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BILL LEONARD on the November 2008 Ballot Measures
Today’s Issue:
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Inside the Leonard Letter
By: Bill Leonard on: Monday, November 17th, 2008
***LAO’s First Report Reads Like Fan Mail***
The new Legislative Analyst, Mac Taylor, released a report on the Governor’s special session proposals. I have never seen or read an Analyst’s report that praised a Governor more than this one. Since past reports from the LAO have favored tax increases combined with spending reductions, it is not surprising that this report likes the Governor’s plan. What struck me was the overall tone of the document. In particular, the way the Analyst treats the Governor’s proposed tax hikes.
The report says the Governor’s estimates of the revenues from higher taxes are “potentially low.” We have a deepening recession after a stock market collapse, lower housing prices, and rising unemployment. How is it possible to understate a tax increase? Yet, Taylor writes in the report, “Specifically, our estimate of the revenue impact of the Governor’s tax proposals indicates that actual revenues may exceed DOF [Department of Finance] estimates by as much as a combined $1 billion over the two years involved.”
The question I have is, did the Legislative Analyst do a dynamic analysis of the proposed tax increases reflecting changes in taxpayer behavior, or did his staff just plug numbers into calculators? I observe that retailers are struggling to stay in business. Employment is dropping like a rock. Housing has not bottomed. Internet competition is growing. But the Analyst thinks a huge sales tax increase is going to bring in more revenue than promised in the Governor's proposal.
Pardon me, I am not convinced by mere assertions.
***When Autopilot Spending is the Problem***
Most of us cannot order up more income whenever we want to cover increases in our spending. The fact that government leaders are asking Californians to increase the government’s income shows that governments just do not operate in the same universe as the rest of us.
Mike Genest, the State Director of Finance, in his column defending the Governor's tax increases, made an important point. That is the growth in spending is not due to Schwarzenegger proposals or to growth in discretionary programs. Schwarzenegger is still trying to wrestle the spending promises made by Davis and previous Governors.
The spending increases are deeply embedded and they continue to drive the state budget deeper into red ink. Spending for entitlement benefits, caseloads, and mandatory formula driven programs in health, welfare, education, welfare, and prisons are driving the spending faster than the economy can fund. Budget cutters will have to address runaway entitlements in order to enact long term fiscal responsibility. Any spending that grows faster than the economy must be changed and if there is some fast growing program that is too important to cut then another program will have to been repealed not just reduced.
http://foxandhoundsdaily.com/blog/michael-genest/why-not-cut-spending-instead-raising-taxes
***Be Aware of Triggers***
Among all the thousands of pieces that make a state budget is an annual calculation on whether or not to continue a “temporary” 1/4 cent sales tax increase. If the two conditions are met then the trigger will pull and the sales tax will decrease. The problem is that those who have a vested interest in seeing the tax continue are those in charge of making the calculations, and the thresholds are easy to fail to meet. One test is that the state's reserve is down below 3% on June 30th. Even in good budget years it is easy to manipulate this number and spend down the reserve on June 30th by transferring the money to another account for a day.
The second test is the one that bothers me the most and that is that actual revenues for the prior four months have to be higher than the estimates made at the start. It seems to always work out that the revenue estimates turn out to be higher than the actual revenues. Go figure—it’s easy to overestimate revenues then post this finding so that the conditions to lower taxes on the people of California are never met. It is, therefore, absolutely no surprise to anyone when the Department of Finance issued its annual findings letter that declared that the “temporary” 1/4 cent sales tax will continue.
Legislators will be tempted to pass contingent tax increases that would only go into effect when certain conditions occur. Be aware that a triggered tax increase that is certain to be pulled is exactly the same as a tax increase.
***California Forward Budget Reform, Part I***
I have been working with California Forward, a bi-partisan policy group, to come up with concrete suggestions to fix California’s budget process. I would like to share with you some of our ideas so far, in four parts.
This week I focus on the problem of the structural deficit. A big contributor to this is our focus on a 12 month budget. By not focusing further out in time legislators avoid the full cost associated with decisions that are politically popular or just expedient; and in doing so, they ignore or undervalue choices that have long-term benefits. This contributes to growing demands on the budget that are routinely passed on to successors.
To solve this, we propose the budget process instead digest a multi-year time span rather than the current 12 months. Our idea is the Governor’s proposed budget would include program-level information for the prior year, the current year, and the next two fiscal years. Major program initiatives would include a two-year estimate of implementation costs and how to finance them.
The final Budget Act adopted by the Legislature would cover two years of anticipated spending. Appropriations for the budget year (first year) as well as baseline appropriations for the second year would be authorized. The following year’s budget would include proposed changes and adjustments to the baseline budget adopted in the prior year to maintain fiscal balance, and/or adapt to changing circumstances. To the extent that new programs require additional resources, their sponsors would have to include a pay as you go provision, either of cuts in other programs or tax increases, and find the extra votes needed to approve these changes.
Under this system, in the spring of each year, the Legislature would consider expenditure and program changes that would cover a 24-month period. The requirement for fiscal year balance would remain. Program changes necessary to maintain fiscal balances would be identified and enacted. Strategic planning and performance measures would be needed to identify the issues to be addressed and bring about program improvement and accountability for how money is spent.
http://www.caforward.org/home
Inside the Leonard Letter
By: Bill Leonard on: Monday, November 10th, 2008
***Special Thanks to All Veterans***
My thanks to veterans of the American armed forces, and our allies’. One day is not enough to say thanks for our liberty.
On November 11, 1919 the Great War ended, and this is the date picked to honor our vets. However, on that date my grandfather was still doing his duty as part of the American Army of occupation. For these soldiers the disease, the hunger, the cold, and the lack of resources to help the starving and homeless populations of Europe were as challenging as any battle. Our men and women serve us well in winning the wars and in keeping the peace. God bless them all.
***America Still a Center-Right Nation***
America has voted and the results are clear. Congratulations are due Barack Obama. He ran a positive, disciplined campaign, and his rhetoric matched the hopes and aspirations of Americans. It is also fitting to rejoice in the election of an African-American to America’s highest office just two generations removed from the time of Jim Crow.
Thankfully, the great Democrat tsunami that was feared by those of us on the right did not happen. The Democrats did make large gains nationally, but they fell way short of total dominance. Some argued the election shows America is no longer a center-right country. I point out how absurd this claim is given that Barack Obama won by promising to lower taxes, to escalate the war in Afghanistan, to continue the fight against al Qaeda, and to preserve our individual right to own a gun. Brent Bozell said on Friday that arguably Obama ran as a Reaganite, others arguing Obama outflanked McCain to the right on taxes (at least rhetorically).
Californians proved my thesis as well. The state voted overwhelmingly for Obama, but when it came to looking at issues one-by-one, the state voted with me on eight of the twelve initiatives, and I am way right of center.
I think two groups of voters going toward Obama proved fatal to the McCain candidacy. A late October Reuters/Zogby poll had McCain barely beating Obama among the critical “investor class.” Bush won this category hands down in 2004. Well over 50% of Americans have a stake in the stock market. The collapse of the stock market created a huge challenge for McCain. The focus on Joe the Plumber proved a weak way of keeping investors in the Republican fold. The Republican Party is most exciting when it is the party of ideas. A zero percent capital gains tax rate could have given investors something to vote for. Even those making over $200,000 a year went solidly for Obama, a tectonic shift from four years ago. My guess is McCain’s unclear performance during the worst days of the financial crisis caused a serious loss of confidence in him as the better steward of the economy.
If nothing else, liberals have shown they are good students of conservatism. We will soon see how much the reality matches the rhetoric. To the extent it does not, I am confident the country will take the Democrats to task, and that will provide the next opportunity for conservatives to rise again. I will be spending the next two years, at least, making my case how to accomplish this. Dick Armey had some excellent provocative thinking in Friday’s Wall Street Journal along these lines:
http://online.wsj.com/article/SB122602742263407769.html
UNDER THE DOME
***Service Tax ***
Good friends alerted me to rumors that state leaders were dragging out old ideas on the taxing of services. I was working on an in-depth response showing the adverse economic impacts of such taxes and the administrative difficulties in taxing labor or services for the first time in this way. But I am already a week behind because serious, permanent, billion dollar service tax proposals are now on the table.
Yes, there are a few other states that tax services in this way. Most of them have low or no income taxes so the tax burden on families is very different and usually lower in the other states. Some states like Hawaii add service taxes to tourist type services and most of those tourist businesses offer discounts to locals.
A hat tip to LA Times staff writer Martin Zimmerman for good research in a short time describing the burdens that Californians bear compared to other states. I concur that if enacted that such a tax is likely to backfire.
http://www.latimes.com/business/la-fi-caltax7-2008nov07,0,4976048.story?track=rss
Another issue related to local government is that none of these taxes on services will include the local share of the state sales tax. The local sales tax for all cities and counties, and those special add-on sales taxes, cannot be levied on services without a separate vote of the people in each jurisdiction.
If this tax survives a week I will be back with more.
Inside the Leonard Letter
By: Bill Leonard on: Monday, November 03rd, 2008
***Budget Target: Schools***
The day after the election, the Governor has called a special session of the lame duck legislature to deal with the state budget. Everyone knew the budget they approved just a few short weeks ago was inadequate so now they will try once again to head off impending fiscal disaster. Already the budget is upside down by billions, ranging from $5 billion to $15 billion depending on which horror story you buy.
The Governor has said that this time the solution must include public education. I do not think it is a scare tactic or idle threat. The fact is that K-12 education takes the biggest portion of the state budget and simply must be part of any workable budget solution. My suggestion is the Governor target his school cuts. I believe the excess administrative expenses of schools could account for the entire amount he needs to trim education spending. In other words, we can achieve the savings needed without touching anyone who interacts with students on a daily basis. The state and district offices might have to make do with fewer staff, but there is no reason that teachers, aides and others who work on campuses need to be fired. Another way to save money without hurting children or teachers is to suspend purchasing new textbooks. The books are very expensive and the quality of instruction should not suffer because few-year-old books are being used. Schools should only purchase those books necessary to replace those that have gone missing or are in such bad shape that they are rendered useless. Such targeted cuts can help solve the state budget problem, take the sting out of the proposal, and help us begin to cut the fat in education spending.
***Basic Fairness***
Most of us learned about fairness on the playground. In games where there were no referees, we had to agree on a set of rules and make fair decisions ourselves. That basic sense of fairness continues through life, though when it comes to California’s tax system, it has been suspended. In a court case involving the Franchise Tax Board, the State of California has taken the position that when a tax statute is unconstitutional, the victims are not entitled to a full refund of taxes paid. Instead, the State argues that victims are entitled only to the difference between the amount paid and what they would have paid IF the statute had been drafted properly and applied in a constitutional manner. In other words, when the Legislature (or local governments) ignore the Constitution and collect taxes under an unconstitutional statute that is later declared “null and void,” taxpayers still do not get all their money back. This is outrageous!
We should all want harsh penalties when the Constitution is violated and illegal taxes are collected. At a minimum, that should mean that the victims get all of their money back, plus interest. That result follows logically from the basic concept of fairness: when a law has been declared unconstitutional, it should be null and void. If an unconstitutional law has no force or effect, how it be used to keep some portion of taxpayers’ money? Obviously, issuing full refunds will cost the State (or local governments) a lot of money, but that is the point. If the consequences are severe enough, politicians will be much less likely to ignore or intentionally violate the taxpayer protection provisions of our Constitution by passing bad tax laws.
The case in question is Ventas Finance I LLC v. Franchise Tax Board (California Supreme Court No. S166870).
***Tax Complications are ….Complex***
In my piece last week on sales taxes I cavalierly suggested that people shop around for cars in order to avoid the super high sales tax in certain cities and counties around the state. I unintentionally made my point on how complex these laws are because while the local city and county sales tax is based on the place of sale, the add-on sales tax voted in by city or county voters is based on the buyer’s home address so it does not matter where in California you buy the car. But this only applies to the sale of vehicles, boats, and airplanes. Thus, it would not be worthwhile for an LA County resident to make the drive up to Lake County to buy a car, but it might to buy a home theater system.
However if the buyer is a business and gets audited then the auditor will ask for evidence that the Use tax was paid properly on this add-on amount.
The BoE has a Frequently Asked Questions section to help make sense of the differences:
http://www.boe.ca.gov/sutax/faqtrans.htm
***Politicians Cannot Cut Taxes on the Poor***
The Obama campaign and Democrats generally have been successful in convincing Americans that Bush’s policies have favored wealthy Americans at the expense of the middle class. The mantra “tax cuts for the rich” has been difficult to counter because the wealthiest did get a significant tax cut in 2003. Of course all Americans got a good tax cut, and now only 60 percent of Americans pay any income tax at all as a result. The bottom 40 percent of all income earners pay no taxes.
But despite the tax cut for the rich rhetoric, the Tax Foundation tells us that researchers at the Organization for Economic Cooperation and Development (OECD) in Paris found that when it comes to what they call “household taxes” (income taxes plus social security contributions), the U.S. “has the most progressive tax system and collects the largest share of taxes from the richest 10% of the population.” As far as making the rich pay their “fair” share, the U.S. is already more progressive than France or Sweden by this measure, and second only to Ireland among 24 rich nations surveyed. A progressive tax system is where the higher income taxpayers pay more than a proportional rate of taxation.
Scroll down to the table at this Tax Foundation site:
http://www.taxfoundation.org/blog/show/23856.html
The extent to which an Obama/Reid/Pelosi triumvirate could extract more from the wealthiest Americans is clearly approaching an upward limit. In California, the wealthiest one percent paid 46 percent of the taxes, according the latest data. I asked our researchers to find out how much the top one percent would pay if we had a flat tax. The response is quite striking:
According to the Franchise Tax Board, the top one percent of adjusted gross income earners would pay about 28 percent of all personal income taxes under a pure flat rate system that had no deductions or exemptions. So, by a fair measure, a flat tax would still have a progressive outcome. Moreover, for this scheme to be revenue-neutral, or to get the same amount of revenue we are receiving now, the rate would only have to be 5.1% for all taxpayers. That sounds attractive, does it not? If you were to accept a 6% rate as being fair, the conclusion is that a lower and flatter rate than many pay now could potentially bring in more revenue.
Since we are approaching the limit on extracting revenue from the wealth creators, a flat tax looks like a better alternative all the time. Ironically, the Bush tax cuts and the California income tax system make this idea less politically viable because -- thanks to tax cuts on lower income categories -- so many pay no income tax at all. Thus, any flat tax would be a tax hike on a large number of Americans and Californians. However, I say for the long term health of our democracy, every citizen should pay something and hold the government accountable for how their tax dollars are spent, no matter how small.
Inside the Leonard Letter
By: Bill Leonard on: Monday, October 27th, 2008
***Shop Around – Higher Sales Taxes On the Way***
For decades, California had a uniform sales tax rate so consumers would not be surprised by different levels of taxation when crossing a county or city line. The Bradley-Burns Uniform Local Tax Law is still on the books but it has been so grossly violated, it is now pretty much meaningless.
Through special legislation, cities and counties can now fund services through local voter-approved sales taxes. These are levied both on a countywide basis and within many incorporated city limits. Since the first local sales tax was approved by voters in 1970 for the Bay Area Rapid Transit District, we now have close to 100 of these special tax jurisdictions statewide.
At first only county governments were authorized to levy the sales tax, but in 1991, special legislation allowed the city of Calexico to impose a city sales tax. Since then, an additional 22 cities, through special legislation, also gained authorization to put sales taxes on the ballot. In 2003 the Legislature opened the door for all cities to impose sales taxes, and the number of voter approved city sales taxes has exploded. There are now 62 city sales taxes, add these to the 36 sales taxes levied in counties, California currently has 98 voter-approved sales taxes. As local governments seek more tax revenue, more is expected. For the November 2008 General Election, there are at least 25 measures slated.
In June, the city of South Gate in Los Angeles County voted to make the total sales tax there 9.25%. Also in Los Angeles County, on their November ballot is a measure that would allow the Los Angeles Metropolitan Transportation District to levy an additional half a percent sales tax throughout the county. Therefore, in LA County, a 9.75% sales tax rate is now likely.
Folks, there is basically no real limit how high these taxes are going to go. As consumers, I urge you to look up the sale tax rate in your community before making a large purchase. Some localities have held their sales tax to the state base rate of 7.25%. Two and a half percent on a $30,000 car purchase would save you $750.
The total sales tax rates for cities and counties can be found here:
http://www.boe.ca.gov/cgi-bin/rates.cgi
Here is a chart illustrating the explosion of these local taxes.
http://www.boe.ca.gov/leonard/2009%20-Emerging%20Issues%208.pdf
ON THE TRAIL
***Vote for Me (Well, Sort of)***
The political parties of California have submitted their lists of presidential electors to the Secretary of State. Even though you see the names Obama and McCain on your ballot, you are really casting your vote for their electors. In a first for me, I am on the list of electors pledged to the McCain-Palin ticket, and if the voters of California choose McCain over Obama then I will be in the State Capitol on December 15th where the actual, technical election of our next President and Vice-President take place. If Obama wins the state, then 55 votes of his delegation will be there instead. I would really like to be there, so please vote for me for elector.
The parties and the Secretary of State have posted the lists of Electoral College designees if you wish to see all of the names of the people for whom you are really. www.sos.ca.gov/elections/election_2008/pres-general/electors_november2008.pdf
Each party selects their electors differently. To read about how each party chooses their list, go to:
www.sos.ca.gov/elections/election_2008/calendar/section7.pdf
***The AR Divide***
Hugh Hewitt spoke in Southern California last week. He presented a less-than-uplifting view of the election for people of my political persuasion, but his talk was filled with insights about what we can learn from this. One of the most poignant was this: there is a national divide based on “AR.” If you are not familiar with the abbreviation, then you are probably on one side of that divide. If you know that it means “accounts receivable” then most likely you are dependent upon your own AR for your livelihood. Hewitt said that in some audiences, no one knows what AR is; these are often groups of public employees.
In an audience like the one to whom he was addressing these remarks, most of the room raised their hand to acknowledge the term. Those who are in the AR group are those among us who create jobs for others and wealth for many. They are the entrepreneurs who take on risk and serve our needs. They are our neighbors who do not want to pay higher taxes because that will mean they cannot create as many jobs or otherwise expand their business. Those who are not in the AR group tend to not understand the daily challenges of any of that, but in an economy like we have now and with the election outcome portending tax hikes, the non-AR folks may be getting a wake-up call about what happens when the AR types are made to suffer.
ISSUE FOCUS
***Instead of the Bailout***
Since he has left Congress, Newt Gingrich has been thinking creatively about how to solve the problems facing our nation. I am impressed with his thoughts about how Congress and the President should be approaching the financial situation instead of spending about
$1.45 trillion of taxpayers’ money “for Washington's ideas on how to save the economy.” While soliciting ideas for how people think the money could be better used, Gingrich offers the following ideas:
Zero capital gains tax – “to see increased economic growth and American competitiveness in attracting foreign direct investment and international corporations.”
Repeal Sarbanes-Oxley – “Instead of enacting reform measures that would reasonably prevent fraud, [Congress] passed a burdensome, accounting mess. Sarbanes-Oxley is a disproportionate burden for small businesses and start-ups, and has forced many companies to move from New York to London.”
Allow 100% annual expensing for small businesses – “Small businesses create 7 out of 10 new jobs in America and account for more than half of the output of our economy. One hundred percent annual expensing would give small business more money to invest in new technologies, like computers and machinery, to improve worker productivity. Likewise, it would allow business to hire more employees.”
Move to break up and privatize Freddie and Fannie – “Corporate greed at Freddie and Fannie fueled subprime mortgage loans.”
Provide a comprehensive plan to keep Americans in their homes – “The government could … offer a no-interest loan to homeowners who are current on their mortgage payments and work with their lending institution to renegotiate their mortgages into a 6% fixed interest, 30-year loan.”
Move towards long term investment strategies – “Congress should look to investing in the National Institutes of Health and the National Science Foundation to foster innovation and make America the most competitive market for research and development.”
Develop an all-of-the-above energy policy – “Imagine if we invested a fraction of the billion dollar bailout into developing, for example, more nuclear power and coal-to-synthetic natural gas technologies and infrastructure.”
To add your own creative ideas to Gingrich’s American Solutions Lab, go to:
http://www.americansolutions.com/SolutionsLab/
Inside the Leonard Letter
By: Bill Leonard on: Monday, October 20th, 2008
***Not So Fast, Mr. Lockyer***
Last week George Skelton’s Los Angeles Times column described a phone conversation with state Treasurer Bill Lockyer, who elaborately insists Republicans are to blame for the state’s fiscal mess. Lockyer concedes the state has a spending problem, but argues that we are not bringing in enough revenue. His theory is programs the Democrats want to protect from cuts– welfare and K-12 education– have been costing the state less over the last decade after taking into account inflation and population growth. He then points to major spending areas Republicans support--like prisons and the car tax cut-- and says that because these have grown faster than inflation and population, it is Republican spending that is busting the budget. Therefore, he argues, Republicans ought to support tax increases, or else they are hypocrites.
Well, there is more than one way to crunch numbers. Lockyer focuses on General Fund spending over the last decade. What he conveniently ignores is revenue over the same period. Since he focused on General Fund spending, I will do the same with revenues. Looking at the major revenue totals at the Legislative Analyst’s site, it shows that in 1998-99, major General Fund revenue was $58.2 billion. In 2008-09, it is expected to be $98.4 billion. That is a 69% increase over the period. Adjusting for inflation, it is still a 27% increase in real spending. Adjusting for inflation AND population growth, per capital spending has increased from roughly $1,780 per Californian to $1,950, which is about 10% more per Californian. That is plenty of extra cash to cover a 7% annual increase in prisons, just one category of spending. It is also plenty to cover a 25% increase of the cost of the car tax over the decade, with plenty left over.
Californians continue to give more of their money– yes, in real terms– to the state of California. California government continues to spend even more. We do not have a revenue problem. We do have a spending problem.
***Buffet is Bullish on America***
I am not a financial advisor, nor do I pretend to be. I find it noteworthy that among all the panic and doomsday-ism out there, Warren Buffet, America’s most successful investor, announced on Friday he is buying the stock of American companies. Buffet points out that if the federal government keeps printing paper as a means of bailing out the economy, high inflation is a likely outcome. Under than scenario, cash is going to lose value, he argues.
Most important to me is that Buffet is showing faith in America. Despite our troubles, this country still has the most efficient economy, the best workforce, the best universities, and so on. A bet against America is, and always has been, a bad bet long term. Thank you, Warren Buffet.
http://www.nytimes.com/2008/10/17/opinion/17buffett.html?_r=1&em&oref=slogin
***My Tejon Ranch Experience***
The Tejon Ranch Company generously allowed me to see some of their incredible 270,000 acre spread near Ft. Tejon off of I-5. As I have noted in this letter before, Tejon Ranch put together a huge deal with the environmental community that will preserve nearly 90% of the Ranch for wildlife and future generations of nature-loving Californians. As well as an agreement to provide much needed new houses for southern California. And, they did this without government telling them to. Imagine that.
I posted some video of my visit. What an incredible legacy for California. Kudos to the great people at Tejon Ranch.
http://www.youtube.com/watch?v=ze2LQeIk8FM
See Tejon Ranch’s official website to learn more:
http://www.tejonranch.com/
***Technology Technicality***
Recall a few weeks back when Sarah Palin’s Yahoo! Email account was hacked (see below to prevent this from happening to you) and her private emails leaked to the media? I was annoyed that instead of being outraged by the crime, the Associated Press was concerned that the Governor was doing the public’s business on something other than a state email program. Technology is quickly moving beyond the point of being able to pin down the electrons. Consider a recent study out of my alma mater, UC Irvine, which found that about 75% of local elected officials use a computer in the course of their duties, and 59% of those use some portable technology (laptop, smart phone or handheld device.) When those users were asked whether they use government-provided email or personal email for their activity as an elected official, nearly half said they use both, and nearly 40% do not have government accounts and use only their personal accounts. Think about how many email accounts you have and where you use them from with different communication devices. The technological advances are moving way beyond the ability of our last-century rules and standards to be relevant.
http://crito.uci.edu/papers/2008/InformationInternetGovernment.pdf
***And a Technology Tip***
Now we know how the hacker got into Governor Palin’s private email account. He used the password reset feature. When you forget your password or even want to change it yourself, most accounts ask you the answers to some security questions. These days nearly everyone can figure out answers to simple questions like where you went to high school or your mother’s maiden name. Read more here about how to avoid becoming a victim:
http://cdn.rsys1.net/ig.rsys1.net/responsysimages/tne/__RS_CP__/trendsetter_oct08_hacked.html
Inside the Leonard Letter
By: Bill Leonard on: Sunday, October 12th, 2008
***Revenue Shortfall Another Sham***
What incredible chutzpah our political culture has. Last week, the news came out that even though it is less than a month since the budget was passed, revenues are already $1 billion short of expectations. I went to Controller Chiang’s website to look at the revenue picture and saw that revenues this year so far (July 1-September 30) were $21.5 billion. But revenues for the same period of 2007 were $21.7 billion. By my math that $200 million difference between identical periods is under 1%. That is not falling revenues; that is flat revenues.
By comparing actual revenues to out-of-date, inflated estimates of future revenues, the state fiscal people have done themselves a disservice. To knowingly use these same bad estimates to paper-over continued growth of government is worse.
That the public is being ill-served by the state budget process is an obvious understatement. It is just embarrassing to need to suggest another budget reform, one that is just simple integrity: Whatever month the budget is passed in, the revenue projection it relies on must not be more than 30 days old.
***Stay in Business***
Some of the heartbreaking tax cases I hear do not even involve a tax dispute. Situations where businesses have closed forever while still owing taxes are tough. Our collectors are sworn to collect all taxes due, but closed businesses do not have any income to use to pay those taxes. The State of California operates a program called Offer and Compromise where former business owners can negotiate with the state to pay as much of their taxes as they possible can.
The program is being expanded. AB2047 was signed into law last month and will allow tax officials to negotiate with business owners who are on the verge of going out of business. Our goal should be to collect all taxes rightfully owed to the state, but not to put people who make mistakes out of business or to hound their credit forever. This bill is a step in that direction.
However, there are lots of restrictions so if you are having a tax issue, please do not wait until the problem reaches this stage to ask for help. Contact me as soon as you have a question or concern so that we can resolve the issue right away.
***Postage Due***
I just learned that if you vote by mail, you need to put extra postage on your return ballot. With mail ballots running two pages, the return envelopes required 59 cents postage. To avoid the extra postage costs, you can drop your ballot by your County’s Registrar of Voters office the week before the election, or at any polling location on Election Day. However, mail ballots received at polls on Election Day are the last ones counted, so it is better to get them in early. Most counties have early voting locations where you can drop your mail ballots there for free. The Secretary of State has links to each county’s Registrar of Voters so you can find those early voting locations at this site:
http://www.sos.ca.gov/elections/elections_d.htm
***Poking Fun at Educrats***
British humor has a way of getting to the core of an issue in a delightful and intelligent manner. A reader recently shared with me a YouTube clip of the British television program “Prime Minister”. The show is a comedy about British government, though this particular segment is perfectly suited to our domestic politics as well. In it, the Prime Minister and his advisor discuss their plan to allow parents to choose which schools their children attend and to eliminate the Department of Education. Their idea is met incredulously by the politician charged with implementing it, and the discussion that ensues as they debate the merits is very entertaining, perhaps because it hits so close to home here in California. Enjoy the antics and be prepared to laugh:
http://www.youtube.com/watch?v=LLDb2V86Ei0
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