Patrick M. Gleason

California's Special Tax Commission Proposes Significant Reform


Posted by Patrick M. Gleason on Wednesday, September 30th, 2009, 2:01 PM PERMALINK

California's Commission on the 21st Century Economy unveiled their final report yesterday. The bipartisan commission was appointed last December by Gov. Schwarzenegger and Democrat leadership to propose an overhaul of the state's tax code with the goal of promoting economic growth, increasing competitiveness, and reducing revenue volatility. The commission's final recommendations agreed to by 9 of the 14 commission appointees, calls for sweeping changes to the state's tax code and while not perfect, represents a vast improvement from the current system assuming it would be revenue neutral as was necessary under the commission's guidelines.
 
California's highly progressive income tax structure, in which 1% of the population provides half of the state's revenue, is the primary cause of the state's highly volatile cash flow. The commission addresses this by proposing an across the board reduction in personal income tax rates and reduces the number of tax brackets from 6 to 2 (plus the 1% millionaire surtax). Income above $56,000 for joint filers ($28,000 for individuals) would be taxed at a rate of 6.5%. Earnings under that amount would be taxed at a rate of 2.75%.
 
The commission also calls for the elimination of the state's corporate tax and abolishes the 5% of the state sales tax that goes to the general fund. Both recommendations would go a long way to make the state more competitive and encourage companies that have fled for Washington, Nevada, and elsewhere, to come back to the Golden State.
 
The corporate tax and sales tax would be replaced with a value-added tax (VAT) on business net receipts capped at 4%.  ATR is opposed to efforts at the federal level to impose a European style VAT to pay for Obama Care, noting that on the whole VAT rates have increased in European countries since their imposition in the 1960's and 70's and yielded bigger and more bloated government. However, in conjunction with elimination of the state's sales and corporate tax, along with simplification of the income tax structure, the commission's plan, VAT included, would improve the state's tax code. Additionally and importantly, California's 2/3rds vote requirement to raise taxes will prevent the proposed VAT from ratcheting up as it has in Europe. However, it is important to keep in mind that there is a concerted effort by spending interests in CA to get rid of the 2/3rds requirement. Senate President Steinberg said as recently as July that the 2/3rds requirement "isn't working." Well the fact that it doesn't "work" for legislative Democrats who want to raise taxes is precisely why it is so important and necessary. It has been reported that efforts are underway to raise the funds necessary to put a measure to eliminate the supermajority requirement to raise taxes on the ballot. Removal of the supermajority requirement would be disastrous for California taxpayers and would make the proposed VAT more problematic.
 
The commission's plan would be a step in the right direction for California and would do much to correct the perennial budget shortfalls and boom and bust revenue cycles that have plagued the state. However, the plan would also need to be accompanied by some form of spending cap. Gov. Schwarzenegger, despite having served as a model of fiscal profligacy, likes to boast that spending has increased less rapidly during his tenure than in previous administrations. However this is nothing to brag about. Since Pete Wilson was in office in 1991 state spending has increased 300%.  The Reason Foundation points out that had their been a spending cap tied to population growth and inflation since then, the state would have a $15 billion surplus as opposed to the $42 billion deficit it had at the beginning of the year, underscoring the need to address the spending side as well.
 
Gov. Schwarzenegger will call the legislature back into session in October to take up the commission's recommendations. The legislature would be wise to seriously consider them. Revenue collections since the July budget band aid are already falling well short of projections. As of this month the FY 10-11 budget is already estimated to have a deficit of at least $7.5 billion. Expect that figure to grow.
 
Given the track record of tax commissions in California and elsewhere, coupled with the stranglehold that public employees unions have on Sacramento, one shouldn't hold out too much hope for meaningful and necessary reform. 
 
For a copy of the commission's final report: Click Here

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Meg Whitman Signs the Taxpayer Protection Pledge


Posted by Patrick M. Gleason on Wednesday, September 23rd, 2009, 11:52 PM PERMALINK

 

Meg Whitman Signs Taxpayer Protection Pledge
Two California Gubernatorial Candidates Have Promised to Defend Taxpayers
 
Washington, D.C. - Republican candidate for governor Meg Whitman signed the Taxpayer Protection Pledge today. The Pledge commits signers to “oppose and veto any and all efforts to increase taxes.”
 
To date, 34 U.S. Senators and 172 members of the U.S. House of Representatives have signed the Pledge. Additionally, seven governors and over 1,100 state legislators have signed the Pledge.
 
“By signing the Pledge, Whitman makes clear that if elected she will stand up for taxpayers and not the tenured bureaucrats, coercive utopians, and union bosses that currently run Sacramento,” said Grover Norquist, president of Americans for Tax Reform. “In a state with one of the highest tax burdens in the country, a dismal business tax climate, rampant overspending, and a government that is so costly that Californians had to work 235 days this year, well over half the year, just to pay for it, higher taxes should be a non-starter for all elected officials and candidates. In signing the Pledge, Whitman has made clear that she recognizes this.”
 
California Insurance Commissioner Steve Poizner, who is also contending for the Republican nomination for governor, has signed the Pledge as well.
 
“Californians are fortunate to have two high quality candidates who have made this important commitment to defend the overburdened Golden State taxpayers,” added Norquist. “I strongly encourage, and challenge, Tom Campbell, Gavin Newsom, and every candidate for governor to sign the Pledge.”

 

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20 Bills Gov. Schwarzenegger Should Veto


Posted by Patrick M. Gleason on Friday, September 18th, 2009, 1:35 PM PERMALINK

California's budget woes dominated the recently concluded legislative session. Facing a $42 billion defitcit at the beginning of the year, lawmakers raised taxes by $16 billion in February. On May 19 2/3rds of voters said no to further tax hikes.  Then lawmakers in Sacramento closed a $26 billion shortfall at the end of July, relying heavily on budget cuts and accounting maneuvers. 

Now that the legislative session is over, there are hundreds of bills awaiting the Governor's action. To save the Governor time, Senator Mimi Walters and Assemblyman Chuck DeVore, who chair the taxpayer protection caucuses in their respective chambers, have compiled a list of the 20 most veto-worthy bills on Schwarzenegger's desk.

Click here to view the list.

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Steve Poizner Signs Taxpayer Protection Pledge


Posted by Patrick M. Gleason on Wednesday, September 16th, 2009, 2:28 PM PERMALINK

Republican candidate for governor and current California Insurance Commissioner Steve Poizner signed the Taxpayer Protection Pledge yesterday afternoon. The Pledge commits signers to, “oppose and veto any and all efforts to increase taxes.”
 
To date, 34 U.S. Senators and 172 members of the U.S. House of Representatives have signed the Pledge. Additionally, seven governors and over 1,100 state legislators have signed the Pledge.
 
“Californians, now more than ever, need leaders committed to fiscal responsibility and pro-growth economic policies,” said Grover Norquist, president of Americans for Tax Reform. “Golden State residents are desperately searching for candidates and politicians that will protect their livelihoods and put their wallets ahead of government coffers.”
 
“By signing the Pledge, Steve Poizner demonstrates his commitment to the hardworking and heavily taxed citizens of California. I applaud him for his leadership and dedication to the ideals of limited government and pro-growth policies,” added Norquist. “I strongly encourage, and challenge, every candidate for state and federal office to sign the Pledge.”
 
 

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Randy Pullen: state Republican Party Chairman not worthy of the title


Posted by Patrick M. Gleason on Wednesday, August 26th, 2009, 1:15 PM PERMALINK

Arizona Republican Party Chairman Randy Pullen is at it again, engaging in activities that are not in his job description and in fact are counterintuitive to what he should be doing, maintaining Republican majorities in the state legislature and getting more Republicans elected to office.

It is reported that at Arizona's LD 6 meeting last night Chairman Randy Pullen had the audacity to berate Sen. Pamela Gorman and Rep. Sam Crump for not voting for the latest budget agreement that would've put Gov. Brewer's beloved sales tax increase on the ballot. Yes, that agreement was coupled with permanent tax cuts in the out years, which many believe might be repealed before they even would go into effect.

Let's get one thing straight though. That last agreement that failed was not the budget that Pullen wanted. Since the beginning of the year Pullen has been a cheerleader for Governor Brewer's efforts to raise the sales tax, without any offsetting tax cuts. Yes, that is correct. A state Republican Party chairman has been in favor of a $3 billion net tax increase since the beginning of the year and now he has the gall to attack lawmakers of his own party who were instrumental in preventing that from happening. In fact, the only reason that permanent tax cuts made their way into a recent agreement is because of legislators such as Gorman and Crump who made it clear that an agreement comprised of the sales tax referral alone had zero chance of getting their votes.

For those that might not even remember, Pullen even went so far as to commission a ridiculous push poll in favor of the $3 billion net tax increase. Yes, he put the Arizona Republican Party on the record in favor of a massive, mid-recession tax increase.

Want an example of how Pullen and the Arizona Republican Party should have responded when Brewer came out of the gate this year with calls for a $3 billion tax increase? Just look at what happened in Alabama in 2003. In a similar case AL Governor Bob Riley, a Republican, pushed for a referendum to raise taxes by $1.2 million.The Alabama Republican Party, recognizing that their job was not to support the governor come hell or high water, especially when it runs counter to the party's core principles, actively opposed Riley and denounced his efforts. Then state party chairman and current chair of the Alabama center-right coalition meeting Marty Connors explained that to support Riley's largest tax increase in state history would be to "throw away 20 years of Republican ideology."

Bottom line, Pullen does not have a leg to stand on when it comes claims of fiscal conservatism. The party's job is not to blindly support whatever a governor of their own party wants, let alone an unelected governor. The party's job is to keep Republicans in office, get more elected, and stand for Republican principles. Pullen has failed on all counts.

Arizona Republicans can find the process for replacing their party chair here.

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Several States Find Budget Agreements Elusive


Posted by Patrick M. Gleason on Tuesday, August 25th, 2009, 11:47 AM PERMALINK

All but four states start their new fiscal year on July 1st and must have a budget complete by that time. Of these 46 states, Arizona, Connecticut, and Pennsylvania have yet to pass a budget despite being well over 50 days into the new fiscal year.

Arizona Gov. Jan Brewer (R) has a budget sitting on her desk awaiting her signature. However, it remains unclear whether she will sign it given it is the same budget that she vetoed in early July. The reason she vetoed that budget and many expect that she will reject this too is due to the fact that it doesn't contain referral of the sales tax increase that she has remained hell-bent on getting since the beginning of the year. Brewer faces opposition from members of her own party who refuse to sign off on any tax increase in the middle of a recession.

Upon receiving the latest budget last week, Brewer tweeted: "Sitting in my office looking at the bills that were just presented to me..going to have to make some BIG decisions." That may be the understatement of the month. Treasurer Dean Martin recently notified the press and public officials that the state will run out of cash in October and that banks will not grant a line of credit if the state has not passed a budget by that time. The deadline for Brewer's signature is tomorrow.

In Connecticut the dispute is not whether to raise taxes but by how much. The state is in the midst of the longest budget standoff in its history as the Governor and the Democrat controlled legislature remain unable to reach a deal. Facing an $8 billion deficit over the next two years, Democrat legislators are calling for a $1.8 billion income tax hike on high earners.  Gov. Jodi Rell (R) prefers to raise taxes to a lesser degree on businesses, tobacco, and alcohol. Lawmakers are slated to return to the capitol on Thursday.

Pennsylvania is another state mired in its most protracted budget fight in decades. Gov. Ed Rendell (D) and legislative Democrats originally sought higher taxes on income, tobacco, and energy production. Now that the income tax is off the table the Governor is looking to apply the state's 6% sales tax to products and services that are currently exempt.   Republicans who control the Senate and are a narrow minority in the House remain firmly opposed to any tax increases and have introduced their own budget, HB 1493, which closes the budget gap without raising taxes or cutting education spending. A deal is expected sometime in September but the apparent lack of urgency among some lawmakers have many worried that the stalemate could continue well into October.

Stay tuned for further updates on the three remaining budget standoffs.

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Newsweek Ignores Effectiveness of Malpractice Caps and Liability Reform


Posted by Patrick M. Gleason on Wednesday, August 19th, 2009, 3:15 PM PERMALINK

Newsweek's Jonathan Alter makes clear what he doesn’t like about the status quo of the U.S. healthcare system in his July 31st squib, “What’s Not to Like?.” In dismissing Republican calls to cap malpractice awards, Alter contends that “nothing happened” when such reforms were recently passed in Texas. This is patently false. 

A study done by the Perryman Group last year found that the legal reforms Texas passed in 2003 have been a boon to the Lone Star State’s healthcare system. Analysis shows that these reforms yielded a 70 percent reduction in the number of lawsuits filed against hospitals in just the first year, a decrease in medical liability insurance rates by an average of 20 percent, 430,000 additional Texans with health insurance, and increased options resulting from an influx of 10,878 new physicians. The study also concluded that the reforms were directly responsible for an 8.5 percent growth in the state’s economy. In fact, in 2006 Texas became the first state to be removed from the American Medical Association’s list of states experiencing a liability crisis.
 
States have long been seen as laboratories of democracy where new policies can be tested. Results from Texas show that caps on malpractice awards and other liability reforms deserve more consideration on Capitol Hill than Mr. Alter lets on.
 
To view ATR's guide to medical tort reform, click here.
 

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Seattle Voters Reject Bag Tax


Posted by Patrick M. Gleason on Wednesday, August 19th, 2009, 11:55 AM PERMALINK

 

Seattle voters soundly rejected tax on paper and plastic shopping bags in yesterday's election. Referendum 1, which would have imposed at a 20-cent per bag tax in the city of Seattle, was rejected by nearly 60% of voters.
 
The 20-cent bag tax was passed by the Seattle City Council approximately one year ago. 22,000 signatures, 2,000 more than required, were submitted last September to put the referendum on the ballot.
 
Rob Gala, a city council staffer and proponent of the measure told the New York Times that the bag tax was defeated because “more people are concerned about their cost of living than what they take their groceries home in.”
 
Estimated to cost each consumer an additional $300 per year, the bag tax would have imposed a significant financial burden at a time when many in Seattle and around the country are already cutting back and struggling to make ends meet. What Gala fails to mention is the fact that not only was the bag tax too costly, it was unnecessary and would not provide any benefit to the city or Pudget Sound.
As has already been noted on this website, 9 out of 10 Seattle residents already recycle and reuse disposable bags and studies show that the bag tax, much like San Francisco's plastic bag ban, would have no visible impact on litter, which was not a problem to begin with in environmentally friendly Seattle.
 
Ultra-liberal Seattle's rejection should give pause to the coercive utopians that have been introducing bag tax proposals around the country. The Washington, D.C. City Council recently passed a 5-cent bag tax.
 
Voters in ever-so-blue Seattle, which voted for Obama by over 80%, have shot down a horrible and unnecessary law passed by their city council. It's time for DC voters to do likewise.

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ObamaCare Spells Trouble for the Lone Star State


Posted by Patrick M. Gleason on Tuesday, August 18th, 2009, 5:21 PM PERMALINK

The Texas Public Policy Foundation released findings from a recent study which shows how the health care reforms pending in Congress would affect Texas. The study, conducted by Arduin, Laffer, and Moore Econometrics, explains how the Obama-Reid-Pelosi health care reform bill would hamper the Texas economy. Findings include:

Texas would see 4.7 percent lower economic growth in 2019 compared to the baseline scenario.

• In addition to federally-funded expenditures, the net present value of all Texas state government expenditures through 2019 that will occur due to federal health care reform is $8.9 billion, or a $365 bill for every man, woman, and child in Texas.

If the federal government requires states to financially cover the expansion of lower income individual’s health insurance, Texas taxpayers will have to cover an additional $28.2 billion in costs, for a total cost to Texas general revenue of $37.1 billion over 10 years.
 
• The current net present value of funding health care reform based on President Obama’s priorities will be $4,265 for every person in Texas. This equals $103.8 billion in total costs that Texans will have to bear.
 
•  Expansion of Medicaid eligibility may further increase Medicaid costs in Texas due to the Frew v. Hawkins lawsuit, a suit based on inadequate access for Medicaid enrollees because the state’s physician reimbursement was so low that not enough doctors would take Medicaid patients.
To view the report in its entirety, click here.

ATR Joins Californians for Smart Energy


Posted by Patrick M. Gleason on Monday, August 17th, 2009, 1:33 PM PERMALINK

Americans for Tax Reform has joined Californians for Smart Energy. Californians for Smart Energy is a coalition of consumers, taxpayers, employers, trade associations and other organizations working to stop the California Energy Commission's (CEC) pending regulation that would ban certain TVs in the state. In the name of energy efficiency the CEC 

is moving forward with a new rule that would require TVs to use 33% 

less electricity by 2011 and 49% by 2013. 

ATR and other opponents of this measure contend that it will not have an impact on energy efficiency and will reduce the two items that the Golden State needs most and is already short on: jobs and revenue.

According to a recent study, the new regulation will destroy 4,600 jobs in California tied to TV sales, distribution and installation, and will reduce government coffers by $50 million annually.

The new mandate would outlaw 25% of LCD and plasma screen TVs on the market and all plasma sets over 60 inches would be illegal.

While such bureaucratic interference with personal and economic liberty may seem troubling to most reasonable people, those familiar with California politics, where government control of thermostats and proposals to ban black cars are seriously considered, this is not unbelievable.

Visit the official Californians for Smart Energy website for more information about what is at stake and to get involved.

Click here to visit the Californians for Smart Energy Facebook page.

Click here to follow on Twitter.

Click here to visit the YouTube page.


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