Patrick M. Gleason

Online Sales Tax Proponents Operate Under Faulty Simple Majority Assumption


Posted by Patrick M. Gleason on Tuesday, March 15th, 2011, 12:26 PM PERMALINK

The following originally appeared this morning in the California Flash Report:

Amid the speculation over whether Gov. Jerry Brown will succeed in extending the largest state tax increase in U.S. history for another half decade - California taxpayers got a rare bit of good news last week when Rep. Nancy Skinner’s ill-advised and unlawful online sales tax legislation, Assembly Bill 153, was placed on the Assembly Revenue & Taxation Committee’s suspense file, effectively tabling it for the time being. Aside from the fact that Skinner’s bill is an unconstitutional cash grab and economically destructive for a litany of reasons – most of which I and the Digital Liberty Project’s Kelly Cobb hashed out in a recent Flash Report op-ed – there is a more important, pragmatic argument against spending anymore time considering AB 153 – the votes simply aren’t there. .

As it would happen, proponents of AB 153 are operating under the faulty assumption that approval can be had with a simple majority vote of the legislature. Not so fast. As a result of Proposition 26, which California voters approved with over 52% of the vote just last November, lawmakers can no longer get around the two-thirds majority vote requirement to raise taxes simply by denying that what they are imposing is, in fact, a tax increase. Yet that is precisely what Skinner and company are doing in attempting to pass AB 153 with a simple majority vote. Skinner herself claims that AB 153 will yield an additional $250-500 million in taxpayer dollars for state coffers in year one. Objective analysis can only conclude that Rep. Skinner would ultimately find her simple majority assumption to be as valid her assertion that her bill wouldn’t cost jobs.

Proposition 26 amended the California constitution so that – according to the language of the law – “Any change in state statute which results in a taxpayer paying a higher tax,” which is the goal and purpose of AB 153, is subject to a two-thirds vote requirement. Online sales tax proponents might have had a shot at getting a simple majority, not so with a two-thirds threshold. 

Just as candidates and campaigns have to adapt to life post-Prop. 14, lawmakers will have to adjust to the post-Prop. 26 world, where the old tricks won’t work and they can no longer circumvent the 33-year old constitutional safeguard that requires tax hikes such as AB 153 be subject to a two-third supermajority vote. And that is a silver lining for Golden State residents amid this season of taxpayer discontent.

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ATR Applauds Gov. Tom Corbett's Taxpayer-Friendly Budget


Posted by Patrick M. Gleason on Friday, March 11th, 2011, 9:25 AM PERMALINK

With states across the country facing budgets swimming in red ink, the Keystone State is providing leadership by showing the rest of the country how to balance a budget without raising taxes. This week Gov. Tom Corbett released his inaugural budget, which closes an estimated $5 billion budget gap without relying on higher taxes.

With this tax-hike-free budget, Gov. Corbett is upholding the central commitment he made to Pennsylvania voters on the campaign trail to oppose any and all efforts to raise taxes. In his budget address yesterday, Gov. Corbett stated that “One: We have to Spend Less. Because we have less to spend. Two: We must tax no more. Because the people have no more to give.”

“What a difference a year makes. For the last eight years, under Gov. Rendell, Pennsylvanians faced the threat of annual tax hikes,” said Grover Norquist, president of Americans for Tax Reform. “Elections have consequences. As a result of the wise decision made by Pennsylvanians last November, they now have a chief executive who is forcing the state to live within its means, just as Pennsylvania families must do.”

With this budget, Gov. Corbett joins his GOP counterparts in other states – such as Govs. Walker, Perry, Kasich, and Christie - who are bringing expenditures in line with revenues and shunning tax increases. As The Wall Street Journal highlighted today, the contrast between Republican and Democratic governors on the subject of taxes has never been so stark as it is today. As it stands, Democratic Govs. Jerry Brown, Pat Quinn, Mark Dayton, and Dan Malloy are presently the only governors in the country that believe now is a good time to raise taxes.

“Gov. Corbett has a lot of work to do to clean up the mess left by his predecessor, but this is an excellent first step,” added Norquist. “The good news for Pennsylvania taxpayers is that it is a new day in Harrisburg. Gov. Corbett heard the message sent by voters in November and has seen the numbers. He recognizes that the state doesn’t tax too little, but instead spends too much. After the last eight years of Rendell’s profligacy, we now have a responsible adult in the Governor’s mansion."

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Jerry Brown's terrible, horrible, no good, very bad day


Posted by Patrick M. Gleason on Tuesday, March 8th, 2011, 10:16 AM PERMALINK

Yesterday didn’t go so well for Gov. Jerry Brown, who has spent the past week courting a handful of GOP legislators in an attempt to get them on board with his budget - which calls on the General Assembly to refer an extension of the 2009 Schwarzenegger tax hikes to the ballot. Five of the GOP senators whose votes Gov. Brown has been seeking to buy sent a letter to Brown yesterday informing him that negotiations had reached an impasse, reflecting the fact that Brown really doesn’t have anything to offer GOP legislators in exchange for their votes.

In their letter to Brown, the five Republican senators express their disappointment that all of their proposed reforms were rebuffed:

“We were therefore disappointed to find that our reforms were either rejected or so watered down as to have no real effect on future spending or the economy. We have therefore concluded that you are unable to compel other stakeholders to accept real reform.”

Proposals offered by the GOP included a spending cap, regulatory reform, and pension reform. Not surprisingly, Brown admitted yesterday that he may now miss his self-imposed budget deadline this Thursday.

The good news for California taxpayers is that Gov. Brown still does not have the four Republican votes that he needs to put an extension of the largest state tax hike in U.S. history on the ballot. But as Senate President Pro Tem Darrell Steinberg remarked yesterday, “72 hours is a lifetime in this business.”

ATR urges California taxpayers to contact their representative in Sacramento today and urge them to hold the line against more job-killing tax increases and oppose Gov. Brown’s budget. Tell Gov. Brown to go back to the drawing board and craft a budget that brings expenditures in line with revenue by simply clicking here.

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The Miseducation of Morning Joe Viewers


Posted by Patrick M. Gleason on Friday, March 4th, 2011, 7:05 AM PERMALINK

The federal budget – whether it’s the continuing resolution to finish the current fiscal year or President Obama’s FY ’12 budget and the forthcoming counterproposal from House Republicans – remains the issue of the day in Washington and despite extensive debate, misinformation remains abound in the media.  

Yesterday on Morning Joe, co-host Mika Brzezinski and former Pennsylvania Gov. Ed Rendell volleyed calls for higher taxes. Brzezinski talked about the need to “spread the pain,” in reference to raising taxes on “the rich” (read: the majority of small business profits and workers). According to IRS data, here’s where “the pain” is currently spread when it comes to who pays taxes:

The top 1% of earners - the folks that Brzezinski doesn’t think are paying their fare share - currently contribute over 39% of all federal income taxes collections. The top 5% pay approximately 60% of all income taxes and the top 10% pay over 70% of all income taxes. The bottom half of earners? The bottom 50% ponies up less than 4% of total income tax collections. So much for spreading the pain.  

Gov. Rendell, a guy who knows a thing or two about raising taxes, piggybacked on Brzezinski’s remarks, offering that the ‘01/’03 tax cuts should be allowed to expire. Yet the ‘01/’03 tax cuts have nothing to do with the deficit and future projected deficits. The fact is that talk of deficits is a distraction from the real problem – unsustainable spending levels. As the Cato Institute’s Dan Mitchell  has pointed out, lawmakers could balance the budget in 10 years – even assuming the ‘01/’03 tax cuts are made permanent – without raising taxes by simply limiting annual growth in spending to 2%.  

History has demonstrated that higher taxes beget higher spending. Meaningful spending restraint and budget reform is only possible when tax hikes are taken off the table.

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Tobacco tax hike potentially headed to June ballot in California


Posted by Patrick M. Gleason on Wednesday, March 2nd, 2011, 12:20 PM PERMALINK

California is one of the most heavily taxed jurisdictions in the world. If that weren’t bad enough, for the next few months Golden State residents will have to deal with an annoying little man in tights pedaling around the state to stump for even higher taxes.

Lance Armstrong, who recently retired from professional cycling to lobby full time for higher taxes, was in Los Angeles earlier this week for a press event with California state Senator Don Perata to announce the launch of a campaign to raise the state tobacco tax.

A measure that would raise the cigarette excise tax by 114% has already qualified for the next statewide ballot, which is currently scheduled for February of next year but would be as soon as this summer if Gov. Brown is successful in referring an extension of the 2009 tax increases on income, sales, and cars to a June special election ballot.

Gov. Brown continues to make the rounds in Sacramento this week in attempt to peel off the requisite four GOP votes he needs – two from each chamber – to put his tax hikes on the ballot. Brown has had private meetings with Republican legislators in recent days, though what he is offering in exchange for their votes remains unclear.

Some suspect Brown might offer pension reform of some sort in exchange for GOP support, as he hinted at during his appearance before a joint legislative budget committe last week. Yet, despite Brown’s rhetoric on the campaign trail last year, Brown has thus far shown himself to be unserious about addressing necessary reforms to fix California’s broken public pension system, which is currently saddled with the largest unfunded pension liability in the nation at approximately half a trillion dollars. Pension reform is certainly needed, but should not be viewed as an acceptable bargaining chip in exchange for extending the largest state tax increase in the nation’s history.

Brown is working against a self-imposed deadline of March 10th for legislative referral of his proposed tax increases. As far as the campaign for a tobacco tax hike goes, Lance Armstrong is the last person who should be telling law-abiding citizens what to put in their bodies, especially when the substance in question is actually legal. ATR encourges Californians to contact their representatives in Sacramento today, and urge that they reject Gov. Brown’s proposal to put tens of billions in job-killing tax increases on the ballot. To do so, simply click here.


Crunch Time in California Budget Negotiations


Posted by Patrick M. Gleason on Tuesday, February 22nd, 2011, 10:06 AM PERMALINK

With California legislators returning to Sacramento today for procedural votes, Gov. Jerry Brown remains committed to getting his budget proposal through the legislature by March 10. With just a little over two weeks until the deadline, Gov. Brown is still looking for the four Republican votes – two in each chamber – he needs to refer an extension of the 2009 Schwarzenegger tax hikes to a special election ballot in June.

Last week Senator Bob Dutton, head of the GOP caucus in the state’s upper chamber, reaffirmed that his caucus remains solidly in opposition to Gov. Brown’s efforts to extend the largest state tax increase in U.S. history.

This latest exercise in squeezing more revenue out of a private economy that has been bled dry by high taxes and onerous regulation provides a teachable moment in that it reaffirms that fact that “temporary” tax hikes are a lot like unicorns – they’re talked about but do not seem to appear in nature. North Carolina taxpayers are currently coming to this same realization. After giving her word that the tax increases she signed into law in 2009 would expire as scheduled, NC Gov. Bev Perdue recently unveiled a budget that preserves a higher sales tax rate.

There is another reason that Jerry Brown wants Republicans to go along with his budget plan aside from the fact that he needs four GOP votes to get his tax hikes on the ballot. The fact is that Brown knows that his budget does nothing to address the states true problem – overspending, it does nothing to address the state’s unfunded pension liability pegged at half a trillion dollars, and will only leave the state’s economy worse off. Brown knows this and wants Republican fingerprints on it for that reason. Gov. Brown’s budget has the same problem as Obama’s – it fails to rein unsustainable spending in the short term, it ignores entitlements that will bankrupt the state long run, and includes massive tax hikes.

Gov. Brown will continue to make the rounds in an attempt to buy off Republican votes. Lawmakers in Sacramento need to hear from their constituents now. ATR urges California taxpayers to contact their representative in Sacramento today and urge them to reject Gov. Brown’s budget. To do so, simply click here.

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State Finances to be the Topic of Discussion on Capitol Hill Today


Posted by Patrick M. Gleason on Wednesday, February 9th, 2011, 9:58 AM PERMALINK

The House Oversight Committee is holding a hearing this morning on the prospect of allowing state bankruptcy. Facing budget deficits of more than $100  billion on aggregate through the next fiscal year, a $3 trillion unfunded pension liability, and soaring Medicaid costs, many policy experts and political observers have begun to debate whether state bankruptcy code might be the best option to help states rectify unsustainable pension systems and prevent a federal bailout of the most profligate states. Testifying at today’s hearing:

Nicole Gelinas - Manhattan Institute 

Professor David Skeel - University of Pennsylvania Law School 

Eileen Norcross - Mercatus Center 

Iris Lav - Center on Budget and Policy Priorities

As e21 correctly points out, the issue of state bankruptcy is quite complex, with many moving policy, political, and legal parts. As such, today’s hearing will likely serve as the opening salvo in a long and healthy debate in congress on state budgetary problems.

For live updates from the hearing, follow Reuters' Jim Pethokoukis on twitter: @JimPethoKoukis.

Elsewhere on the Hill, the Public Pension Transparency Act, a bill that would be a prerequisite to state bankruptcy legislation, will be featured at an afternoon press conference in the Capitol Visitors Center. The event starts at 12:30. Speakers include ATR president Grover Norquist, along with bill sponsors Rep. Devin Nunes, Rep. Paul Ryan, Rep. Darrell Issa, Sen. Richard Burr.

Start Time: 12:30 PM

Location: Capitol Visitors Center / HVC-200

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California Group Looks to End Government-Sector Collective Bargaining


Posted by Patrick M. Gleason on Tuesday, February 8th, 2011, 9:03 AM PERMALINK

A Santa Barbara-based organization is currently drafting a measure for the statewide California ballot that would put an end to government-sector collective bargaining, undoing what was perhaps the most catostrophic policy enacted during the first Brown administration in the late '70s.

Larry Eberstein, president of the Santa Barbara taxpayers Association, described the issue as such:

“The problem is that the government exists to serve the people, not public employees. But the way we structured finance in our society now, on the government level, is government is acting mostly in terms of public employees’ interest, not the public interest….It’s just a non-progressive policy and simply a policy that benefits one special interest.”

California, facing a half of trillion dollar unfunded pension liability, is home to the nation’s largest ticking pension time bomb. Noteworthy is that calls for pension reform are becoming increasingly bipartisan, especially in blue states like California where left-of-center interests are beginning to recognize that ballooning pension costs are taking up an increasing share of the budget and diverting scarce state resources from progressive pet projects and programs. 

As the Manhattan Institute’s Fred Siegel recently noted in the Wall Street Journal, government-sector unionism is a relatively recent development, a product of the 1930s, that liberals originally had great reservations about:

“..in a 1937 letter to the head of an organization of federal workers, FDR noted that "a strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied. Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkable and intolerable."

Siegel is right to point out that public sector collective bargaining is not rooted in some deep-seated American tradition and was the result of a relatively recent political decision that can and should be reversed.

California isn’t the only place where this debate is being had. Most notably, Gov. Scott Walker has called for ending the morale hazard that is government-sector collective bargaining in Wisconsin. Other reform-minded governors would be wise to follow Walker’s lead.

Eberstein’s group is expected to formally submit their measure to newly-elected Attorney General Kamala Harris later this week. Given the spending power of government-sector unions in California, the campaign will need some serious cash to have a snowball's chance.

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New Study on Bag Taxes: Economically Destructive, Job-killing


Posted by Patrick M. Gleason on Wednesday, February 2nd, 2011, 5:10 PM PERMALINK

The bag tax that Washington, D.C. residents have been paying for over a year will precipitate a significant decline in disposable income and will result in more than 100 lost jobs, according to a new report  released today.

The study, commissioned by D.C.-based Americans for Tax Reform (ATR) and conducted by the Boston-based Beacon Hill Institute (BHI), examines the economic fallout of the D.C. bag tax. The study found the year old tax will destroy more than 100 local jobs and reduce real disposable income in 2011 by $5.64 million. This in turn will yield a loss of $108, 340 in sales tax revenue and will reduce investment in the District by $602,000.

For the full story in today's Washington Examiner, click here.

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Amazon Tax Rears its Ugly Head in California Once Again


Posted by Patrick M. Gleason on Wednesday, January 19th, 2011, 12:54 PM PERMALINK

The budget introduced by Gov. Jerry Brown last week has been a hot topic of discussion in the Golden State and nationally. And while Brown is calling for $12 billion in higher annual income, sales, and car taxes, legislative Democrats are now jumping into the fray and proposing their own ill-advised tax hikes.

Among the most misguided of proposals coming out of the Democrat caucus is Assemblywoman Nancy Skinner’s Amazon tax legislation, reintroduced just yesterday, that would illegally require out-of-state businesses to collect California’s highest-in-the-nation sales tax. Make no mistake, this new tax, commonly referred to as the “Amazon tax,” is a guaranteed job killer that wouldn’t even make a dent in California’s budget deficit.

Perennial attempts to pass this job-killing tax on e-commerce have been rightfully rejected in California and elsewhere. Aside from failing to address the real problem – overspending – and adding to the state’s 12% unemployment rate, an unconstitutional Amazon tax wouldn’t do squat to close the state deficit, estimated at $26.4 billion over the next 18 months.

Assemblywoman Skinner projects that an online sales tax will generate an additional $300 million annually for the state. While that projection is without basis in reality for reasons that I will get into in a moment, let’s assume Rep. Skinner’s faulty revenue projections and look at how much of a dent it would make on the state’s deficit. At $300 million in annual collections, an Amazon tax would chip a meager 1.1% off the state’s overspending-generated deficit. Yet the reality is that the state wouldn’t even realize that paltry sum. What’s that? You want a chart you say?

 

The fact is that Rep. Skinner’s proposal would raise no additional revenue for the state. In fact, as the chart above illustrates, the state would actually lose revenue, as has been evidenced by the handful of states that have enacted Amazon taxes.

Three states have enacted an Amazon tax in the past two years – Rhode Island, North Carolina, and Colorado – and all three have generated zero additional revenue from it.

Rhode Island General Treasurer Frank T. Caprio had this to say about his state’s Amazon tax:

“the affiliate tax has hurt Rhode Island businesses and stifled their growth, as they’ve been shut out of some of the world’s largest marketplaces, and [it] should be repealed immediately.”

As ATR has repeatedly explained to state legislators, Amazon taxes hurt small ad businesses and do nothing to fill state coffers. Rather, it has been demonstrated time and again that retailers will simply terminate contracts with advertisers in states that stupidly enact an Amazon tax to avoid creating a “nexus” and, therefore, being forced to collect this unconstitutional tax.

In 2009, 25,000 individuals and small businesses in California earned $1.6 billion from online advertising, paying $124 million in state income tax (plus employment tax, business tax, property tax, sales tax, etc). That is a revenue stream that will dry up if Skinner’s legislation passes.

It gets worse. Not only is the tax harmful to employers, the state of California could face a burdensome and costly lawsuit if Skinner’s legislation were to pass.

Not every state is a total failure; some just serve as bad examples. California legislators would be wise to learn from the bad examples set by lawmakers in RI, NC, and CO, rather than choose to serve as one themselves.

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