California Budget Mess Will Not be Solved on Margins

I was struck by an excellent column by Timm Herdt of the Ventura Star. He posed a very insightful question, “Are efforts to better collect taxes that are already owed the political equivalent of actually raising taxes, or are they designed to ensure fairness for those who are already paying their full share?” I say the answer is they are tax increases, but so small as to be inconsequential. Fairness is pursuing individuals who falsify their tax returns and purposely do not pay. Raising other people’s taxes is not fairness.

Herdt focuses on several issues, like the proposed “Amazon tax” that would require internet retailers with affiliates in California to collect sales tax on behalf of the state for sales that they do not make. Another is a proposal to assess penalties on high-income taxpayers who are denied eligibility for certain tax credits. Under the bill (SBX8 32), those who unsuccessfully claim credits that defy “reasonable basis” in an “excessive amount” – both undefined terms – face a 20% penalty of the amount claimed, if the taxpayer makes over $250,000 a year. At the same time, the bill would allow people who short-sell their homes to have the difference between their loan balance and sale amount not count as income. According to the legislative analysis, even with the higher penalty for rich people, the proposal is a net revenue loser.

The common element between these is the majority Democrats identify people they do not like and then go after them. They know the electorate is angry and think if they can project that anger onto others they will get a break with public opinion. That is leadership of a certain kind, but not what is needed to balance the budget.

The Amazon tax is hyped as a way to close the tax gap and make fairer the tax treatment of California retailers. Both goals are unattainable with this approach. The BoE already collects 96% of the overall sales and use tax due. The Board brings in around $44 billion in sales tax collections every year. The Amazon proposal is estimated to bring in only $107 million a year more, or two-tenths of one percent. This estimate assumes Amazon does not fire their California associates, as they did to their New York affiliates when New York passed the same law. Amazon simply hired new associates in New Jersey. New York ended up with no new revenue and more people without jobs. There are a lot of under-employed people in Nevada who would happily service California consumers. As I have stated many times, the way to mitigate the Amazon tax inequity is to lower the sales tax enough so the difference between shipping to California and paying sales tax is more equal.

The voters want the Legislature to get serious. Legislator approval rating is diving. The proposals highlighted here neither increase fairness for other taxpayers, nor bring in anywhere close to the revenue needed to close the deficit. These proposals are tinkering on the margins in ways that have no practical effect but appeal on an emotional level to some. That is not “getting it done.”

***The Liberals’ Free Speech Problem***

In case you did not see, there was a party off campus from UC San Diego that had as its theme mocking black history month and “ghetto” culture. It was offensive to me and many others. Both the University and concerned alumni should talk to these students and appeal to their reason that their actions reflect badly on their school, and to contemplate the isolation some black students feel. However, what the students do on their own time, at a private party, is hardly a matter of State. I am reminded of the Golden Rule. It is not the people we love that we are called to forgive; rather we are called to forgive people we can hardly stand. The spirit behind the First Amendment is similar – it protects expression even when it is repulsive.

Others apparently disagree with me. There was a big press conference with a rally on the Capitol steps with a large contingent of liberal lawmakers, including Speaker Karen Bass (Republican Anthony Adams spoke, too) berating and threatening the students. This bothers me even more. There is merit to the idea of black history month because it is worthwhile to take note of the contributions of black Americans. But the idea of a special month is undeniably a construct of America’s elite. Therefore, in the best American tradition, it is absolutely eligible to be mocked by young people. It would be highly ironic if the fallout of making fun of black freedom and achievement results in a loss of freedom to those who spoke. The American response must be to strongly express disagreement with the mockers but not to sanction them.

There is no doubt in my mind that if modern liberals had the power to make certain expression illegal, they would exercise it. This is far more offensive to me. Conservatives writ large have been building a reputation as defenders of the First Amendment in the face of political correctness for a long time. My first-in-the-nation 1991 “Leonard Law” protecting the free speech for students is one example. The recent Citizens United case is another. So, kudos to the Sacramento Bee for a recent editorial that urges lawmakers to focus on the budget, not protesting off-campus college parties. They got it right.

***New Speaker of the Assembly***

It is always a time of hope and celebration when a new Speaker is sworn-in and John Perez is no exception. Although he is part of a long line of Assembly leaders with strong ties to organized labor, in this era of limits he will be spending a lot of his time cajoling those government workers that they must accept less. I wish him the best. A few things caught my attention as Speaker Perez assumed the mantle last week.

One is that, like proud parent, it is fun to see the kids growing up and taking their place. Perez related that he was part of the Boys State program and visited the Capitol to learn about state government. He was 16 in 1985 and I was serving my seventh year in the State Assembly at the time of his visit. I hope he learned what to do and what not to do.

Second, Perez has announced that he will appoint a couple of Republicans to committee chairmanships. While it is a generous gesture to share the power, the reality is that these chairmanships are empty gavels and the Republicans should respectfully decline. Even with a Republican chair there will be a super-Democrat majority on those committees as there is on every other committee. And some position like Chairman that is freely given can be just as freely taken away if that Republican chair disagrees with the Speaker. Given the disagreements between the parties on a host of policy issues some dispute is sure to occur.

And lastly, the new Speaker has ordered legislators to not receive text messages from lobbyists. Short of banning all electronic devices from the Assembly floor (including members’ laptops), this new rule is unenforceable, violates the First Amendment guaranteeing free speech, and suggests that legislators are so weak in their integrity that a text message would sway their vote. Decorum on the floor is enforced by the Sgt. at Arms. I cannot see how the Sgt. at Arms can patrol the floor reading phone screens over the shoulders of legislators. It would be better to spend the time training legislators in how to say and mean, “No.”