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No to Tax Increases in California

Friday, April 27, 2012
posted by B-Daddy

As a matter of fact, if there was some real pension reform, there wouldn’t be any need for tax increases. California is drowning under the burden of employee pension costs. Even the modest reforms offered by Jerry Brown are making no progress in the Democrat union controlled legislature. A couple of key parts of his proposal:

  • Equal sharing of pension costs: Require all new and current employees to contribute at least 50 percent of their retirement costs, shifting the burden from public employers, some of whom currently make the entire contribution.
  • Hybrid pension plan for future employees: Form a mandatory “hybrid” risk-sharing pension plan for new employees. New plan would include a reduced, guaranteed defined benefit, a defined contribution portion such as a 401(k)-style plan and Social Security.
  • Cap for high-income public employees.
  • Higher retirement age for future employees.

My personal belief is that this is a bait and switch. Brown knows that the legislature won’t pass these reforms or would slowly repeal them in the future; but he wants tax increases. His November ballot initiative calls for:

  • Increase the state income tax levied on annual earnings over $250,000 for five years.
  • Increase the state’s sales and use tax by 1/2 cent for four years.
  • Allocate 89% of these temporary tax revenues to K-12 schools, and 11% to community colleges.

But of course this money will actually be funding teacher pension benefits not improving education. Meanwhile the state legislature is barely making a pretext of passing pension reforms proposed by their fellow Democrat, Governor Brown.

“It’s not as fast as I would like, but it’s complicated,” Senate President Pro Tem Darrell Steinberg, D-Sacramento, said this week during an appearance before the Sacramento Press Club.

He said Democrats have an obligation to deliver pension reform, particularly as they will ask voters in November to approve hikes to the income and sales taxes. But he also said they have “a different take” on parts of the governor’s plan.

A different take? Really? What take would that be? I’m not holding my breath for anything significant coming out of this legislature. Beating back tax increases is necessary to save California from even more businesses and wealthy individuals from leaving. Despite the Democrat lock on the state legislature, I firmly believe these tax increases will be defeated in November.

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2 Responses to “No to Tax Increases in California”

  1. Excellent piece in the POINTS made, B-Daddy. But some technical corrections. You are looking at the OLD Jerry Brown prop. That hs been withdrawn — or rather modified.

    Consider the “new, improved” Jerry Brown prop that the unions are scrambling to qualify for November.

    – To make it more palatable to the voters, the sales tax has been cut from a half-percent to a quarter-percent, and is for “only” four years.

    – On the other hand, the state millionaire’s tax has gone from 12.3% to 13.3% — and extended to seven years. The tax increases still start at $250,000.

    Consider the magnitude of this millionaires tax increase. If approved, CA will be by far #1 in income tax rates. We will be 21% higher than the 2nd highest state (Hawaii), 34% higher than the third highest state (Oregon), and a heck of a lot higher than all the rest – including six states with zero income tax. http://www.taxfoundation.org/files/bp59_es.pdf

    And as I wrote here earlier, a number of states are considering reducing or eliminating THEIR state income taxes — perhaps in hopes of landing some fleeing California “whales.”

  2. Poway Roger says:

    Once again, no fixes are offered. If they are going to try to impose new taxes, then come up with new ways to cut. I won’t even look at a measure unless it offers that.

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