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| Office of the Chancellor / Public Affairs |
Wednesday, January 7, 2004
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Sacramento Bee 1-7-04 Peter Schrag: Friends of gridlock and other corporate fat cats |
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| They call themselves Californians Against Higher Taxes. But with Anheuser Busch, the California Wine Institute, Chevron-Texaco, Southern California Edison, Philip Morris and State Farm having already kicked in more than $150,000 each, a more accurate name would be Liquor Dealers, Brewers, Big Oil, Big Tobacco and Other Fat Cats Against Democracy (LDBBOBTAOFCAD). Their cause is stopping Proposition 56, the labor-sponsored initiative on the March ballot that would, among other things, allow the Legislature to pass the state budget and raise budget-related taxes by a 55 percent majority. Although ideally it should be a simple majority, it's the most sensible political reform that's been on the ballot in decades. California is now one of three states that require a two-thirds margin to pass the budget. That's gridlocked the process year after year, given political minorities power far in excess of their numbers and allowed every Sacramento politician to dodge responsibility for the fiscal mess in the state Capitol. But don't bet the farm on its passing, despite the strong support it seems to have gotten in early polls. Many Californians are already convinced they're overtaxed, and with the millions that Californians Against Higher Taxes is likely to spend in the next couple of months, the power to befuddle is almost unlimited. Just a few days ago, LDBBOBTAOFCAD held a press conference retailing numbers from the corporate-funded Tax Foundation purporting to show that, as the California Taxpayers Association put it, "Taxes are a heavy burden in California." The Tax Foundation's document, headlined "Ranking Califronia" (sic), avers that, contrary to federal data and to analyses like that of PPIC, the devotedly nonpartisan and scrupulously careful Public Policy Institute of California, California's total burden of state and local taxes as a percentage of personal income -- the best measure of "burden" there is -- was now eighth among the states. By comparison, PPIC and the independent (and, yes, liberal) California Budget Project, using Census Bureau and other data, rank California's tax burden at 18th or 19th in the nation, a little above the national average, but no higher (and by some measures lower) as a percentage of personal income than it was in the early 1970s. Jean Ross, who directs the California Budget Project, points out that because the census does not count the dollars investors and executives receive from stock options and capital gains as part of California personal income, the numbers from the late 1990s, when stock market gains temporarily gushed into the state treasury, exaggerate the real tax burden on Californians. How the Tax Foundation got its numbers is a mystery. Some are as wrong as its spelling of the state's name. It says that the census numbers are old data because the state's sales tax rate jumped from 6 percent in 2000 to 7.25 percent in 2003. In fact, the sales tax rate in early 2000 was precisely what it is now. Under a legislatively enacted formula, when the state's income-tax revenues spiked, the sales-tax rate automatically dropped 0.25 percentage points in 2000, then went up again by the same amount when the capital gains bubble burst. More broadly, because corporate and other taxes (including the car tax) were cut in the late 1990s, and because upper-bracket incomes soared, the burden probably dropped through the late 1990s. Still, the foundation is right that the state's tax structure is goofy. The sales tax rate is high, as it says; its coverage, "riddled with special-interest exceptions," is too narrow, meaning that even though many of us pay more than people in other states, California still collects less. It should cover services, which are the fastest-growing sector of the economy, and Internet sales to level the playing field for the local businesses with which they compete. More fundamentally, if the state were to return to the good old days that even some conservatives muse about, it would restore the old ratio between personal income taxes and corporate taxes. According to the California Budget Project, income taxes pay an ever-increasing share of the state's costs (up from 34 percent in 1981 to 49 percent this year), while corporate taxes have been falling (down from 14 percent to 9 percent). Is that something that LDBBOBTAOFCAD and other corporate interests would like to sign on to? California's two-thirds requirement to raise taxes imposes a one-way tax process: Majorities, often driven by corporate interests, can lower taxes; only super-majorities can raise them. The opponents of Proposition 56 complain that allowing budgets to be passed and taxes raised by 55 percent is giving somebody a blank check to lift money out of taxpayers' pockets. But California's one-track system, which writes special-interest loopholes into the tax code with little notice, and often with little opposition, is a reverse blank check that benefits corporations at the expense of individual taxpayers. That makes the system doubly undemocratic, denying majority rule in the Legislature and giving big interests still more clout in Sacramento. Proposition 56 would eliminate at least part of that, and make it a lot easier for voters to identify the rascals and hold them accountable. It's called democracy. |
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