California Tax Commissions Plan Misses the Major Point

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California Tax Commissions Plan Misses the Major Point

By David Bahnsen | 10/22/09 | 09:12 PM EDT | 1 Comment

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The final report from the Commission on the 21st Century Economy has completed the work that Governor Schwarenegger commissioned them to do via executive order, specifically that they "set the commission to the task of evaluating and proposing reforms of California's tax system, to realize a revenue stream that is more stable and reflective of the state economy." The biartisan committee completed their work and has submitted it to the Governor. No future commission meetings are scheduled, but presumably the Governor intends to pitch the series of recommendations to the legislature.

First of all, this bill is dead and will not be going anywhere. Secondly, the primary issue I have with this topic is the principles that conservatives need to have when they enter the discussion of paying for something with government money.

I have studied every nook and cranny of this tax proposal, and oppose it despite it obviously having some very good elements. Fundamentally, my basis for opposing it is this:

The very premise behind the commission is flawed. We do not need a “revenue neutral” tax overhaul, and to pursue policy changes that concede revenue neutrality from the onset beg for our opposition. Replacing a capital gain tax with a new business tax are not “supply side”; they are just re-shuffling the cards in the same deck. We do not have a revenue problem in California, and we never have. We have a spending problem. To lower marginal income rates is good. To lower sales tax is good. To lower corporate rates is good. But as long as the premise is that the size of government must be maintained, they have to replace that revenue with something else (in this case, a Business Net Receipts Tax). We conservatives have to oppose this. We can and should support the portion of this plan that seeks to cut taxes; but it is only half-right. They replace those taxes with very unfriendly business taxes. And in fairness, they have to, because they started the conversation by conceding that spending not be cut (and therefore that revenue must be maintained). Our tax plan and tax conversation must look like this:

(1) The size of government and spending must be cut by X …

(2) Once we have done that, we can look to cut taxes by X, and stimulate growth and prosperity more efficiently.

Simple, huh?

I believe a marginal income tax reduction, capital gain elimination, and corporate tax decrease are all part of this stage 2. But until stage 1 is done, the rest is just lipstick on a pig.

See more at http://www.davidbahnsen.com

TAGS: supply side, California tax commission

1 Comment | Related Topics »CALIFORNIA

Comments

Bahnsen is Correct - the Waste Needs to Stop

David makes a good point in here. "We do not have a revenue problem in California, and we never have. We have a spending problem." California alone has one of the world's largest economies, which is part of why our current economic situation is so devastating; it's man-made.

In the midst of all this economic strife, the need for state and local governments to cut waste and spending is urgent. Why, then, is the LA County Board of Supervisors fighting to renew a contract with an underperforming and overpriced firm?

Last year, the Los Angeles County Department of Public Social Services (DPSS) procured for vendor services to operate the county's GAIN case management services - a program that helps welfare recipients find work. Two bids came in from the incumbent company (MAXIMUS, Inc.) and Policy Studies Inc. (PSI). The two companies were scored by a neutral third party, and PSI beat Maximus solidly in several categories, including performance and price. Maximus protested the scoring, but the findings were upheld on 3 levels and PSI was recommended by DPSS to receive the contract.

The Board of Supervisors disagreed. They rejected the recommendation with 3 votes. They claimed the process of consensus scoring somehow concealed bias from the DPSS, though no specific evidence of this bias was ever presented. Furthermore, this scoring process was documented as a valid process which had been used for years prior to 2008, and the same process whereby the incumbent Maximus had been recommended and awarded. The BOS then directed the DPSS to extend Maximus' contract for 6 months while they reissue the RFP and devise a new scoring method.

The BOS also expressed some superficial concern that the cost of the contract may exceed county requirements (see County Prop A). Although language could've easily been built into the contract to ensure cost neutrality/savings, the BOS rejected that argument and asked DPSS to review their contract monitoring costs for possible reductions and eliminate or reduce pay for performance provisions that could drive up the overall contract cost should the vendor outperform expectations.

The reissue of this RFP makes no fiscal sense whatsoever, particularly given the dire state of California's economy. What's more, the state faces federal penalties to the tune of approximately $185 million if they do not meet a preexisting federal threshold. Why is the BOS insisting on spending MORE of our tax dollars in an effort to maintain their business relationship with Maximus - a company whose performance was scored lower and whose contract was priced higher than PSI? (The county has estimated the cost to reissue the RFP to be $250,000). PSI's contract would save the county over one million dollars annually. What's going on here?

An LA Times article from last year exposed just how entangled Maximus is with the BOS. In the first half of 2008, Maximus spent over $124,000 on two lobbying firms, more than doubling what they spent on marketing in year before. Perhaps even more troubling, Maximus donated $1,000 (the maximum allowed) to the campaigns to re-elect supervisors Don Knabe and Michael D. Antonovich. They even gave $1,000 to two members whose terms had 2 years left to run.

In these lean times, something else must be motivating the board's decisions, because it's certainly not the bottom line.

Submitted by Anonymous on Fri, 10/23/09 - 06:14 PM »