appreciate just how outrageous this admission is. According to everybody’s friend (mine anyway) Wikipedia, “S&P” means: “Standard & Poor’s (S&P) is a division of McGraw-Hill that publishes financial research and analysis on stocks and bonds. It is one of the top three companies in this business, along with Moody’s and Fitch Ratings.”

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Lockyer and Feinstein to oppose Lottery proposal in Budget Deal

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

At the Milken Institute’s State of the State conference today, California Treaurer Bill Lockyer said he would join with Senator Dianne Feinstein in opposing the governor’s proposal to use the lottery to help fix the budget hole. This propsal was part of the budget deal. If defeated in next year’s special election, another five billion dollar hole will appear in the budget.

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A Few Canaries in the Coal Mine To Think About

Patrick Dorinson
Host of The Cowboy Libertarian Radio Talk Show in Sacramento

The term “canaries in the coal mine” has been around for a long time. Unfortunately we are a nation of urbanites, suburbanites, and ex-urbanites who have no idea what it means. For that matter most Americans have no idea where their food comes from either, but that is a story for another day.

Here is the best definition I have found, courtesy of

“Life for an actual canary in a coal mine could be described in three words – short but meaningful. Early coalmines did not feature ventilation systems, so miners would routinely bring a caged canary into new coal seams. Canaries are especially sensitive to methane and carbon monoxide, which made them ideal for detecting any dangerous gas build-ups. As long as the canary in a coal mine kept singing, the miners knew their air supply was safe. A dead canary in a coalmine signaled an immediate evacuation.”

In modern terms, the canaries were an early warning system to keep the miners out of danger.

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