Thursday, June 16, 2011

Saving California

Between 2001 and 2009, the most recent year for which data are available, the total adjusted gross income of California’s personal income taxpayers increased by 16.5 percent. In contrast, the net profits reported by corporations for California tax purposes nearly tripled, rising by 192.0 percent.
California Budget Project

Turning California into a Third World nation where the environment is neglected, a lot of people are genuinely desperate and a lot of the young have a hard time getting an education or just can't get one doesn't benefit anyone.
Rebecca Solnit

Boosting our local economy by helping real small businesses create jobs should be our goal. We can either cut taxes for CEOs and Wall Street traders, or we can invest the money to generate more customers for small business by keeping teachers, police officers, and other Americans on the job rebuilding the crumbling transportation, water, and energy infrastructure small business depends on.
Frank Knapp, CEO and President of the South Carolina Small Business Chamber of Commerce

Out here in California, our political structure would be considered a laughing stock if the effects were not so painful. Yesterday was the deadline for the Legislature and Governor Brown to come up with a budget or else...each legislator loses pay for every day that they do not compromise for one until it is a done deal. Democrats passed a budget that would raise car fees ($12 per car), use smoke-and-mirrors accounting tricks and cut into university funding even more. Governor Brown vetoed it today, refusing to "kick the can down the road" any further.

Conservative politicians and pundits blame the huge budget deficit on bloated government, mainly public pensions. They have all signed "no tax pledges" so they refuse to raise revenue...anywhere. Democrats have large majorities in both houses of the State Legislature...sort of. They are 2 seats away (in each house) from a 2/3 supermajority, the precise amount needed to raise any taxes. That means that 4 GOP legislators are needed to do that...which means that it is not going to happen...which means more budget cuts.

In California, the GOP is far and away the party of corporate sponsorship, routinely echoing the refrain that businesses are overtaxed and overregulated, despite studies showing that overall tax burden on businesses have actually declined significantly in the past 30 years. This lower burden is due to tax credits that benefit corporations (research & development), the same tax rate for small businesses making $100,000 & for large corporations like Google (bringing in $7 billion in profit last year), the strange fact that CA does not have an oil extraction tax (conservative states like Texas, Louisiana and Alaska all do: TX = $884 million) and Proposition 13, which (since 1978) has greatly benefited commercial property taxes due to the infrequency of selling property.

Republicans (in California & nationally) continue to fight off these studies by sticking to the no-tax script, arguing in the face of reality (see chart below) that "lack of revenue is not the problem."

Of course, for them, government spending is the real problem. The legendary Grover Norquist's Americans For Tax Reform basically fear-mongers Republican leaders into signing a no tax pledge. This has even led to even the condemnation of the consideration of a compromise with the Dems to close corporate tax loopholes at the national level. From 2001 to 2009, according to the California Budget Project, the total adjusted gross income of California’s personal income taxpayers increased by 16.5 percent. In contrast, the net profits reported by corporations for California tax purposes nearly tripled, rising by 192.0 percent. So witness the ugly cycle: Norquist's uber-powerful organization intimidates GOP leaders who in turn have held Sacramento hostage with their demands for pension reform, spending caps and environmental regulation while refusing to extend vehicle, sales and income taxes until voters can decide in mid-September.

Many everyday Republicans that I know also chant the "no more taxes" mantra, while at the same time, say they proudly support public schools, the environment and lament the rapid increase of tuition at community colleges, Cal-State and UC schools. It's a rather strange combination. In the past 3 years, per-pupil spending in California's K-12 schools has decreased by $600 while tuition/fees at UC schools have risen 65% in the past 5 years.

More and more, though, I'm realizing that Republicans (both leaders and followers) should not take all of the blame for this mess. Pensions do, in fact, need reform. And raising revenue needs to be done much more creatively and progressively, pinpointing businesses (CA is home to Chevron, profiting $6.2 billion in the 1st quarter of 2011) and individuals (millionaires have greatly benefited from a decade of Bush Tax Cuts) that can overwhelmingly afford it, while seeking products like plastic bags and sodas that we can place a small tax on to start weaning us all off of. The Dems should be taking this lead...but aren't.

We are starting to hear some viable arguments about the ability of the Legislature to place the tax extensions on a September ballot without a 2/3 vote. Two key points are being made: (1) the taxes are technically "extensions" not "raises" and (2) the Legislature is not technically taking action--the people are! The whole situation is sad really. The history of budget deficits, unfortunately, has grusomely worked against poor, working, vulnerable and marginalized peoples. This is precisely why it must be high on the ethical priority list of every faith community in the state.

The biblical Script adamantly calls humanity to care for the least of these. Many churches have responded creatively and consistently to the pain and struggle that the Great Recession has rendered in the past 3 years, but we must additionally come together to advocate for public policy that reclaims some of the lost ground since the late 1970s when we had great K-12 schools and the best public universities in the world (literally). Poor and marginalized people need an opportunity, not a handout. There's a big difference between the two. Many of our wealthy brothers and sisters share this conviction and are honorably fighting to raise their own taxes (and if you are asking why they don't just donate to the government, read this). Perhaps megachurches in wealthy suburban locales will join them?

It's time for every Christian in California to wake up. If the Republican Party could get what they really want, they would privatize schools & parks so that eventually only the elite could afford an education and a weekend trip to Yosemite. Even a cursory reaing of the biblical text reveals that Christians, Jews and Muslims must advocate for the poor and marginalized. If we don't lobby for the least of these, who will? Unfortunately, many of the conservative faithful dodge this responsibility with supply-side fantasies that have not worked out so well for the least of these or simply fetishize their so-called "real biblical issues" (abortion and gay marriage) which aren't mentioned (as framed in today's debates) in the biblical Script anywhere. We just tend to be a people a little slow to learn all of this:

Epilogue: At the end of his masterful The Moral Vision of the New Testament (1996), Duke professor Richard Hays proposed that we should re-prioritize our ethics:

If our moral concerns were shaped in accordance with the New Testament vision of Christian discipleship, we should direct our energy and attention to four fundamental issues: (1) the renunciation of violence, (2) the sharing of possessions, (3) the overcoming of ethnic divisions, particularly the division between Jew and Gentile, and (4) the unity of men and women in Christ.

Which, of course, brings up another embarrassing issue for Californians who care about justice: what kind of revenue will it really take to deal with our vastly overcrowded prison population (obnoxiously overrepresented by Latinos and African-Americans)?


  1. It is unclear to me why pinpointing BOTH businesses AND individuals is a good strategy for raising tax revenues. Since corporations are owned by individuals, why not drop the corporate tax part of your strategy and simply advocate taxing wealthy individuals more progressively?

    The tax incidence would be the same, and you would be more likely to make political inroads with those obnoxious Republicans.

  2. I like your gdp share of taxes graph. Unfortunately, if you raise taxes to the historical average (about 18%) we still run a huge short fall. So I don't see how you can avoid the role in spending in the structural deficit.

    Also worth noting, the 2000 bush tax cuts seem to be justified, highest taxes per GDP collected since 1950.

    Also some other interesting things are after the 2000 tax cuts, the share plummets from 20% to 15%, but returns to historical averages very shortly, even though tax rates remained the same.