IOU California, IOU for everything!

Arnold has a proposal on the table that makes hard cuts and raises taxes. The Legislature is bogged down and refuses to compromise. Arnold has declared a state of emergency!

What do I think? I think this SUCKS! And I think we need to drastically reform our State Government to 1) allow a budget to be passed by simple majority and 2) Give the Governor real power.

Oh and there is real talk now of rescinding Prop 13

Cylon, to rescind prop 13 and to let the budgets pass with only a majority is to open us up to endless tax hikes. The people on both sides do not want to give in. It is the usual nonsense right down party lines with a Governor that only wants to do what seems popular at the time.

We are in bad shape and I don't think that any of these people are going to help matters. I need something to happen other than endless fights between the two parties and the desire for them to raise taxes, or should I say "revenue".

If you go to the SFGate.com discussions on this you'll see a divide between those who are newcomers to the State (like me) who are screwed by Prop 13, and long timers who are bound and determined to keep it live no matter how much it screws the budget

Bottom line: We'll have to raise taxes and cut services for a couple of years at least. No one is ready (yet) to accept this

Arnold has to go. He is trying to Shock Doctrine California.

I've got the feeling that he's not so much "trying to" as "going to". We've got talk of furloughs and pay cuts at the institution I work for, and people are pretty pissed off.

I guess he will succeed though, won´t he? Admittedly I don´t know enough specifics about the California situation but the shock doctrine still works like gangbusters. And todays scenario fullfills all requirements for a successful implementation I fear.

I disagree that Arnold or anyone else is trying to "Shock Doctrine" California. There is a fundamental disconnect between the current level of spending and current sources (and amount) of revenue. And the political structure is designed in such a way that it is much much easier to enact new spending vs. new taxes.

No one is proposing real changes in this budget: they want to cut funding to programs and raise taxes, as opposed to doing anything that will address the core issues.

All Arnold is trying to do is leave his office with the state in some semblance of solvency.

Oh, and next week the unions at BART will decide whether or not to strike, thus potentially shutting down a major transportation hub in Northern CA, and potentially costing the state economy millions in lost revenue.

No, Arnold is unwilling to get behind any kinds of tax increases on corporations, which have pretty much a free ride in California in spite of their disproportionate use of the infrastructure. California has been under attack for 30 years from the greedy and indifferent, and while Arnold can't fix the situation alone, he could provide a degree of leadership, which he is not doing. His only focus is on cutting spending and spending has not increased any more than every other cost has risen in this state. Yes, there's waste and excess and that has to go, but to truly fix the dysfunctional budget situation in this state, the corporations and very rich have to start paying their fair share into the commons. All the regressive taxes on the table hit the working and middle classes hardest. It's time for a progressive tax, and bring back the luxury tax, which was perfectly acceptable under republicans and dems alike for 50 years.

There are too many issues to list here that are a direct consequence of Prop 13, and none of them are good. The arcane 2/3 majority rule also has to go.

I must say, I'm guilty as anyone of paying more attention to national politics than state politics, but that is now changing.

Yup. All of this.

Did you go to the big meeting last week? My wife mentioned that even with all the cuts (4% - 8% depending on your salary), the people at the top will still get their big bonuses because they were written into their contract.

Any suggestions on a new state to move to?

No, I skipped out on it, but heard all the gory details afterward. That was a nice closer to a particularly decent week.

Sure this is an issue, but it's a drop in the bucket compared to the billions in tax breaks to large corporations that is killing this state.

This is from the California politics blog, Calitics.com, talking about a meeting to roll back the part of Prop 13 that affects corporations:

Drop in the bucket is correct. It's just discouraging for all the employees that are making so much less (maintenance, janatorial, etc) to hear that some people are still going to get bonuses that rival their yearly income.

Mike Malloy had a great show on Prop 13 last night. I'd try to summarize what he said, but it would do him better justice to just listen to it online.

I heard part of that and it was really good.

It doesn't help you have cuntrags like John & Ken screaming every afternoon. This coupled with the idiotic 2/3rds rule allows the budget to be held hostage by some of the most batshit legislators who refused to comprimise.

Granted there needs to be massive reforms. Both in the legislative and initiative process.

What bothers me is that the prop 13 loophole and relaxation of the luxury tax are elephants in the room and yet are virtually ignored by the mainstream and, of course, right wing. Even the always-great Diane Rehm show had conservative talkers on who ONLY talked about spending, and even some Cato Instituted j*rk-*ff who wanted to "move to a more stable tax base," meaning cutting taxes even further from corporations and the top brackets, with no opposing viewpoint represented. It's really shocking how complete this media blackout has been.

I tried to get a prop 13 and luxury tax question into the Schwarzenegger Q&A on Digg.com but it got buried probably by lobbyist plants.

Good news - we may not have to worry, apparently the hospital CEOs are challenging the pay-cut/furlough suggestions on the grounds that the hospitals/med schools receive very little state funding (only through Medi-Cal, really), with everything else being revenue and grant money from NIH and the like, plus approximately 85% of the hospital staff being unionized throws a huge wrench into any budget cut plans. Putting staff out on unpaid holidays or furloughs would lead to them having to hire temp staff to fill the clinical/administrative spots, which would end up costing more. Obviously this is all pretty premature and they're all still working on the specifics, but the CEOs are in agreement system-wide. This will be a pretty interesting macro-battle, to say the least.

And good link to Calitics, yt - I've been checking that one out ever since this whole ordeal started brewing and it's a really solid site with a lot of great contributors.

Good intro on the history of California's budgetary woes: Prop 13 and the Roots of of Cal's budgetary problems

From the article:

Here's what I say to that, Snaieke, call me crazy, but...

GOOD F&^%ING RIDDANCE!

If a corporation wants to just suck the blood from a state, pollute it possibly, drain and profit off its resources possibly, use its infrastructure for free, and not contribute its fair share back, it can move wherever the %^$# it wants and new companies will spring up in its place that will hopefully be more democratic and fair in their charter. Seriously. I hate this argument. I've lived in California all my life. I've watched the coastline eaten up by offshore oil drilling and seen the beaches go from clean and clear to polluted and toxic. I've seen ecosystems and citrus groves ploughed under for endless sprawl literally as far as the eye can see. I've seen freeways choke with commuters who provide a service to these corporations and watched the sky go from dangerously smoggy to deadly smoggy. These corporations don't give two $#!%s about the messes they cause, the costs in health care and infrastructure they engender, and the destruction their lobbyists and cayman island accounts do to our schools and our quality of life, and the door is right over there.

Plus, seriously: did anyone who threatened to "Go Galt" during that whole functionally retarded show of hands end up doing it?

The distinct scent of bullshit wafts through the air every time I hear those two words squeaked by some Randian champion of capitalism.

Depending on the revenue code, NY still might be able to get you, if your income producing activities still happen within the state. You may not be a resident, but if your money comes from an activity with sufficient economic nexus in NY, blammo, you're paying NY taxes. At least, business-wise that is...

The problems businesses have in California are not just the tax rate they pay. California has a plethora of HR, environmental, etc regs that are a nightmare to businesses. Not just the straight out costs to comply, but the administrative hassles etc.

Plus the wages one has to pay due to the higher costs of living in this state make it unattractive to locate a business here (I'm excluding those businesses which employ illegals, which is a whole other issue)

YT will soon get her wish: corporations have been leaving this state for at least a decade, contributing to the decline in the tax base.

The brunt of Arnold's cuts are going to be in Education, not coincidentally the end point for property taxes in most states....

This was an excellent piece. Thanks for posting!

Cylon, I'm not wishing corporations will leave (well, Kauffman & Broad can definitely go), I just don't believe in the whole "outrageous untaxed profits trump the public good" corporate philosophy. I think that corporations that operate with that intent should go Cheney themselves.

Yes a great link thank you!

Of course that editorial mentions another fundamental problem: the Utopian picture painted by Meyerson took place during the post WWII boom. We've been living in a very different economic environment since the 1970's.

Snaieke conveniently stops the quote just before "No doubt the majority of that loss in millionaire filings results from the recession." Which is a pretty important and basic point. The writer then goes on to say that the result of the progressive tax system is that more of the tax burden falls to the middle class. Beyond the "duh" factor of this being the natural and necessary result of a recession shrinking the upper class, he doesn't articulate a viable alternative. If putting more of a tax burden on the upper or middle class is unacceptable, that just leaves the lower class to push it on. And that seems like an even more unstable, not to mention dangerous (probably the most efficient way I can think of to spike violent crime) solution.

There is a legitimate issue buried in there. With our system of federalism, there is always going to be some competition between state laws to draw whatever desirable element in. But the answer isn't to shamelessly pander to the worst instincts of that group. Corporate law went that way when Delaware undercut every other state in catering to corporations with their totally hands-off approach, and the end result was a great deal of damage to the economy and nation.

Alternative headline: "How Howard Jarvis fucked California in the ass and we've lived the damage ever since."

The Mess In California is like the climax to Murder On The Orient Express:Everybody Did It.
Neither Party has shown much in the way of intelligence over the past 20 years.
The GOP has adapted "No New Taxes Under Any Circumstances" atttude equalled by the Dems never being able to say no. Fuck them both.

Meyerson does a great deal of longing for the good old days,without realising they are simply not coming back.

I have no love for large corporations, but if they leave California they will take a lot of jobs with them.

Thing is moving you business from one state with high taxes to one with low taxes is a real possibility, whereas "going Galt" and totally withdrawing from the economy is not.
Corporate flight from California has been a fact for years. I have at least two friends who had to lose their jobs or move out of state within the last year.

Dude! Spolier tag please!

A spoiler tag for that would be like a spoiler tag for What Rosebud is in "Citizen Kane": It is such common knowledge that people who have never seen the movie know the ending.

Paranoid much?
You ain't that important.
Here is why I have such a dislike for Conspiracy Theorist: They take the most logical explanation...there were thousands of questions and just a few spots on that digg session...and throw that away into "They Are Out To Get Me"/
yt made some good points, but then threw thiis away with her paranoia.

Yeah...therein lies the humor.

The San Jose Mercury News ran a really interesting article that sums up the fiscal crisis in California.

Chief "OMG" point for me? Wealthy individuals contribute more via state income tax than less wealthy (earn less than $500K per year), Corporations and Sales Taxes!

More at http://www.mercurynews.com/news/ci_1...nclick_check=1

If they get rid of Prop 13 do you renters realize how much your rent will go up? Your land lord does not pay property tax out of the goodness of his own heart. He is after all in business to make money, and any added expense he acquires he will pass on to you, the renter.

And if he raises it too high, people will leave and then he'll have the mortgage and his property tax to worry about.

He will just raise your rent by how much he is taxed say 6 to 30 thousand dollars a year. I just believe some things should not be taxed, property is one of them, because by taxing them all you do is fuck the poor.

^And there is the dilemma. If you repeal Prop 13 the costs flow downwards, pushing many more people into poverty or out of the state. Revenue might increase in the very short term but will drastically decrease long term.

Oh, and the IOUs that the state are paying contractors with? They include an interest rate that the State will pay once they have cash on hand again! So it costs the state more to pay in IOUs than in cash....

Eenin and Cylon, please explain. idgi. How so?

Property tax is based on the value of said property. If you live in an apartment that is worth 100,000. With Prop 13 right now you the renter are paying 1000 Dollars a year in rent go toward that tax. If they repeal Prop 13 then you the renter will be paying as much as 5000 dollars a year more in rent. Every landlord will add the value of the Property tax to said rent. In the South California, a apartment worth 100,000 dollar is a pretty small apartment. A small house in a ghetto is most likely worth over or around 300k right now. So a poor families' rent can go up by as much as say 15k a year. In some states with out a Prop 13 the property tax can be 6% of said property, and this cost will always get defied to the renter. Everyone pay property tax, especially those who do not own property. Property tax will always add to the cost of living in any given area. This is why Property tax is more evil then most other taxes.

Prop 13 is rescinded

My landlord faces a property tax for the first in years on the properties he owns. (We could run different scenarios where the tax is small, increases over the years etc)

Said landlord then raises rents to pay the tax.

Let's be optimistic and say my house "owes" $3,000 per year in property tax. That would be enough to make me look elsewhere..maybe a 1 bedroom apartment, maybe something in another state altogether (I can work pretty much anywhere I have phone/Internet access). My landlord loses revenue for an unknown length of time (it can take 2-6 months to fill an empty rental property)

For people who are currently under-employed, unemployed, or living paycheck to paycheck, a rent increase can mean the difference between being homeless and having a place to stay. How many people fall into this category? Unknown, but I bet you it is a significant number.

A lot of people you meet doing receptionist work also have 1-2 other part time jobs, plus their Husband/wife/significant Other also work their asses off. It would not take much to really hurt these people economically.

EDITED TO ADD: And add this on top of costs for childcare, healthcare, etc

Firstly, what is getting traction is not rescinding the part of Prop 13 that affects private residences; it's targeting corporations. Second, it sounds like you're using the working poor as cover for the rich. The problem with your argument is that most of the people you're referencing are dealing with property tax raises outside of prop 13 protection anyway. It's the wealthy elite who skirt any increase in property taxes through well-lawyered transfers of property among family or associates. Property taxes are only raised under prop 13 when a new purchase is made.

Also, the benefits to the working poor by an increase in taxes in terms of improvement of schools and neighborhoods, to me, outweighs this hypothetical rise in rent. If you look realistically at what you're talking about, the kind of people hovering on the edge tend to be section 8 anyway. Also, as someone who rented for years before I bought a house, my rents were raised arbitrarily all the time. There's no rent control in most of California; you're mostly dealing with the whims of your landlords. I think it's a weak argument to say the reason not to roll back parts of prop 13 is to protect renters. That's like saying it's OK for the wall street fraudsters to do what they did because a few middle class people saw some brief profits in their 401Ks (which they quickly lost as that wealth got sucked into offshore tax shelters).

You do realize if they do Prop 13 is rescinded. It will be much worse next year when hyperinflation kick in. One of the thing Prop 13 does is keep the price of property tax set at the year the Property was bought. What about all elderly, and working poor who have kept their property for years and could not afford to pay a cost increase.

One of the problems with you liberals is you think life should be fair and equal, but life is never fair or equal. The best you can every do is increase more people chance for success. Eliminating something like Prop 13 will only decrease many people chance for success.

Actually you could see Prop 13 itself as a very Liberal law: it allows a lot of people to own property who would not be able to make the Property tax payments in a "free" market.

And YT, you neglect the fact (that I pointed to above) that people earning more than $500K per year in California shoulders most of the fiscal burden via state income tax.

Yes Corporations pay lower taxes, but they also pay heatlhcare costs, have to conform to numerous regulations, and must pay a higher salary to keep workers.

These factors are driving companies out of the state, and have done for decades.

How would axing Prop 13 not accelerate this trend?

As usual, tax rates have little to do with tax collections. As usual, the rich pay far less of their income from the middle or poor. And as not so unusual, California does not tax oil companies at all. We could learn some extremely valuable lessons in benevolent socialism from Sarah Palin's energy tax policies in Alaska.

Source.