Too Bold? How About "Too Absurd"?

At first I thought that the headline writer was confused. "California tax reform plan much too bold for Capitol," it said above George Skelton's column today. "Too bold" could maybe have more than one meaning. Surely Skelton wasn't throwing in with the idea that massively shifting the tax burden to the lowest income levels in society was too good an idea. But I think that is, in fact, what he's saying.

"I would sign it immediately" if it were a bill, Schwarzenegger told reporters. "Without any doubt."

Of course, this is a governor who constantly seeks out things new and bold. And the tax proposal was all of that -- much too new and bold for most Capitol denizens, especially those representing special interests.

As Genest told me: "It shouldn't come as any surprise that lobbyists in Sacramento are in favor of maintaining the status quo unless they are confident that the change will serve their interests. That's why they're called 'special interests.' "

Nowhere in Skelton's article does he quote any figures or statistics citing the practical effect of the Parsky Commission's plans. He doesn't mention that, under the plan, taxpayers making over $1 million dollars a year would save $109,000 annually on average, while taxpayers making between $40,000 and $50,000 would save four bucks. He doesn't mention that the proposal would result in a net loss of revenue to the state, causing wider budget deficits. He does manage to mention critiques of the business net receipt tax from the side of business and industry, but offers no critiques from the opposite end, a la Jean Ross' statement that “You could not say, ‘We’re going to tax child care so we can lower the income tax on millionaires.’ But that’s what this does." The fact that the BNRT would hit business payrolls and disproportionately tax companies in the knowledge economy rather than the service economy also doesn't make it in. Skelton never mentions that, by taxing all businesses in the state, the BNRT would effectively tax rents.

He just says it's "too bold."

The Parsky Commission was practically designed to shift wealth upward. It should surprise nobody that this is what it ended up doing. That is bold, but not in the way that Skelton means it, I don't think.

He does give voice to where Karen Bass may steer the debate:

Bass was holding her tongue, trying not to express disappointment in the commission. When she first proposed its creation, the speaker envisioned the panel proposing something more practical and simple: reducing the sales tax rate and spreading it to currently untaxed services.

She promised a "thorough and objective public review" of the panel's recommendations.

Good idea, but don't stop there.

"My biggest message to dysfunctional Sacramento is to get something done," Parsky says. "If you've got a better idea, get it done."

There's no question that flattening and broadening the sales tax base is a decent enough idea. Under the constraints of minority rule, it may be the best one lawmakers can get, and it would prove popular if enacted. We'll see if the Parksy Commission report is dumped in favor of that.

Parsky Commission To Introduce Their Shock Doctrine Document

We heard last week about outlines of the Parsky Commission report that would radically shift the tax burden in California. We even heard that offshore drilling may have been snuck into the draft at the last minute. Last week, the commission held a public meeting which featured more details, including the intimation that 3% of the population would see half of the tax break under the Parsky plan. They made the public wait for seven hours and then gave one individual a minute to make a comment. Yesterday, the final public meeting was held, and right before it, Jean Ross offered some facts and figures showing how the commission's recommendation would amount to the Latvia-ization of the state of California, with a massive transfer of wealth to the upper classes at the expense of working families.

The biggest winners would be the state’s millionaires, who would receive personal income tax breaks averaging $109,000 per year. The biggest losers would be middle-income families who would receive a tiny, if any, reduction in their personal income taxes and who would pay substantially more for goods and services due to the new “value-added” tax the Commission proposes to replace revenues lost due to the tax cuts for the wealthy and repeal of the corporate income tax.

The magnitude of the shift proposed by the Commission is nothing short of stunning. The changes to the personal income tax structure alone would reduce income taxes paid by the poorest 62 percent of California taxpayers by $4 per year, on average, while providing six-figure breaks to the millionaires. The bottom 81 percent of the income distribution – the vast majority of all Californians – would receive 10 percent of the personal income tax cut, while the top 0.2 percent would receive 27 percent of the benefits.

And that’s the “good news.” The Commission would repeal the corporate income tax and the state’s portion of the sales tax and replace it with a new tax on business net receipts – a tax that has never been tried anywhere in the US – that the Commission’s own consultant notes would raise prices of goods and services, while exerting downward pressure on wages and benefits [...]

Some might be willing to support these changes if they ended California’s persistent budget crises. But again, the Commission’s own estimates predict that revenues raised by the new tax system would grow more slowly over time than those raised by the state’s current tax system. Thus, the Commission’s recommendations would lead to larger, not smaller, budget shortfalls in the future.

At the committee hearing yesterday, commissioners requested an analysis of the impact of the recommendation for taxpayers, and it came out precisely as Ross stated - "The 10 million taxpayers making less than $50,000 would pay $100 million more in taxes while the 7 million taxpayers who make more than $50,000 would get $6.8 billion in tax cuts."

This will not be a consensus document, most of the liberals on the panel won't sign it. And even the news reports today acknowledge that the changes would "largely benefit the wealthy." Clearly the Governor will put his weight behind it, but that's meant nothing in Sacramento for several years. The question is whether the Democratic Legislature would dare to massively reward the rich so nakedly by accepting these recommendations. Because the business community is actually against it, worried about the effect of the net receipts tax, I'd still guess no, but people should be letting their Representatives know that they will not get away with a transparent shift in wealth from the middle class to the super-rich.

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.

And... That's Over

The California Chamber of Commerce and 33 other business groups have basically stuck a knife in the Parsky Commission with a coalition letter opposing most of the tax reforms proposed. I'm sure they'd still love to see a flat income tax and the elimination of corporate taxes, but since they have basically refused all revenue-raisers in this document, that won't happen.

The coalition doesn't like removing Proposition 13's property tax limits from business property and a proposed new "carbon tax," both of which have been promoted by the tax commission's liberal bloc. But it also is warning about the potentially negative effects of a "net business receipts tax," similar to a European-style value-added tax, that commission chairman Gerald Parsky champions [...]

"The California business community has consistently stated that the solution to California's revenue problems will only come from robust economic growth and job creation," said today's letter to Parsky. "We believe the proposed split roll property tax and the energy tax would be extremely detrimental to California's economy. As for the business net receipts tax, we believe it is risky and inappropriate to move forward with dramatic changes to the tax structure without first fully vetting their impact on California jobs and the economy."

The only way for the Parsky Commission to get an up-or-down vote for its recommendations is by making the package revenue-neutral. The CalChamber document opposes all of the tax hikes while saying nothing about the reductions. California Democrats can be squishy, but not squishy enough to eliminate corporate taxes in exchange for nothing. Sen. Steinberg never agreed to bring the commission recommendations to a vote in the first place. And without an offset, they will never see the light of day.

Arnold Schwarzenegger is a wholly owned subsidiary of the Chamber of Commerce. Even in the unlikely even that the legislature ignores this letter and passes some plan including split-roll or a carbon tax or a business net receipts tax, there's no way the Governor signs it. The Parsky Commission is dead.

And I'm not really shedding a tear for it. Forcing a revenue-neutral standard on how to fix the tax structure inevitably was going to shift the tax burden from the rich, who have the clout to shield themselves from the predations of lawmakers, to the middle and lower classes, who don't. The very structure was flawed, and the reforms sought of a lesser order than being able to properly fund government according to the wishes of the majority.

So we can move on to the next challenge. Calbuzz has a good scene-setter on that, referring to something that Jean Ross mentioned in our Netroots Nation panel last week. California Forward's reform package may include, as a condition of repealing the 2/3 rule for passing a budget (and only the budget), a raising of the threshold to 2/3 for mitigation fees on businesses, which may extend to fees on alcohol, oil production and "anything else that carries a nexus to a public problem." In other words, while the budget would require a majority vote, revenue (which is 1/2 of a budget) would be subject to an even higher standard than it is now, and the legislature would be constrained in their ability to respond to the impact of corporate actions that harm the public good. Actually it could go even further than that:

But Chairman Bob (Hertzberg) insists it would be a mistake to focus only on Sinclair as the key to business support for CF reforms. The only way some of the conservatives and business people on CF would “even consider” allowing 50% to pass the budget is if there’s a whole panoply of budget reforms – pay-as-you-go provisions, controls on one-time expenditures, two-year budgeting, performance reviews, sunset provisions AND limits on what can pass with 50% as a “fee,” he said.

But will liberals – on CF and in the Legislature – agree to circumscribe their current authority to impost fees with a majority vote? Will they agree that there has to be a “clear nexus” between charges allocated to a polluter or manufacturer of polluty stuff?

As Jean Ross puts it, ever so succinctly, "California Forward?" I concur.

So while we appear to have sidestepped the Parsky Commission (for now), California Backward's set of "reforms" still lurk in the distance.

Memo to Calbuzz: Hey, right back atcha!

To: (insert fun and in no way dated Communist Party reference here) Comrades Phil Trounstine and Roberts
From: Dave

I read with interest your dripping-with-contempt response to my criticism of your reports on the Parsky Commission. Actually, 4/5 of the article concerned the Commission itself and not you, but I am reminded of the words of Carly Simon:

You’re so vain
You probably think this song is about you

As a regular reader of Calbuzz, I admire your sources, if not your willingness to string an entire article together based on two politicians standing next to one another smiling, as well as an over-emphasis on horse-race politics and narratives. But clearly, you have a bit of an inflated view of your clear-eyed mission of “journalism,” and the assumed objectivity that goes with it.

Allow me to be blunt: Calitics has been writing about the Parsky Commission since December of 2008, before there was such a thing as Calbuzz. We have followed up time and again, in particular when two weeks ago, Susan Kennedy tipped the hand of how this commission will go by stating that “Our revenue stream is way too progressive.” So it was not exactly some kind of amazing scoop to report on a commission that has open meetings and presents all their material in public, which is why plenty of contemporaneous reports were written, based on the documents posted on the Internet that the Parsky Commission presented in anticipation of their open meeting.

Unlike you, I don’t pretend to hide my opinions on the very clear economic and tax policy implications of the Commission’s report behind some false veil of objectivity. Most of my comments were directed at the report itself, and the way in which a flat tax would quite obviously shift the burden of taxation to the middle class and the poor; but I couldn’t help but notice clear language like...

the impending bankruptcy of state government should be sufficient to show players at every point of the political spectrum not only that sweeping change is needed, but also that everyone will have to compromise to keep California from sinking into the 9th Circle of Hell

...which certainly allows people, in my view, a window into how you determine the best policy, defined as the midpoint between whatever pleases those hateful hippies and the ranters on the right. That may be a nice and quick methodology, but it's anything but rigorous, and I'm pretty sure it's an apt description. After all, wasn’t one of you the communications director for Gray Davis, who was not above bold expressions of centrism and a fear of the spectre of “The Left”?

(How did pumping out that daily message for ol’ Gray turn out, by the way? What did that guy do after his two successful terms were up? Just curious.)

I mean, I’m very sorry for bringing up the inconvenient fact that so-called “objective” journalists can frame a story in such a way that they put their own thumbs on the ideological scale. You claim that your job is to “ferret out the facts” of the policymakers, you know, like hard-hitting reporting on an email to supporters and what one Republican said about another Republican in a press release, but it’s fairly clear from the above-mentioned article that you view flat taxes and eliminating corporate taxes as pretty sensible and down the middle, and it colored your coverage. I should probably just have shut up about it and gone back to my Communist Party self-criticism sessions, which by the way is a hilarious and timely joke. Here’s another one: In Soviet Russia, television watches you! You can use that!)

So this notion that I should just say thank you for illuminating a public document seems to be to be a bit too self-regarding, and your lashing out at me for pointing out the not-so-hidden biases in that particular article a bit to “the lady doth protest too much.” But of course, I have an infantile disorder.

Which brings us to this criticism about the Barbara Boxer press conference and certain bloggers clapping at the end of it, something of a hobby horse for you folks. I am not going to speak for anyone in the room but myself, but I know quite for certain that I didn’t clap, and I know what I asked. See, based on my notes (yes, I took them, just like a real live reporter) I know that I followed up a series of queries about torture (yours was some process question about how the Obama Administration "rolled out" the torture memos released a week before) with a specific question about a resolution before the state party seeking the impeachment of Jay Bybee for his role in authorizing torture, to which she answered “I’m very open to that,” reminding those assembled that she voted against Bybee’s confirmation as a federal judge. Now, at the time, I was involved in securing thousands of signatures from across the state endorsing this resolution, and when it came before the resolutions committee, I would argue that having Sen. Boxer’s agreement that calling for the impeachment of someone who helped authorize torture was a reasonable request actually helped get that resolution passed. In other words, it was a combination of what the netroots community does best – using citizen journalism and activism in tandem to effect progress on progressive issues.

Which I personally think is more of a relevant bit of work than asking a federal legislator about a state issue.

I’m just sayin’.

p.s. In the cited post, I used variations on the word “fetish” once, in a 1,400-word article. But it made for a smashing joke about therapists, so points for you!