CA Cons Still Trying To Live Off What We Built In The 60s & 70s

Lots of people want to live in California.  This is a good thing.  Conservatives try to portray this as a bad thing.  Let me explain.
George Will repeats the conservative narrative that people and companies leave California because of taxes and regulations.  He writes,
It took years for liberalism’s redistributive itch to create an income tax so steeply progressive that it prompts the flight from the state of wealth-creators: “Between 1990 and 2007,” Voegeli writes, “some 3.4 million more Americans moved from California to one of the other 49 states than moved to California from another state.”
Actually, any people and companies that move from California do it because the cost of living is so much higher and that is because it is a desirable place to live.  California was the envy of the rest of the country through most of the 20th century.  The best state government in the country used our taxes to build the best public structures — the schools, colleges, roads, courts, water systems, etc. that attracted the innovative industries and the economy prospered even more.
What conservative propagandists like Will leave out is that so many people want to live here because of what the taxes and regulations created.  These public structures are what attracted so many people and businesses that the cost of living here went up.  They are trying to make people think this is a bad thing, and are trying to make people think the government and the public structures it builds are the problem rather than the source of our prosperity.  In essence they want to sell off what We, the People built and keep the proceeds for themselves.
The social contract used to be that We, the People built up the infrastructure of “public structures” like the legal system, schools, roads, water system, etc.  And this is what enabled businesses to prosper.  Then the businesses and people who did well paid back by pitching in with the proceeds to keep that system of public structures up to date.
It worked.  California built up the best schools and colleges, etc. so places like Silicon Valley and biotech grew up and thrived, and the state became a great place to live, attracting so many people and industries.  But this infrastructure was taken for granted.  Because this system was so solid and well-maintained people were able to start deferring maintenance, cutting everything, etc so that the big corporations and wealthy could have their taxes cut.  (Yes, the middle class got a bit of that through Prop 13 but even that primarily benefited commercial property.)
In essence the state has been living off of the past savings account of infrastructure that was built up in the 60s and 70s.  But now we’re in 2010 with a 70’s system. The schools are near the bottom in the country and the college and university system has been gutted.
We’re STILL just getting by on living off of the last of what we built up in the 60s and 70s, but that is at an end now and the savings account is exhausted.  It is time to start to rebuild the infrastructure we used to be so proud of.  It is time to ask the wealthy and corporations that are here because of what the taxes and regulations built to pitch in again and start to rebuild that savings account of public structures and infrastructure.

What “Cut Taxes And Cut Spending” Means For You

You hear it over and over again from California conservatives, “Cut taxes and cut spending,” and “government spending is too high.”

So what does this mean to YOU? How does this affect your life?

Simple answer, cutting spending means that your schools, roads, police and fire protection, lines at the DMV, parks, environment, food safety inspections, services to help small businesses and courts all deteriorate. It means that it costs more – much more – for you to send your kids to college. That is what “cut government spending” means.

And in spite of what you think, their promise of cutting taxes rarely means your taxes. There is a huge concentration of income and wealth at the very top, which means that tax cuts really mostly benefit the very, very wealthy. Even the well-known Prop 13, thought of as helping homeowners, shifted the tax burden from the corporate owners of commercial property to middle class citizens. From, Corporate loopholes make Prop. 13 crippling for state:

Thirty years ago, commercial property owners contributed 59 percent of property tax revenues and residential property owners contributed 41 percent. Today, we see a virtual flip: commercial property owners contributed just 43 percent of property taxes in 2008, while residential property owners contributed 57 percent.

Another thing you constantly hear are calls to cut the number of government employees and their benefits. If you think about it, layoffs and pay cuts for government workers (teachers, police, firefighters, road workers, etc.) translates into increasing pressure to cut your own wages as well, plus it means fewer customers for California’s small businesses, fewer teachers in our schools, increased crime rates, etc. Cutting their benefits means that your own benefits come under pressure as well.

Conservatives promising that cutting taxes and spending are good for you have held sway for the last few decades. They are always promising that tax cuts will make things better for regular people. But they haven’t gotten better. The real tax burden keeps shifting further and further away from the wealthy and powerful and onto the backs of the middle class. Meanwhile the things that our government does for us are reduced and reduced, so life gets harder.

The lesson to learn is: glowing promises of a free lunch usually mean that you are the lunch.

USA Can’t Get Health Care, CA Can’t Get Budget — Same Reason

The country is trying to pass health care reform but a single Senator is able to block the popular “public option” and “Medicare buy-in” plans, because he says it is wrong to let the public have any choice besides for-profit companies.  Actually it is one Senator plus the entire Republican caucus – but we already understood that they do the bidding of the big corporations that fund them. The rule of the Senate allow minorities to thwart the will of the people and block bills.

An NBC/WSJ poll that came out yesterday showed that 45% of the public found it unacceptable that the public option was removed, and 42% acceptable, but 58% wanted the Medicare buy-in and only 32% didn’t.  But never mind, both of those are out because of one Senator (joining all the Republicans.)  This is a clear example of democracy thwarted.

In California we can’t pass a budget or tax corporations or the wealthy to pay for our schools, colleges and universities, reads, etc. for the very same reason.  Our legislature is structures to that a minority can thwart the will of the people.  It requires a 2/3 vote to pass a budget or raise revenue.  And we have a minority that is funded by the big corporations, with one corproate PAC funded by Wal-Mart, Blue Cross of Ohio (?), Reliant Energy and others putting almost $1 million of into just one race last year.

It is time to trust the people and change the system in Washington and the system in Sacramento. It is time for majority rule.


Businesses Need Customers Not Tax Cuts

A letter in today’s San Jose Mercury News expresses the misguided but oft-repeated Republican “spin” that tax cuts and deregulation “create jobs”.  As usual it bears little resemblance to the truth.


Create jobs by helping business
The two ways government can affect the job market are by spending on projects through borrowing or by reducing the tax burden on families and businesses. If it borrows, it causes another tax through inflation and interest expenses that will go on forever. If it reduces taxes and regulations, the loss in revenue will be far less than the amount the Democrats are planning to spend, and without any interest.
You create jobs by making it easier for businesses to hire people through reductions in taxes and regulations, such as a tax break for every person they hire and retain. You don’t make it harder for them by raising their expenses. Let’s do what worked in the past.

The writer is correct about the tax through interest expenses that is the result of borrowing, but incorrect about the effect of tax cuts.  In fact, it is tax cuts that have caused so much borrowing without helping the economy.  Here is what is wrong about the idea that tax cuts create jobs: 
  1. Businesses hire the employees they need to hire to meet demand. If demand is low no amount of tax cuts can induce a business to hire people. Why hire and pay people to have them just sit around?
  2. The way to get more customers into the businesses – i.e. to create demand – is to get more money circulating in the pockets of regular people. Cutting taxes for the already well-to-do doesn’t accomplish this.  The way to do this is with government policies that increase wages and reduce working hours, like how raising the minimum wage and mandating 40-hour weeks and weekends off helped create America’s middle class. Helping regular people is good for business. 
  3. The writer says we should do what has worked in the past. The fact is that the economy has always done better when the tax rates on the wealthy and corporations were highest. Just look it up. The reason for this is that our economic system when left to itself always becomes a low-age, everything-to-the-top system, because the wealthiest always game the system to get the most for themselves. The way to fix that is to apply regulations to prevent this, and high taxes at the top so the government can implement policies that raise the wages of the rest of the public. This is how we got out of the depression after the huge concentration of wealth that built up until 1929.
  4. Taxes are not an “expense.”  Businesses pay taxes on the profits (revenue minus expenses) — so the businesses that need help don’t need tax cuts, they need customers.  It doesn’t make sense to try to help businesses that are not doing well by giving even more money to their profitable competitors.  We should be using that money to instead help the businesses that need the help.  Helping the already well-to-do is bad for business.
There are no examples in history of deregulation and tax cuts creating a better economy, but plenty of these steps creating worse economies. And before you say it, Reagan’s tax cuts were followed immediately by huge tax increases, and still led to the tremendous borrowing and interest payments that the writer is worried about. And to make matters worse, Reagan’s deregulation almost led to economic collapse twice – first with the Savings and Loan crisis, and then with the recent financial crisis. 
To fix California’s economy we need to ask the wealthy and corporations to start contributing their share again, and use that money to educate our students, rebuild our infrastructure and bring back the kind of state that created and attracted the semiconductor and electronics and biochem and other industries. This all occurred when taxes were high, not low.
Tax cuts and deregulation hurt the economy.  The only economy that is ever helped by tax cuts is the economy of the Cayman Islands, where many of the rich store their hoards of cash. 

Why America needs to go back to taxing the wealthy

(This article originally appeared in the San Jose Mercury News)

America has always been a place where a person could get rich, it used
to be that you got rich a bit more slowly, and everyone benefited in
the process. This is because we used to have very high tax rates at the

A person could do very well, but income that came in above a
certain level was highly taxed and used to pay for the teachers,
police, courts and roads that enabled businesses to thrive. Just how
high were taxes? During America’s “golden years” of 1951-1963, tax
rates were over 90 percent on income over $400,000. Then through the
1960s and 70s, they were 70 percent on income above $200,000.

had many beneficial results — especially for the people who paid higher
taxes. Back then, government could afford to invest in programs that
improved everyone’s standard of living, including health, knowledge and
technology, all without borrowing. History recalls these as the years
we created and grew our prosperous middle class, built our public
universities, conducted our economy-changing scientific research and
developed a culture of thriving entrepreneurial businesses.

when it took time to make a fortune, business people had to rely on the
health of the greater community to nurture their own enterprises. They
had to think and act long-term. They had to carefully build solid
businesses that satisfied their customers. They had to hold on to
workers because their experience was valuable.

Meanwhile, the roads and bridges used by their trucks
were kept in repair, our schools provided excellent education to their
potential employees, and our courts were well funded to properly
enforce contracts. Businesses and communities depended on each other to
do well.

But once top tax rates were lowered, vast personal
fortunes could be realized from a single quick deal. This created
incentives for people to engage in activities that we can now see
helped make our country a worse, and less prosperous, place.

became predatory, caring little for the community because executives
planned to get rich quick and leave soon. Short-term business models
that cut employees to the bone and took advantage of customers began to
make sense.

Because of reductions in tax revenue, we cut spending
on schools and infrastructure. Yet even with all these cuts, our
federal government had to borrow to make up a shortfall. Now we have a
massive debt that costs us hundreds of billions in interest each year.

businesses’ interdependence with the community went out the window, it
became more profitable to outsource or sell off our manufacturing
capacity. Then, as communities fell apart, those few who benefited from
such business practices could just fly away in their private jets. The
greater community was of no use to them except as a crop to be

We can see the effects of this quick-buck, short-term
thinking all around us today. Our roads and bridges and schools are
falling apart. The experiment in low taxes has nearly destroyed our
economy, too, and may yet if we don’t stop borrowing instead of asking
the wealthy to pitch in.

So it is time to change the formula. It
is time to make our businesses part of our communities again. The way
to do this is to continue to help people become wealthy — just a bit
more slowly, please, and bring us all along. Bring back the top tax
rates of our golden years so we can all enjoy the benefits of our
economy again.

Sen. Feinstein Demands Social Security Cuts

California Senator Dianne Feinstein has joined a group of Senators threatening to allow the nation to default on its debt unless a commission to “fast track” cuts to Social Security is created. 

Talking Points Memo describes what is going on,

Moderate and conservative Democrats want to empower an outside
entitlement commission to reshape major domestic spending programs like
Medicare and Social Security, and they’re threatening a truly nuclear
option to get their way. If Congress does not create this commission,
they say, they will vote against must-pass legislation to raise the
nation’s debt ceiling, which would trigger a default, and, perhaps,
economic calamity.

“I will not vote for raising the debt limit without a vehicle to
handle this,” Sen. Dianne Feinstein (D-CA) told McClatchy. “This is our

About this commission,

As proposed, it would hand a significant amount of Congressional
authority over entitlement programs to an outside body. That body would
make recommendations that Congress would have to vote on, up or
down–no filibusters.
That’s a bridge way too far for liberals, who see the commission as a backdoor approach to gutting Social Security.

Here’s the problem.  Many people believe that there is a problem with Social Security – that it is “going broke.”  But the fact is that Social Security has a huge reserve in the bank.  Social Security runs a huge surplus, and that surplus has been added to this reserve every year for decades.  Social Security will continue running a surplus until at least 2017, and can then draw on that trust fund to make up any shortfalls for at least the next 30-40 years.

Ah, but where is that trust fund?  According to a recent Washington Post story, 

The Treasury Department has for decades borrowed money from the Social
Security trust fund to finance government operations. If it is no
longer able to do so, it could be forced to borrow an additional $700
billion over the next decade from China, Japan and other investors. And
at some point, perhaps as early as 2017, according to the CBO, the
Treasury would have to start repaying the billions it has borrowed from
the trust fund over the past 25 years, driving the nation further into
debt or forcing Congress to raise taxes.

So there is the problem in a nutshell. They spent it. They spent it on tax cuts for the rich, and now that people are retiring and want that money, Senator Feinstein and the others don’t want to raise taxes on the rich to pay back what was borrowed from the nation’s retirement account.

This is the same as the situation in California. They cut taxes and made up the shortfall with various gimmicks, until the gimmicks ran out.  So now that the bill is due the protectors of the wealthiest talk about “spending” – which is government coming through for the people – as the area to cut, instead of turning to the people who received all the benefits of the earlier actions.

Senator Feinstein, keep your hands off of my — and everyone else’s — retirement account.  You borrowed that money, now pay it back.  Don’t think you can solve this problem by asking me to accept less than what I was promised because you handed that money out to the wealthy.  The people who got it should be the ones paying it back, not the people it was taken from.  You already took money from the taxpayers to bail out the wealthiest, don’t do it again.

CA Raises Tuition Rather Than Tax Oil Companies, Wealthy

Alaska and Texas tax oil as it comes out of the ground and use that money to pay for state government, schools, colleges, etc.  Alaska even sends everyone in the state a check with that oil money.

But in California the state refuses to tax oil companies that take our oil out of the ground to sell back to us.  Instead it raises college tuition by a third.

California also doesn’t ask its wealthy residents to pitch in and help run the state.  Instead it makes it much more difficult for children who are not born to wealthy families to get a university education.

This is the choice California makes when it allows a 2/3 rule that lets a minority block the state from raising the revenue it needs to run the government.

Getting CA Back On The Right Track

Dan Walters asks, When U.S. economy recovers, will California be left behind?  Walters talks about “the business climate” which usually is interpreted to mean do we tax and regulate  businesses.

Well here is a business problem: many businesses say that recovery will be delayed in California because there just are not enough trained workers ready to compete in a 21st-century economy.  And the infrastructure is in terrible shape, and courts take too long to hear cases, etc.

These problems are not because of high taxes. Instead they are problems because we have cut taxes and government and now there is not enough government to educate workers, fix roads and bridges, hear court cares, etc.

We need to get our priorities back where they belong and get our government back to educating our kids and workforce and fixing roads and hearing court cases, etc., so businesses want to come here and stay here and thrive and provide the 21st century jobs that we need.

BNRT–Not a European Vacation

Assemblymember and Budget Chair Noreen Evans has been commenting
on the “work” of the COTCE Commission which was created to try to deal
with California’s revenue creation issues that have been blamed for the
annual budget problems here in California.
While there is
clearly room for improvement in how we collect the revenues necessary
to invest in our state and its future, the suggestions by Gerald Parsky
and the Governor who appointed him to head this work are really a
subterfuge for giving more tax relief to the wealthiest Californians at
the expense of the rest of us.

We know that
the real answers call for closing billions in tax loopholes for the
rich and large corporations, correcting a split roll for real estate
taxes so that big commercial properties don’t short=change our
communities and realizing that as a 21st century economy,we’re
primarily a service-based and technology-based economy where revenues
should be coming from services and internet sales. 

Here are
Assemblymember Evans observations on the half-baked proposal by Parsky
and his crew to misdirect our attention away from what we should be
considering and lessening the responsibilities on those who have
benefited the most and stand to gain the most from this ill-conceived
and transparent attempt to give the rich even more.” — HBJ

BNRT–Not a European Vacation

by Assemblymember and Budget Chair Noreen Evans

The proposal by the Commission on the 21st Century Economy (COTCE–rhymes with “gotcha”) to scrap the California tax system and replace it with the Business Net Receipts Tax (BNRT) is riddled with problems and full of questions without answers. It begs
the question–how stupid do they think we really are?

Few people understand how the BNRT works and no one knows how it will impact 
California. Some compare the BNRT with the European Union’s Value Added Tax (VAT). That’s like saying the Oakland Raiders and Manchester United both play football.

the surface, both tax systems sound similar. The proposed BNRT would be
imposed as a percentage of a business’ gross receipts from the sale of
goods and services, minus the business’ purchases of goods and services
from other businesses (which have already been taxed). A VAT is a tax
on manufacturers at each stage of production on the amount of value an
additional producer adds to a product. This cost is typically passed on
to the consumer in the end.

A key distinction between the VAT and BNRT lies in the fact that California is a state, not a sovereign nation. So, the BNRT lacks a critical element of Europe‘s VAT–the border adjustment. The United States Constitution prevents California from
implementing a border adjustment because that interferes with
interstate commerce, which can only be regulated by the federal

This creates an enormous problem for California businesses. Europe‘s VAT system ensures that products made in Europe are taxed at the same rate as products made abroad by placing the VAT on products entering Europe and rebating the tax for those products leaving Europe. However, under the United States Constitution, businesses without a nexus to California cannot be taxed by California. Thus, California products will be subject to the BNRT while products made elsewhere will enjoy a competitive tax advantage.

The BNRT’s problems don’t end there. Most importantly, the BNRT reduces incentives to create jobs in California. 

Commission’s proposal provides a tax deduction for payments to
independent contractors, but not for employee wages. It’s almost as if
the Commission was trying to find a way to punish 
California workers. Under this proposal, California businesses would be taxed for keeping employees on their payroll. The logical result is that Californiabusinesses will turn to out-of-state labor contractors who hire workers in California and then contract them out to California businesses. Thus, Californians will have even less stable employment and we would see fewer jobs created here.

Adopting the untested BNRT proposal requires blind faith in the Commission’s promises that it will somehow benefit California,
despite all the evidence to the contrary. It’s like quitting your dull,
but reliable job because a late night commercial promises you can make
$100,000 working from home.

Who benefits from this proposal? California workers don’t benefit. California‘s small businesses don’t benefit. California corporations don’t benefit. Any benefit to California‘s
taxpayers is entirely speculative. The only certain beneficiaries from
this proposal are out-of-state businesses, large, multi-state or
multi-national businesses, and out-of-state labor contractors. Was this
really the purpose of the Commission on the 21st Century Economy?

Many economists love Europe‘s
VAT and extol its benefits to the European economy. But don’t be
tricked into believing that the proposed BNRT will bring these or
similar benefits to 
California. The greatest lessons Californians can learn from Europe regarding the BNRT are the lessons learned the hard way in the casinos of Monte Carlo.

Dead Before Arrival

The COTCE report is due today, calling for an end to corporate taxes in the state, as well as a “flat” tax — cutting taxes on the rich and making up for the lost revenue by … well you can see where that has to go.

Mr. Parsky has been working in a shroud of
secrecy (in violation of the spirit, if not the letter of the group’s mandate)
so we won’t know just exactly what his plan to help the rich calls for until the news conference being called by the Governor for today. We’ll have
our responses and action-options for you here as soon as we’ve had a chance to review
and analyze just how tainted this belated and flagrantly lop-sided Parsky
Report is.

This plan should be and probably is dead before arrival.