California: The Golden State With Some Not So Golden Measures

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Posted by Elise DeCristoforo on Friday, October 28th, 2016, 2:32 PM PERMALINK

It’s not November yet, but changes are already happening in California. Last month, Governor Jerry Brown (D) signed a number of bills into law that will negatively impact the Golden State economy.

Most notable and problematic is Senate Bill 1234, dubbed the California Secure Choice Retirement Savings Trust Act. For workers without an employer-sponsored retirement plan, this new law will require 2-5% of their wages to be automatically set aside for California bureaucrats to manage in a state-sponsored IRA. This new law will place the savings of seven million eligible employees under state government control. The Wall Street Journal’s Allysia Finley, a California native, explains what the state would then do with the siphoned wages:

"They essentially want to give it to this Retirement Board that's comprised of mainly politicians in Sacramento and their union allies. And they would supposedly invest the money for the first three years in treasuries and other 'safe investments.' And then they could distribute the money essentially to their politically-favored causes' investments."

Workers can technically opt-out of making contributions to a state-run IRA, but as Finley notes, “it’s a very onerous process,” just like it is for public employees who want to opt out of paying dues.

In a recent Forbes article, Chuck DeVore, a former California legislator and current Vice President of National Initiatives at Texas Public Policy Foundation, explained the motive behind this odious new law:

“Why are the weakest government pension systems seeking to force private sector workers to pay into their accounts? There are four reasons: the infusion of new cash can help the balance sheets; millions of additional voters will be made more dependent on government programs; those same voters will be invested in ensuring that state-run pension systems are adequately funded; and the political appointees and politicians who oversee those retirement systems will have billions more in investment leverage to pressure corporations to bend to their progressive demands.”

Not all of the bills signed into law by Gov. Brown last month are bad. Senate Bill 443, for instance, is a bipartisan-supported measure that requires a conviction before police can claim civil asset forfeitures. In the past, police officers could claim an individual’s assets without a conviction.

“This important legislation will drastically reduce the opportunity for police to take money from and otherwise harass poor people, immigrants, people of color, and small businesses that work primarily in cash,” said Lynne Lyman, California state director of the Drug Policy Alliance.

In less than two weeks, California voters have some important decisions to make that will influence everything from their tax returns to their trips to the grocery store. The Americans for Tax Reform 2016 Ballot Guide, released this week, highlights the noteworthy measures on the 2016 ballot that will have the greatest impact on California taxpayers and the state economy:

Notable Tax-Related Ballot Measures

California Proposition 67, Plastic Bag Ban Veto Referendum

Americans for Tax Reform Stance: Oppose

Proposition 67, if approved by voters, would uphold a 2014 state law banning the use of plastic bags and charging consumers a 10 cent on every paper bag used at checkout. All revenue collected from this bag tax would go to grocery stores, not state government coffers.

Prop. 67’s approval would result in a multi-million dollar tax increase on consumers that will do nothing to improve the environment but will transfer income from low and middle-income households to the bank accounts of large corporations.

California Proposition 65, Dedication of Revenue from Disposable Bag Sales to Wildlife Conservation Fund

Americans for Tax Reform Stance: Support

Proposition 65 is an initiative statute to Proposition 67 that would direct all bag tax revenue away from grocery stores, as current law stipulates, and instead towards the Environmental Protection and Enhancement Fund, a new fund that would be managed by Wildlife Conservation Board.

Americans for Tax Reform opposes California’s plastic bag ban and paper bag tax. Yet if Prop. 67 is approved and the paper bag tax remains on the books, revenue raised by it should go to public coffers instead of private companies. As such, ATR opposes Prop. 67, while supporting Prop. 65.

California Proposition 55, Extension of the Proposition 30 Income Tax Increase

Americans for Tax Reform Stance: Oppose

Proposition 55 would extend the higher temporary income tax rates approved by voters in 2012 on incomes exceeding $250,000 a year. If this measure is approved, the higher income tax rates will remain in place through 2030. However, if voters reject Prop. 55, these tax increases will begin phasing out in 2018.

Currently, California’s top marginal income tax ranks highest in the nation at 13.3 percent. Second highest in the nation, Oregon, is more than 3 percentage points lower. Keeping such a high rate in place for a longer period of time will continue to hamstring the state economically and will be particularly harmful to small businesses owners who pay their taxes on their individual income tax return.

California Tobacco Tax Increase, Proposition 56

Americans for Tax Reform Stance: Oppose

Proposition 56 would increase the state cigarette tax by $2.00 per pack, resulting in a total cigarette tax of $2.87 per pack. This increase would be equivalently applied to other tobacco products as well.

In that vein, Prop 56 would also expand the state definition of “other tobacco products” to include e-cigarettes, which would hold these innovative, safer alternatives to traditional cigarettes to the taxes outlined in Proposition 99 and Proposition 10. 

Prop 56 would make California’s cigarette tax rate within the 10 highest in the nation and make it among the few states that taxes e-cigarettes.

Local Tax-Related Ballot Measures

San Diego, California Football Stadium Initiative, Measure C

Americans for Tax Reform Stance: Oppose

Measure C would raise the city’s hotel room tax to finance the construction of a new stadium for the San Diego Chargers, and additional convention center space.

Currently, the city’s hotel room tax is 10.5 percent, which is collected with an additional 2 percentage point surcharge to fund the Tourism Marketing District for an effective total hotel tax of 12.5 percent. Measure C would lower the Tourism Marketing District down to 1 percent, however, the overall effective rate would still increase to 16.5 percent. Approval of Measure C would result in a nearly 60 percent increase in the San Diego hotel tax.

Numerous Local Soda Tax Ballot Measures

Americans for Tax Reform Stance: Oppose

Voters in San Francisco & Oakland, CA, as well as Boulder, CO will face ballot questions asking them to approve punitive tax hikes on soda.

Simply put, discriminatory soda tax hikes are regressive cash grabs that will do nothing to improve public health.

One of the few times Senator Bernie Sanders (I-VT) has ever been correct about any fiscal policy issue was when he pointed out on the presidential campaign trail this year that soda tax hikes are “fairly regressive. And that is, it will be increasing taxes on low-income and working people.”

Significant Local Ballot Measure

Monterey County Ban on Fracking and Extreme Oil Extraction Methods Initiative

Americans for Tax Reform Stance: Oppose

This initiative would ban hydraulic fracturing in Monterey County, California.

Banning energy extraction methods such as hydraulic fracturing prevents the development of affordable, cleaner, reliable, and abundant natural gas. Furthermore, banning hydraulic fracturing will cause Monterey County to forgo economic growth and job-creation. 

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