Controller’s Report Shows Business Taking a Hit

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

Some interesting information appears in the Controller’s Report on revenue issued this week. Those who think taxing business is the way to solve California’s budget problem should especially take notice.

The Controller reported that while income tax came in a surprising 12.1% above May Revise projections (a plus $283 million), the increase in dollars was greatly offset by a 3.5% drop off in projections in sales tax ($124 million off)and a whopping 36.1% below projections for the corporate tax ($90 million lower than expected).

Compared to May a year ago, corporate taxes are down 49%.

Yet, with business clearly suffering some think the answer for California’s budget woes is to tax business more. Adding a tax on business will just slow business even more, which means revenue for government will likely decrease not increase.

If you don’t believe me, consider what John Maynard Keynes wrote in the Times (of London) in 1933 about the futility of trying to alleviate deficits by increasing already high tax rates:

“Nor should the argument seem strange that taxation may be as so high as to defeat its object, and that, given sufficient time to gather the fruits, a reduction of taxation will run a better chance than an increase of balancing the budget. For to take the opposite view today is to resemble a manufacturer who, running at a loss, decides to raise his price, and when his declining sales increase the loss, wrapping himself in the rectitude of plain arithmetic, decides that prudence requires him to raise the price still more — and who, when at last his account is balanced with naught on both sides, is still found righteously declaring that it would have been the act of a gambler to reduce the price when you were already making a loss."

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A Dangerous and Precedent-Setting Intrusion

Guest Author and Vice President of Community Advocates Inc.

An Assembly bill claiming to bring diversity and transparency into charitable giving in California is actually an unprecedented intrusion by government to muscle its way into charitable organizations.  Here’s a fuller perspective on the bill which David Lehrer and I wrote for the Jewish Journal:

The next few weeks will be the moment of truth for Assembly Bill 624, the so-called, “Foundation Diversity and Transparency Act” as it comes before the State Senate Business, Professions & Economic Development Committee.

The bill is a nearly unprecedented intrusion by government into the world of charitable giving. While purporting to promote “transparency”, in fact it is the first step in setting government mandated priorities for where charitable dollars should go.

Through the not very subtle means of mandating the publication of the race, ethnicity, and gender of large foundations’ staff and board members, AB 624 requires that they inquire about and report on the race, ethnicity and sexual orientation of the board and staff of the organizations to which they make grants and of every business contact they have. The bill also mandates that foundations report the percentage of their grants that go to organizations that “specifically serve” designated minorities.

This intrusive legislation (which in the version that passed the Assembly, additionally required that the foundations survey their boards and staffs to determine everyone’s sexual orientation) is bad policy and will ultimately drive our largest foundations to set up shop outside of California.

The bill claims to simply be “sunshine” legislation—aimed at letting the public know more about large, tax-exempt foundations and their beneficiaries. In truth, sunlight is not what animates the authors of this bill; they have tried to hide in the shadows the true intent of the legislation.

The Greenlining Institute, the bill’s drafters, has rarely betrayed what the motivation behind AB 624 is. In a televised discussion of the bill last year, Greenlining Institute’s Associate Director, Orson Aguilar, made an admission that Greenlining has been loath to own up to since,
We think that foundations have a lot of power in society today. So what we want is to make sure that foundation dollars are reaching our communities so that we can be active decision-makers, discussion-makers, that we can be voters, that we can influence the democracy that we live in. So that’s basically what we’re asking for…. equal dollar amounts (emphasis added).

It was a rare moment of honesty in the debate over AB 624— a moment when the real purpose was revealed— to ultimately direct where the charitable dollars of private foundations are given.
That unprecedented over-reaching is compounded by other serious deficiencies in the legislation that are dangerous in their implications.

For example, the universe of the underserved is not defined by race, ethnicity, disability or sexual orientation. The poor and disadvantaged come in all sizes, shapes, colors and sexual orientation. Focusing on selected groups (as the bill does) is, in fact, special pleading and identity politics.

The Institute’s contempt for those causes they don’t favor has also been a hidden reality. Its executive director, John Gamboa, has derisively dismissed as “pet causes” foundation gifts to “elite universities and the opera.” If it’s not on Greenlining’s agenda, it’s not very important.

The Nonprofit & Unincorporated Organizations Committee of the State Bar of California has weighed in twice on this legislation. In its most recent opinion it concluded that it is unconstitutional, burdensome on foundations, poorly drafted, and invasive of privacy. There is no equivocation in its analysis; the bill has “fatal flaws.”

Equally troubling is the statistical “data” proffered by the Greenlining Institute to justify the need for their bill, information they testified to before the state legislature as if it were gospel. The most damning of their assertions is their claim that just three percent (or more recently the claim is 3.6%) of foundation giving went to minority-led organizations in California and only 10% went to benefit low income communities. An amazing assertion if one is at all familiar with large foundations in California and their patterns of giving.

Although few eyebrows were raised as they repeated their claims over the past year of lobbying, Greenlining’s data—the rationale on which their legislation is predicated—is as “fatally flawed” as the bill. An independent study of their research by George Mason University’s Statistical Assessment Service concluded that the Greenlining’s research “contains several analytical problems, involving sampling strategies, data collection, operational definitions, and data analysis…As it is, the foundation community seem ‘set up to fail’ by the comparisons used in the report.” After that critique, there isn’t much left for Greenlining, or its supporters, to hang their hat on.

AB 624, despite its manifest flaws and its being based on erroneous and skewed research, sailed through the State Assembly in a virtual party line vote earlier this year—every Democrat voted for it, every Republican, save one, opposed it. With the attention the bill has received in recent months, the result in the next few weeks might be different.

Students at UC Berkeley, hardly a bastion of conservative or libertarian thought, editorialized on AB 624 in the campus newspaper, The Daily Californian, and got it right, “AB 624, however, is less an effective treatment for pervasive inequality than a horrendous intrusion by the state into the affairs of private institutions. “

Hopefully, our legislators will think twice before reflexively voting for a measure that will do far more harm than good.

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19th Amendment still on the books

Public Affairs Consultant specializing in Issue Advocacy and Strategic Communications

Like a college freshman needing to learn some smooth lines to connect with co-eds, the GOP needs to better learn how to connect with women voters.

The latest example of the GOP missing the boat on attracting women voters is from a Santa Ana city councilman’s comment after the Orange County Board of Supervisors yesterday selected Sandra Hutchens as the new sheriff:

As reported in the Los Angeles Times’ lead paragraph on the story, "I kept telling the chief," he said, referring to Santa Ana Police Chief Paul Walters, who narrowly lost the sheriff’s job, " ‘Maybe we should get you some implants. Or a water bra.’ "

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Timing Couldn’t Be Worse to Float Tax Increase

Jon Coupal
President of the Howard Jarvis Taxpayers Association

Yesterday was a day of contrasts at the Capitol with a vocal rally of taxpayers chanting "No New Taxes" while democratic leadership called for $11.5 billion in new taxes. Perata’s call for massive tax hikes is nothing more than brazen. But in one respect, the establishment of clear lines of demarcation benefits the Republicans. Had the democrats actually proposed something reasonable, the Republicans might find themselves in the familiar territory of being on the defensive. But 11 billion plus in new taxes has even resulted in snickers from the Capitol press corps.

The timing couldn’t be worse to float such a silly idea – didn’t the democrats just see the polling where most Californians thought that the lion’s share of the action should be in cuts, not revenue increases?

One more observation: Kudos to Republican leadership for being proactive by advancing a series of alternative proposals. Come August, there is a good chance the dems will be viewed as the obstructionists. It’s about time.

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Exclusive Interview – With the Voting Ghost

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

With all the controversy this week about ghost voting in the state legislature, Fox and Hounds Daily attained an exclusive interview with the Ghost about his voting practices.

F&H: So, you’re the ghost who votes on these bills. Tell me Ghost, why do you do it?

GHOST: Someone has to vote. Do you realize how many bills need to be voted on? Thousands! If you waited for all the legislators to be present for all those votes they would never get anything done around here so I help out.

F&H: So what political philosophy guides your voting practices?

GHOST: Political philosophy? Please. Liberal or conservative doesn’t matter to me. What matters is an unguarded vote button I can push. Sometimes I vote the opposite way the member would vote just to have fun.

F&H: You mean like last month when Assemblywoman Hayashi’s vote on a housing bill was recorded the opposite way she would have voted?

GHOST: Great fun. Just great fun! It’s just the poltergeist in me. The Assemblywoman wasn’t there but I was, so I pushed the button.

F&H: But some people say it was Assemblyman Kevin de Leon who actually pushed the button. He sounded pretty guilty when he explained, "I don’t recall it, but I don’t deny it, either."

GHOST: No, no. Kevin was just covering for me. I am very helpful to the legislators you know. They like to have me around. Why I can vote even when they are on an airplane, like I did for Assemblywoman Bentley back in’92.

F&H: Aren’t you concerned that your mischief making will hurt the governance of this state.

GHOST: Come now. So I’m guessing when I vote Yes or No. That’s no different than what some legislators do. Do you remember Senator H.L Richardson? Maybe you’re too young, but I’ve been around a long time. He wrote a book that was titled: "What Makes You Think We Read the Bills."

F&H: Whose ghost are you anyway?

GHOST: Actually, I’m three ghosts rolled into one. I’m the ghost of legislatures past, the ghost of legislatures present and the ghost of legislatures future. You see nothing much changes around here. This practice has been going on a long time and every attempt to stop it has failed. And unlike my friends under the dome, I have no term limits.

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A stark contrast

Chandra Sharma
Political Communications, Redistricting and New Media Strategist

Two events took place at the State Capitol yesterday that may prove to be of particular significance to California taxpayers. Inside the building, Democrats led by Senator Don Perata held a press conference calling for the legislature to raise taxes in order to balance the budget. Outside, on the west steps, several Republican legislators including Assembly Leader Mike Villines and Senator George Runner joined grassroots taxpayer advocates Americans for Prosperity and the Howard Jarvis Taxpayers Association in staging a rally demanding ‘No New Taxes!’

Check out this video from the Sac Bee’s CapitolAlert/CTNS:

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Have you ever bought the really cheap garbage bags?

Political Consultant specializing in issues management and strategic research

Reducing medical reimbursement rates for doctors and pharmacies will hurt consumers and businesses.  Finding a doctor or a pharmacy that will accept Medi-Cal patients will become more difficult, and Medi-Cal patients will then deluge those that continue to accept them.  Such pharmacies could be forced out of business, leaving people with no place to turn – except the emergency room.

Furthermore, as more and more doctors and pharmacies do not accept Medi-Cal patients, many people will be unable to obtain preventative care and unable to fill prescriptions. Predictably, patients will suffer physically and taxpayers will suffer financially.

Cutting the reimbursement rate only provides savings in a very rudimentary way – in the same way that I save money when I buy the cheap garbage bags that don’t have handles or the cell phone headset that no one can hear me on.  I am really proud of myself for my thrift until liquid is leaking from my trash bag and making a gross trail from the kitchen to the front door and I am screaming into my cell phone so my mother can hear me.

Since this cut obviously doesn’t prevent anyone from getting sick – it just prevents them from seeking care until they are sicker – those who are insured will end up subsidizing the inevitable visits to the hospital emergency room.

One of the many consequences of this cut will be individual Californians paying more for healthcare.  I’d like to say that this is one of those unintended consequences of poorly thought out proposals, but I doubt it – policymakers know better. So let’s not pretend or close our eyes and hope for the best.

More emergency room visits, lost productivity, and needless suffering – that’s what we’ll get.  All for fake savings.

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Drought of Real Solutions

Robert Rivinius
Executive Director, Family Business Association

Everybody has undoubtedly heard the news that Governor Schwarzenegger has declared that California is in a drought and we need to conserve as much water as possible. The homebuilding industry is especially concerned about California’s water situation and shares the Governor’s commitment to increase our water supply and improve our water conveyance infrastructure.

Our industry stands ready to work with Governor Schwarzenegger and our legislative leaders to solve the water crisis facing our state.

However before we can find solutions, we need to set the record straight about growth in California and the real impact new homes have on water demand. As Dan Walters recently pointed out, “California’s population has doubled since the last major water projects were built in the 1960s, and it probably will increase by another third by 2030. Having more people means more demand for water, even with the most stringent conservation programs.”

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What about the minimum wage?

Loren Kaye
President of the California Foundation for Commerce and Education

Lots of political and economic notice has recently been taken about the sharp increase in the national unemployment rate, up a half-point to 5.5%, which is a ten percent jump from the previous month’s level of 5%. However, closer inspection of the numbers reveals what might be either an anomaly or – more tantalizing – a policy outcome.

Nobody is claiming that the overall unemployment situation is not deteriorating. But John Silvia, chief economist with Wachovia, said the unemployment rate was distorted by a big jump in teenage unemployment in May, to 18.7% from 15.4%, as the school year ended and teenagers started searching for jobs. The rates for all adult men and women stood at 4.9% and 4.8%, respectively, reflecting much smaller increases.

According to some observers, it is at least possible that in addition to the more general problems in the US economy, last summer’s increase in the federal minimum wage as well as the next jump coming in late July are behind the particulars here. Last July, the federal minimum wage increased to $5.85/hour and will increase to $6.55 next month. With a sluggish economy, it certainly seems possible that the higher minimum wage is discouraging employers from hiring lower-skill workers whose productivity cannot justify paying them that wage, particularly if they know they will have to give them a raise come late July.

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Joel Kotkin Warns: Global Warming Issue Could Lead to Social Engineering

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

Noted Urban Studies scholar Joel Kotkin argues that some in the environmental movement are using the issue of global warming to further an agenda to regulate land use and force people to move back into cities, creating high density living conditions.

Kotkin, Presidential Fellow in Urban Futures at Chapman University in Orange, California and author of THE CITY: A GLOBAL HISTORY, spoke at a recent conference on California Public Policy sponsored by the Claremont Institute.

A self-described life-long Democrat, Kotkin spoke of how the global warming issue is being used politically by those with an agenda. Kotkin said in this case the issue is not about energy or environmental effects but rather about compelling people to act in a certain way. “Its a social agenda.”
Kotkin charged that “urbanists” want people to move to the central city to cut down on driving miles. Kotkin noted that in Los Angeles only 4% of the population works in the central city as compared to 50% in New York City.

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