Parsky Commission Looking To Spring A Surprise On California?

When business groups began to object to various provisions in the Parsky Commission effort to upend the tax structure in California, including anything that even smelled like an increase (even though the plan had to be revenue-neutral to clear the Legislature), I figured the effort was dead and buried. It appeared that the entire effort was a complete waste of time, and the effort to Latvia-ize the state by shifting the tax burden from the upper class to the lower class had been sniffed out and extinguished. However, the recent secrecy on the part of the commission, after a pledge of transparency, has many wondering if the shock doctrine is alive and well.

The plan is that, just about 24 hours from now — or 11 a.m. Thursday, to be precise — a state commission will consider and potentially adopt a proposal for an entirely new tax system for the state of California.

It would be a radical undertaking, slashing some taxes, eliminating others and establishing a new tax about which no one in California is familiar. No one can say with anything approaching certainty how much it would cost businesses and consumers or how much revenue it would generate to finance state services.

Yet, despite the significance of the task, despite all the unanswered questions and despite the imminence of a decision, as of this writing — midafternoon Tuesday — the details of the proposed new tax plan have not been made available for public review.

A spokeswoman told me a little after 3 p.m. there was still hope that the detailed proposal would be posted on the commission’s Web site before the day was out.

The Legislature has made no indication that they would take up whatever plan the Parsky Commission votes out, even after the Governor orders a special session to deal with it. And with both sides of the aisle condemning aspects of the plan, liberals for the tax burden shift, and conservatives for the unknown tax increases that may be part of any deal, I wouldn't call the prospects likely for a Parsky Commission plan to become law. But the secrecy is certainly troubling, as well as the revival of provisions voted down by the people on multiple occasions.

But members of the tax commission are reviving the rainy-day fund idea once again. Most notably, the idea has had some of its strongest support from Democratic-appointed commissioners.

Former Assemblyman Fred Keeley said recently that while many commissioners believe the state can reduce its budget volatility through changes in the tax system, he believes the tax system isn't so much the problem.

"My belief is that volatility of the general fund, to the degree it's a problem, is due to the governor and Legislature with regard to spending," Keeley said. "That can be solved by way of an appropriately designed rainy-day fund or lockbox."

Another Democratic appointee, University of Connecticut law professor Richard D. Pomp, reminded the commission this month that he has long believed the reduction of volatility was a spending issue.

"From the outset, I have argued, and continue to believe, that volatility, which is a feature of every state's tax system, is a spending problem and not a tax problem," Pomp wrote. (That comes awfully close to the oft-used GOP line that California's budget problems are "a spending problem, not a revenue problem.")

I think these Democrats are trying to argue that volatility in the tax structure is a good thing, which it is. But the leap from that to a spending cap doesn't follow. There's a difference between spending wisely in good years and a third-party mechanism that limits the ability to restore chronic budget cuts from bad years, which is what a cap would inevitably do. (A rainy-day fund without a cap would be different, but may end up serving the same purpose.)

I stick with my prediction that the commission is doomed, but it still bears watching.

...Kevin Yamamura has more.