A situation that was already volatile may be push to the brink by surprisingly bad news in the May revise that was issued on Monday. Even before that news, the school district was facing a three million dollar deficit and facing more cutbacks.
Last week, the situation turned tense as the district was planning a 5.5 percent cut.
As Davis Teacher’s Association President Gail Mitchell said at the time: “Two weeks ago, the board asked us to consider a 5.5 percent permanent, ongoing pay cut. What I hear from teacher after teacher, at site after site, is: ‘I can’t afford to see my paycheck shrink any further.’ “
The news on Monday was absolutely devastating as Governor Jerry Brown announced that the state budget deficit grew by a staggering 70 percent since January and worse yet, those figures had little to do with the economy.
Reported the Sacramento Bee, “They instead blamed a bad marriage of volatile capital gains and political intransigence that led state leaders last year to count on a huge upswing in revenues that never materialized.”
Moreover, “At the same time, corporate tax changes from 2009 appear to have cost California more than state officials ever realized.”
That was enough to push the deficit from $9.2 billion to $15.7 billion. On Monday the Governor acknowledged that his previous forecast was just too optimistic, some that most economists warns last summer.
The impact on our schools will be devastating and Superintendent Winfred Roberson took the unusual step of sending out a Robo call to families with children enrolled in the local school district.
“Ensuring that your child learns is DJUSD’s number one priority. Many of you know that today the Governor released his May revised budget; its potential impacts on schools are more glaring than originally anticipated,” the Superintendent said.
“DJUSD has already seen its budget reduced by nearly 20% over the past four years. Each of these years we have made operational, program and administrative reductions to adjust to these cuts. However, the State’s cuts and deferrals have occurred at a faster pace than we could amend our budget,” he continued.
“For 2012-13 we are forced to reduce valuable personnel to close our deficit. These personnel reductions ultimately increase class sizes and impact the way we serve students. It’s not what we wish but it is our new reality,” the Superintendent warned. “As Superintendent, during these unprecedented times, it is my goal to work closely with the Board, employees and the community to make decisions that are student centered and keep our schools academically strong and financially solvent.”
Assemblymember Mariko Yamada issued a statement in response to the governor’s revise.
“The budget ax falls again on those who are already the least advantaged in our society – the poor, women, children, elderly, disabled, and on those who are the future of California – our students,” she said.
Assemblymember Yamada added, “This grim news underscores the need for all Californians to support the Governor’s temporary revenue measure. Simplistic statements about the state’s spending problems ignore the stark realities of what it actually costs to maintain a basic, minimum standard for education, healthcare, and public safety in one of the most complex democracies in the world.”
Superintendent of Public Instruction Tom Torlakson said on Monday, “Today’s May Revision raises the stakes for California’s public schools, which now need the help of voters to prevent more than $5 billion in cuts and a dramatically shortened school year.”
“Our state’s financial difficulties cannot be resolved within the Capitol alone. As Californians, we share a common future. The 6.2 million students we serve today will soon be the doctors who treat our aches and pains, the architects and skilled workers who build our homes and factories, and the programmers and engineers who design our cars and our computers,” he said. “The quality of their work tomorrow depends on how well we summon the collective will—now and in November—to prevent further cuts, and to begin the hard but necessary work of investing once again in California’s public schools.”
“Today’s proposal also puts the difficult choices before us in stark relief, and puts in jeopardy California’s longstanding commitment to quality early learning and child care,” Mr. Torlakson continued. “I’m hopeful that the Governor and legislative leadership will ultimately craft a budget that preserves these vital programs, and puts our state back on track for long-term success.”
Dean E. Vogel, president of the 325,000-member California Teachers Association, a Davis resident, responded to the budget proposals by arguing that this shows the urgent need to pass the governor’s tax measure.
“Educators know that the governor’s revised budget released today reflects the harsh realities we all face as the state budget deficit continues to swell. But we also know that our schools cannot take more cuts,” Mr. Vogel said in a statement. “California already ranks 47th in per-pupil spending and has cut or deferred $20 billion from our schools and colleges in the past four years, despite having the ninth-largest economy in the world.”
He added, “The billions in proposed trigger cuts to schools are unthinkable, and make it all the more crucial that voters pass the governor’s tax measure in November to put California back on the road to recovery.”
“CTA also continues to have concerns about changing the school funding formula in these uncertain times. Moving toward a funding formula that creates a system of winners and losers for students will only add to the challenges local schools are facing,” Dean Vogel concluded.
—David M. Greenwald reporting
“Moreover, “At the same time, corporate tax changes from 2009 appear to have cost California more than state officials ever realized.’ “
These were passed to get to 2/3 to pass a budget that year in spite of the structural deficit that already existed at that time. When will Californians have enough of the 2/3 rule that provides the no new tax Grover Norquist pledged Republicans a choke hold on taxation that is strangling the public sector in California?
And how long do these folks think it will be before the educational deficit created by shorting our students now strangles the private as well as the public sector?
Americans and Davisites are being forced into the same “austerity” program as the Greeks, Italians and Spanish. Yet, we are duped into thinking otherwise in the name of budget deficits and cost-cutting. If it looks like a duck and quacks…enough said.
Ok… from the Bee, Brown says he’s going to implement a 5% reduction in state workers’ pay, by going to 4 day, 9.5 hour/day work weeks. Says that state unions are coming to the plate.
Davis is seeking 8-15% reductions in compensation, and is increasing its negotiators’ contract to achieve this.
Davis teachers: no concessions will be considered.
Vanguard: [i]The impact on our schools will be devastating and Superintendent Winfred Roberson took the unusual step of sending out a Robo call to families with children enrolled in the local school district.[/i]
Roberson’s robo-call might have also been in response to a different issue. The main narrative of the DTA leadership is that irresponsible budgeting by DJUSD has caused this problem to Davis schools. “Responsible Budgeting” has become their catch phrase. (See this link ([url]http://www.davisteachersassociation.org/?p=137[/url]) as an example, as well as its link to the DTA op-ed in the Enterprise ([url]http://www.davisenterprise.com/opinion/opinion-columns/value-and-respect-our-educators/[/url])) I was told that DTA leadership yesterday wanted their members to pass out flyers to parents at school sites to communicate that narrative. I think Roberson may have wanted to make sure that the district’s positions was out there, and the release of the May revise gave him the opportunity to do so.
There is a problem with DTA leadership’s current message. It happens to be the nearly identical message what Jose Granda and Tommy Randall made in opposition to Measure C. If a local school parcel tax were on the June ballot and I were opposing it, I would quote Gail Mitchell’s op-ed verbatim as the reason.
I disagree with that narrative. Nearly 1000 other school districts in California are dealing with the same thing and are making similar kinds of responses as DJUSD. Were those school districts also budgeting irresponsibly? If DJUSD were nearly alone in the state in laying off staff, then DTA would be onto something. And then at the state level, CTA is strongly supporting the November tax measure, as represented by Davis resident & CTA president Dean Vogel’s comment above. CTA’s message on the situation appears to be at odds with their Davis affiliate.
If DTA leadership is correct that this is all the administration’s fault, then why support the November state tax measure? why did they endorse Measure C? does it make sense for DSF to engage in community fundraising according to DTA narrative?
It might be nice if DTA leadership would clarify specifically how they feel about the November state tax initiative with respect to budget issues in Davis. Do they recommend that I vote for it? How would such a recommendation square with their case that DJUSD is budgeting irresponsibly?
Hpierce: I’m unclear on your point
I believe hpierce is saying that state and city workers are facing substantial reductions in pay, but Davis teachers are refusing to consider similar concessions. I.e., if implemented, one class of public employee would sacrifice a lot less than others.
Vanguard: [i]May Revise Puts a Huge and Surprising Hurt on School District[/i]
This article has a different take on the situation with respect to K-12 schools in California: John Fensterwald, TOP-Ed, 5/15/12K-12 schools spared, for now: But automatic $5.5 b cuts if tax initiative fails ([url]http://toped.svefoundation.org/2012/05/15/k-12-schools-spared-for-now/[/url])
I would note that as far as I know, Bruce Colby, District CBO, has said nothing about how this will affect DJUSD, including in the agenda material for tomorrow evening’s school board meeting.
David… Don is correct… again, I wax in-eloquent.
[i]”Moreover, “At the same time, corporate tax changes from 2009 appear to have cost California more than state officials ever realized.”[/i]
Bullshit. This cannot be proved. There is no way to accurately measure the relative rise or fall in tax revenue related to this change. The likelihood is that we would be in worse shape without it.
California is still ranked near last (or dead last in this survey [url]http://www.latimes.com/business/money/la-fi-mo-california-worst-state-20120502,0,461178.story[/url]) of all the states for being easy to do business in. We are still at the top of the list of tax burden by state (#6 in 2009) [url]http://www.taxfoundation.org/taxdata/show/336.html[/url].
This comment is just the left trying to maintain their tired, old lie attaching blame for their own failures governing this state to the GOP and conservative business principles.
Wealth cannot be taxed until it is earned. That is basic fly in the ointment for left ideology that dominates CA politics. The governance in this state has been anti-business, pro-union labor for the last 2-3 decades. During this same them the world grew much more competitive for earned wealth that can be taxed.
Looking across the nation, it is the low-tax states that are generally faring better in terms of economic recovery and unemployment than the high-tax states. This makes sense since higher tax rates chase away wealth and wealth creation. The Laffer Curve is real. In simple terms, a 5% tax on wealth and wealth creation brings in more revenue than a 10% tax if there is more than double the wealth… and low tax states are attracting more wealth and wealth creators. These low-tax states are looking at the big picture for long-term economic stability.
California is stuck in crisis mode and has been for decades. We cannot think and act strategically because so many CA residents have entitlement stamped on their forehead, and the public employee unions still call the political shots. I am absolutely sure we will go the way of Greece… and be the first state to declare bankruptcy and be taken over by the federal government. Hopefully this will happen with a GOP majority controlling the executive and legislative branches of the US government. Maybe the fear of this can be used to help liberal Dems get their fiscal act together.
The bottom line is that Brown and Dems in control of the state screwed up again keeping their union benefactors happy… and we all get to suffer because of it.
[quote]The news on Monday was absolutely devastating as Governor Jerry Brown announced that the state budget deficit grew by a staggering 70 percent since January and worse yet, those figures had little to do with the economy.[/quote]
If the Governor badly predicted how much revenue was going to come into the state budget this past year, and clearly is clueless as to the reasons why, how good will he be in predicting his new taxes are going to bring in enough revenue to do any good? Does anyone have a link to information on how much revenue to the state budget the Governor thinks is going to be generated by his tax proposals?
[i]”If DTA leadership is correct that this is all the administration’s fault, then why support the November state tax measure? why did they endorse Measure C? does it make sense for DSF to engage in community fundraising according to DTA narrative?”[/i]
Good question, but why not take it to the bigger picture question…?
If the current system is fiscally unsustainable, then why keep propping it up with new temporary tax measures?
JB: [i]Looking across the nation, it is the low-tax states that are generally faring better in terms of economic recovery and unemployment than the high-tax states. This makes sense since higher tax rates chase away wealth and wealth creation. The Laffer Curve is real.[/i]
Why do you choose to stay in California when you argue that business is better in other places, like Texas?
It depends what you spend that tax money on, and what you get in return. California has a higher educated populace than most lower taxed states (source ([url]http://www.economicmodeling.com/2011/06/14/data-spotlight-the-rise-in-college-degree-holders-by-state/[/url])) California also rates better on many quality of life measures.
Here are some businesses that are headquartered in California, most started here: Apple, Facebook, Google, eBay, Twitter, Disney/Pixar, Oracle, Cisco, Intel, ESRI, Lucasfilm, Hewlett-Packard, Live Nation, Big 5 Sporting Goods, Chevron, DreamWorks Pictures, Safeway, Sierra Club, AMGEN, Adobe, Del Taco, Wells Fargo, Trader Joe’s, Peet’s Coffee, and I could go on.
Do you use any of their products/services? Many of these companies are changing the world. Why did they start up out here? Would you have preferred to experience the computer/internet revolution in Oklahoma instead?
Most of those lower-tax states need those lower rates because there isn’t much else attractive about living there. If all you care about is a good bottom line, then sure, you can probably do it better elsewhere. But if you want the human capital to change the world, California is an excellent place. A principle thread in this discussion is sustaining a higher level of education to nurture and leverage the creativity and ingenuity to continue to change the world.
Come on, Jeff, stand up with me right now, put your right hand over your heart, and repeat after me, with joy and enthusiasm, “I LOVE California!” I know it’s in you. 😉
[i]”Why do you choose to stay in California when you argue that business is better in other places, like Texas?”[/i]
The current job I have is based in California. I have family in California too. Certainly CA is a great place to live for the weather and things to do. However, should I hit it big in business, or if I develop a future need to earn a living, I will consider moving in a heartbeat. There are a lot of great places to live in the US that would make it easier for me to do business in and allow me to keep more of what I earned. And in most of these places, the people are much nicer.
I’m not one of these people, but let’s take a 1 percenter that happens to earn $1 million in wages from $2 million in corporate profit from his/her business. In CA he/she will give the state about $110,000 of the $1 million in wages, and $176,800 in corporate taxes. Take the total of this and multiply it for five years ($1,434,000). Now consider this person moving to Nevada and having an extra $1.43 million to reinvest in his/her company or spend locally… thereby helping grow the economy and jobs.
Now if the business is based in California and/or relies on California resources, there is going to be offset operational, expense and revenue considerations. California has had the advantage in a strong customer base, and inexpensive state colleges. It has also been lucky with great weather and an attractive vibe. All those things are eroding except the great weather. We are getting to the point where we are way over-leveraged on our good weather… and paying the price for failing to keep the other attributes strong. California is basically destroying its value-proposition for living here because we are smug and conceited thinking that everyone will accept the abuse to say they live and work in California.
When I traveled, I used to have a feeling of being lucky to live in the state. Now I more often admire other people living outside of the state. It is really hard to be proud of what we have become.
wdf1: I do agree with you on the “change the world” vibe and a higher-educated population. I am drawn to that.
Several years ago I got a phone call from a guy that had looked me up on the Internet after reading a review I did of a GoVideo VCR/DVD combo device. I gave the unit a poor review because it had stopped working. I wrote that I had thrown it away. The guy had the same device and his dog had eaten the remote control. The company had gone out of business, and he was trying to find a replacement remote controller and was calling me to see if I had kept it and would sell it to him.
I told him unfortunately I had discarded the remote along with the defective unit.
He seemed like a very pleasant and intelligent guy that was in no hurry to hang up the phone. We started having a casual chat about a number of topics. He asked a few questions about me, and I asked a few about him. We learned we had some things in common. He told me that he was born and raised in the Bay Area, went to school at UCD and moved to his current location in Missouri (where I was born) about four years earlier to purchase a big house on 80 acres… a thing he would never have been able to afford in CA. I asked him how he liked Missouri. He said he hated it. I asked why. He said that he had not had a decent conversation with anyone living in or from Missouri since he had moved there until he had called me.
Of course I chuckled knowing some Missourians.
However, in the last 10-15 years since my friendly conversation with this remote-less, unhappy, Missouri fellow, things have changed. California is less elite, and other places throughout the nation have attracted more educated people. I was in the south last week, and I had more interesting casual conversations with random people than I ever seem to have in California.
The exception is the Davis Vanguard blog where I have copious interesting and friendly conversations! 😉
“Moreover, “At the same time, corporate tax changes from 2009 appear to have cost California more than state officials ever realized.”
“Bulls**t. This cannot be proved. There is no way to accurately measure the relative rise or fall in tax revenue related to this change. The likelihood is that we would be in worse shape without it. “
The top line was from the Sacbee article. Actually Jeff both the Congressional Budget Office and the Legislative Analyst Office in Sac do this all the time, Notice the language its even worse than expected and that is only one example. We can also blame Arnold’s cut to the car tax as another Republican tax cut that helped create the structural deficit. The Democrats could fix the state budget if they had a simple majority rule to raise taxes or any Republicans would help. As it is the Republicans are determined to reduce state government to something so small that we stop educating kids, Jerry Brown is doing all he can to spare the schools but he has run out of room. If you think its bullshit your dogmatism has blinded you to reality.
JB: [i]Looking across the nation, it is the low-tax states that are generally faring better in terms of economic recovery and unemployment than the high-tax states. This makes sense since higher tax rates chase away wealth and wealth creation.[/i]
The context of your statement looks at this recent economic downturn as being driven by the collapse of business in general. I understand this economic downturn to be the result of a collapse in the housing market. Folks wanted to live in places like California, Florida, and Nevada so much that they bought more house than they could afford. Why did folks want to live in those places?
The bad economy didn’t hit Texas or other states as badly because fewer people were looking to move there to drive up housing prices to unsustainable levels.
[i]”The top line was from the Sacbee article…”[/i]
Quoting another California leftist state political entity.
The problem is lower tax receipts because the economic recovery in California is still in the toilet thanks to a state government that sides with labor and has done all the wrong things to get the state out of the recession.
California was having state budget problems before the recession due to decades of overspending. Democrats in charge have kept it up for two reasons:
1. They didn’t want to piss off their union benefactors by making necessary cuts.
2. They expected to rely on their time-tested marketing strategy which makes victim-heros out of teachers and safety employees… serving to convince stupid voters to increase taxes YET AGAIN… to fund the union gravy train.
Number 2 in action is this temporary tax initiative by Brown. I think it goes down to defeat because now enough people know about number 1.
[i]”The context of your statement looks at this recent economic downturn as being driven by the collapse of business in general.”[/i]
No wdf1, the context is that the housing bubble was artificial. It gave the perception of sustained growth based on asset equity growth resulting from an irrational feeding frenzy. So, if the economic growth was artificial, but then disappeared, what then is the “real” economic engine of growth? It is business. Business creates the wealth that feeds the tax beast. There is a taxation equilibrium that is demonstrated by the Laffer Curve. Too high tax and capital goes elsewhere seeking tax avoidance, and hence higher returns (remember… to business taxes are just another line item expense to manage). Too low tax and government does not reap the benefits of the prevailing economic climate.
The problem for CA is that we are already one of the highest taxed states. We already have more regulations and restrictions on business. Commercial property costs have reset, but it is still more expensive than many other places. We are no longer attracting business, we are repelling it.
Sacramento is a great mini example of my point. The area grew housing much faster than industry. Now there are not enough jobs to sustain the existing housing supply. What is the solution? If you increase taxes you exacerbate the problem of having too few jobs… and you perpetuate the housing slump too.
Other states have figured this simple puzzle out. They know that the only way to get out of the recession is to grow their business base so that it feeds their tax coffers. They have lowered taxes to attract wealth and wealthy creation… seeking the equilibrium for maximizing all of it. California is so far off equilibrium and nobody in power in state government seems to get it.
JB: [i]There is a taxation equilibrium that is demonstrated by the Laffer Curve.[/i]
Increases on VLF, sales tax, and income tax rates expired recently. Why didn’t state revenues go up correspondingly, according to the Laffer Curve?
The governor has proposed eliminating the deficit by budget cuts of about 50% of it, and the remainder by raising taxes on the wealthy and raising the sales tax. Opponents from the right apparently feel it should all be budget cuts. Opponents from the left want even higher taxes. Sounds like he’s got it just about right.
[i]”Increases on VLF, sales tax, and income tax rates expired recently. Why didn’t state revenues go up correspondingly, according to the Laffer Curve?”[/i]
Because we are so far out of equilibrium and other states are eating our business-friendly lunch.
[i]”Sounds like he’s got it just about right.”[/i]
Sure. Let’s say I am an alcoholic and have put my family in financial dire straits by buying booze every day and not working enough to bring in more money. I then announce to my family that I will stop buying booze on Mondays and compel my extended family to send in a little extra every month to help pay the bills. That sounds just about right, right?
Change to the previous…
I will stop buying booze on the third Monday of the month every month.
One possible Laffer Curve:
[img]http://davismerchants.org/vanguard/lafferone.jpg[/img]
Another possible Laffer Curve:
[img]http://davismerchants.org/vanguard/lafferb.jpg[/img]
Problem is, nobody really knows where ‘A’ is.
Laffer Curve as usually described by conservatives, who seem to think it is a Laffer Line:
[img]http://davismerchants.org/vanguard/mythlaffer2.jpg[/img]
So, Jeff, I assume you believe the $16 billion deficit should be entirely eliminated by cuts?
No Don, read what I posted. I said there is equilibrium where we achieve the highest possible tax revenue before chasing capital investment to other states.
Conservatives do not think the Laffer Curve is a line. The Laffer Curve has a sloped distribution like you demonstrate in the first two graphs.
It is simple to understand. If I have money to invest, I will seek the highest potential returns relative to risks/opportunities. If I can chose between a low tax state and a high tax state and my risks/opportunities are similar, I will more likely select the low tax state because it improves the probability that my returns will be higher. So, when taxes are increased, capital will flee and tax revenue will decline as a unit of GDP.
The trick is to find a balance of taxation levels relative to the choices that exist for capital investment.
The problem today is that California is high tax and high regulation (regulation is just another form of tax because of compliance costs) and it is preventing capital investment in state economic development. It is also chasing existing business from the state to other lower tax states. If we increase taxation to close deficit gaps from overspending, then we chase out more capital, economic development, wealth and the tax revenue it would all provide.
The equilibrium would be to be in the middle or lower part of the pack in terms of the full tax and regulatory burden per state assuming average efforts for attracting and facilitating economic development. California does have good weather and nice places to live… and that will always attract some business owners and can be leveraged. But I have a good friend that moved himself and his business from Santa Barbara to Incline Village, NV when his business took off because he would save hundreds of thousands of dollars doing so. All of that tax revenue left the state when he left. He says he would have preferred to stay living in Santa Barbara and vacation at Incline Village, but he saves a bundle doing the opposite. That is the Laffer Curve in action.
JB: [i]Because we are so far out of equilibrium and other states are eating our business-friendly lunch.[/i]
The expired taxes account for several billion in the deficit this year. That’s not chump change. If there were an example to test the Laffer Curve, this would be it.
What that’s worth to California education would itself make the difference between someone locating here or not (cut the education spending, people leave; fund education, people might give a second look).
[i]”What that’s worth to California education would itself make the difference between someone locating here or not (cut the education spending, people leave; fund education, people might give a second look).”[/i]
I agree, but not so much the wealthy and wealth creator. That person(s) does not so much care about education funding except as a contributor to a qualified workforce. That is the main reason to have a strong education system… increase the value of the workforce. However, as we see today, without jobs it doesn’t make much difference how good the education system is. If we tax the crap out of wealth and wealth creation (like we are doing today) to fund education, we are in effect funding the process while defunding the final goal. Ask Saudi youth what it is like to have a great, well-funded, education and no jobs. Looking for something to do you might have to start flying jets into buildings.
[i]”The expired taxes account for several billion in the deficit this year.”[/i]
So, even so, where are we in terms of total tax burden per GDP per state? If we are out of equilibrium, then raising taxes to fill the gap is still a bad idea.
I sorry, but I wanted to pass on my thoughts and prayers to a great family that lost a wonderful mother and wife today. Nancy Hatamiya passed away. I didn’t know her as well as a coworker who is very close with the family, and my wife who got to know Nancy because her son Jon, (a trombone-playing sensation that we will all be hearing more from in the future), and my son Eric, played in Davis High Jazz band together. I am thinking about Nancy and all she did for the high school band program. It is people like her that we need to thank for the excellent Davis music program. It brings to mind the direction we are going with respect to education funding… it may take more and more heroes like Nancy to keep our schools program strong.
Someone has some very big shoes to fill and needs to get started right away.
Do millionaires really move when their taxes go up?
[url]https://iriss.stanford.edu/millionaire_tax[/url]
Quote: “The study, which is published in the June 2011 National Tax Journal, examines the migration response to New Jersey’s tax, which raised its income tax rate on top earners by 2.6 percentage points to 8.97 percent, one of the highest tax rates in the country. Drawing on unique state tax micro-data, Professor Young, along with co-investigator Charles Varner of Princeton University, estimated the migration response of millionaires to the rate increase. [b]Their results showed that overall, top earners didn’t move. Only one relatively small subset of the millionaire population – those who are retired and living on investments rather than employment – showed a small migration response.[/b] On balance, the tax raises roughly $1 billion per year in new revenue.”
From the author: “The state’s income tax data shows that only 19 percent of people in the millionaire tax bracket own businesses of any size (small, medium, or large). Moreover, business ownership ties people to their state and makes them less likely to move. We show this in the millionaire data set: those who own businesses are less likely to migrate.”
“Wealth cannot be taxed until it is earned”
Which is a nice sentiment except that much wealth is not “earned”. Much is inherited, or transferred, or extracted by paying non living wages
( such as farm laborers) to people who have no other alternatives. Much of the wealth creation you are so fond of quoting is anything but creation.
JB: [i]Nancy Hatamiya passed away.[/i]
I’m very sorry to hear that. I did not know her, but I saw her son play once; very impressive. May she live on in the lives she touched.
Hatamiya catches Marsalis’ attention ([url]http://www.davisenterprise.com/entertainment/hatamiya-catches-marsalis-attention/[/url])
[i]”Which is a nice sentiment except that much wealth is not “earned”. Much is inherited, or transferred, or extracted by paying non living wages ( such as farm laborers) to people who have no other alternatives. Much of the wealth creation you are so fond of quoting is anything but creation.”[/i]
medwoman, not really. If the producer does not start and grow a business that pays “non living” wages as you call them, there are zero wages. If starting and growing a business was so easy to warrant your level of dismissal, then those non-living wage earners should be able to do it themselves. Some can and do, especially in the good ol’ USA, but then they become the targets of scorn and vitriol from the left for paying a non-living wage.
Even inherited wealth was earned once. It doesn’t just materialize out of thin air. It is not taken from the non-living wage earner because he didn’t have it to begin with.
Look at all the countries with significant natural resources but with very poor people. China was a good example until industrialized business exploded. This raised the overall income per capita and created a large middle class. But… now we have greater income inequity in China. Would you have China scrap their growing industrialized economy just so there is not so much income inequity? That is what the left is doing to the US economy.
I know your ideological worldview is more sympathetic to labor, but labor-versus-business is not a chicken-versus-egg argument… it is a cart-versus-horse argument. And without a horse, the cart stands still and does nothing but rots.
I don’t know why this is such a difficult concept for some to grasp. History provides copious evidence that tipping the hat too far to labor is devistating for a country. Argentina is a recent example.
There is an argument to be made that it takes infrastructure, safety and law enforcement for business to start, grow and be successful. Government provides these and other services that add value to the private economy… the one that keeps people working and funds the services. These services should be valued and protected. It should be a closed-loop, cooperative and symbiotic system between these government services and private business. Instead it has become a politically-polarized system. The left that controls government has singled out private business as the enemy. The right has singled out government as the enemy. Since one cannot survive without the other, both are dying as both are attacked.
But here is the thing… government has power over private business. And government has grown even stronger through the union-political connection. Business cannot and never could win a fight against a tyranny of the majority alone, but especially not one controlling government. Previous political leaders knew this and always kept the labor dogs enough at bay so they don’t destroy their own kennel. However, the in-over-his-head chief, Obama, has let the dogs loose… and Brown does not have enough treats left to get them to behave in this state.
Just to clarify: the district has already prepared for a mid-year cut of $3.5 million in the event that the November tax initiative fails. That was already set based on the original projected ~$9 billion deficit from January. For the moment, it doesn’t appear that the new $16 billion revised deficit will add any more cuts to the district, based on the governor’s plan. Details are still coming out, however.
Wow, it’s amazing how many things Obama and labor unions are responsible for, in the world view of conservatives.
I know the feeling Don. Bush, CEOs and conservative’s principles of free market capitalism destroyed America in the world view of liberals.
The question is who really did and who really is?
There cannot be two right answers. One world view has to be more wrong than the other.
[quote]surprisingly bad news in the May revise[/quote]
I’m a bit late to this one. I think its important to note a few things:
1. No one I know was surprised by the May revise. Brown’s forecast was overly optimistic. While the economy has bot grown rapidly it also has not slipped into a recession–it has performed as expected. But the revenue forecast was overly optimistic. Arnie played the same game. Jerry promised not to–guess what he is.
2. IMHO Brown is threatening to cut education in order to get voters to agree to a tax hike. Voters don’t support anything else.
THis is just sad–the continuation of a decline in education that started in 1978.
Jeff
I might be more inclined to agree with you if I shared your limited definition of the word “wealth”. As you use it ” wealth”applies only to material possession such as money, land, natural resources. I tend to use “wealth” more broadly to mean “that which is of value” which would as you implied include an individual’s time and labor. In your view, these are discounted such that if the “wealth” say in the form of increased property is gained by for instance slave labor in the past, or serf labor, or by stealing someone else’s land because the individual had more fire power, your response in the past has been ” there will always be winners and losers”. I am not demonizing the wealthy. This is an accurate depiction of how much of our wealthy has been created and made available to be ” handed down”.
Where you go wrong in your idea of my world view is that you cannot see past a competitive view of human nature and so believe that this must be true for me also. You frame it as though I believe that business must be “bad”. But that is not how I see the world. In the world as you describe it, competition is what drives success . I agree that it is one potential driver of success.
Where we differ is that I believe that collaboration and working to maximize the good of all, not just the “wealth” off the individual could be an even more powerful driver if we only were to make that choice. And I believe that the choice is our to make.
Saying that historically establishing a more egalitarian society has never been done is both erroneous and unnecessarily limiting. Numerous egalitarian societies have existed and thrived, just on a small scale. All of which I am aware such as the Amish, the Tohono Otam of Arizona and some other Native American groups are based, not on the concept of dominion over the earth and power over others, but rather on living plainly and in natural balance with the earth . Clearly, “human nature” does not preclude the existence of such societies. So why the claim that this cannot be done? personally, I believe it is largely due to a lack of imagination. We have been taught that our way of doing things is the ” right” or “best” way, and we believe it even when faced with overwhelming evidence that it is not true in many areas.
[i]There cannot be two right answers. One world view has to be more wrong than the other.[/i]
I wonder what you think moderates believe.
Medwoman:
Thanks for the thoughtful post while I drank my coffee this morning. It helped wake up my brain.
I get where you are coming from, but there are a few points I must make.
First, on the subject of competition versus collaboration… the former is inclusive of the other as needed. It all comes down the goals. If the goals are shared, then the greatest opportunity to reach the goal is through collaboration (the whole is greater than the sum of its parts). Great business competitors are generally the people most skilled at collaboration. They are also the most skilled and building shared goals as a bridge to collaborative achievement.
On the subject of wealth… I agree that there are other types of wealth. Wealth is simply the possession of something valued. The level of value can be assessed individually, or by markets. For example, having great health is something most of us individually value. We can even barter it by seeking lower insurance rates. We can improve our chances of being healthy by eating right and exercising. A worker has a wealth of skills. He can grow his wealth by increasing his skills. He can barter his applied skills for higher wages.
However, on this topic we were talking about state budget shortfalls and wealth that can be taxed. We don’t tax these non-monetary types of wealth. Unless you are advocating we start hitting up the people with better health, a greater education, a higher IQ, acquired job skills… then this more obscure type of wealth does not fit into this topic, IMO.
Don:
If you are talking about moderates that get out and vote, we are still a conservative country. Moderates tend to be be center-right. That is why states routinely reject the change in the definition in marriage.
But, we are talking about fiscal issues here. I think moderates are even more right-leaning on fiscal issues. They know for instance that government is spending way too much. The challenge for them is that they don’t want to give up the benefits coming to them… they only want the other guy to get hit with reductions. That is the secret to advancing socialism. Step by step the left-leaning power gives more things to voters to create codependencies. In this way the liberal politician is the drug pimp, and the citizen is the junkie. Moderates don’t like it, but they cannot seem to give up their drug habit.
No, actually, Jeff, those of us who consider ourselves moderate on fiscal issues believe that ideologues on the left and right are the problem, particularly those who value competition over cooperation.
Pete Wilson was a moderate on fiscal issues. Faced with a budget shortfall, he and Willie Brown crafted a compromise of about equal parts cuts and taxes. That is what Jerry Brown is trying to do.
You really need to get over your fixation on socialism. We don’t have anything resembling socialism in this country.
Don, there is no more room to craft a comprimise. You can’t just keep raising tax rates without hitting a ceiling at some point. We are at the ceiling. We are actually over the ceiling. We need to reduce tax rates and cut spending. That is the only sustainable compromise.
One disregarded factor of the tax rate ceiling is the tax and regulatory burdens from competing states. So, even if tax rates are lower than some historical high, the difference of greater competition for taxable wealth and wealth creation has lowered the ceiling. Remember, the Laffer Curve is about the flow of capital. Higher tax rates cause capital outflows; lower tax rates cause capital inflows. Capital inflows can be taxed. Capital outflows cannot be taxed.
[i]Don, there is no more room to craft a comprimise.[/i]
I rest my case.
We aren’t at the ceiling or over it. We need to raise tax rates somewhat, and cut spending. That is what the governor is proposing, over the objections of his own party and, of course, with unanimous opposition from the Republicans. That is what I support and intend to vote for.
What you are describing ([i]We need to reduce tax rates and cut spending[/i]) is not a “compromise,” it is the non-negotiable position of California Republicans. That is why the governor, who is proposing a moderate compromise, has to go to the voters. Because California Republicans refuse to compromise.
Governance used to be the art of finding solutions where each party gives some and accepts less than they wanted. Now it seems to be an all-or-nothing competition, at least as far as California Republicans — and increasingly, national Republicans — are concerned. Having adopted that approach has gotten California Republicans into a seemingly permanent minority status. Odd that national Republicans would emulate the approach. It seems the Republican party has become a protest party, not a governance party.
I wonder if you know what the actual definition of the word “compromise” is.
Don Shor: [i]I wonder if you know what the actual definition of the word “compromise” is.[/i]
Jimmy Kimmel gave a good example of this recently:
[quote]Jimmy Kimmel Hosts The 2012 White House Correspondents’ Dinner ([url]http://lybio.net/jimmy-kimmel-hosts-the-2012-white-house-correspondents-dinner/comedy/[/url])
….
Jimmy Kimmel: I wanna thank the Washington Hilton for hosting us tonight. You know, President Obama wanted to move the dinner to the Kennedy Centre this year but the Republicans wanted to keep it here at the Hilton so they compromised so, here we are at the Hilton.[/quote]
[quote]I’m a bit late to this one. I think its important to note a few things:
1. No one I know was surprised by the May revise. Brown’s forecast was overly optimistic. While the economy has bot grown rapidly it also has not slipped into a recession–it has performed as expected. But the revenue forecast was overly optimistic. Arnie played the same game. Jerry promised not to–guess what he is.
2. IMHO Brown is threatening to cut education in order to get voters to agree to a tax hike. Voters don’t support anything else.
THis is just sad–the continuation of a decline in education that started in 1978.[/quote]
Excellent observations…
Don, the compromise is to allow incremental cuts instead of forcing the mad-spending Democrats that have controlled state government for the last two decades to have to accept a turning back of the clock back to when he had a sustainable, balanced budget.
We have been taking more from the economy…
[img]http://www.cscdc.org/miscjeff/CATaxPerGDP.jpg[/img]
In terms of both state and local taxes, in 2012 California will take in 18.81% of GDP. (and spend 19.85% of GDP).
In contrast, Texas currently takes in 13.4% of GDP.
In terms of spending per capita, California’s is $11,001 and Texas’s is $8,292. California spends more per capita than all except five other states: New Jersey, Massachusetts, New Yuk, Wyoming (surprising) and Alaska.
So California is already sucking substantially more dollars from the state economy per GDP, and spending substantially more per capita than a state that competes with us to attract business away.
That is my point; you have lost negotiation leverage for getting more from the GDP and the GOP. The only compromise left is how much and how fast to cut to get back to reasonable and sustainable.
Brown has proposed cuts. Compromise is a combination of tax increases and spending cuts.
You believe taxation should always be directly proportional to GDP? Note that dozens of states have budget deficits. Including Texas.
[i]”The only compromise left is how much and how fast to cut to get back to reasonable and sustainable.”
[/i]
That attitude is the problem.
Sixth highest spending per capita and 17th highest spending per GDP. Both much higher than the main states that compete with us for attacking business that provide jobs that allow people to earn income that can be taxed. Yes, looking at this metrics it is clear that taxes need to come down and spending needs to be slashed.
There is room for compromise on how much we cut and how fast we cut.
You should thank the state GOP Don, they are doing what should have been done years ago. At some point the severely obese kid must be put on a regimen of diet and exercise. The compromise you are advocating is analogous to allowing him an extra candy bar every day if he agrees to some exercise.
Here is how state GOP planned to balance the budget in 2011: [url]http://articles.latimes.com/2011/may/13/local/la-me-budget-republicans-20110513[/url]
[i]”The proposal would wipe away the biggest chunk of California’s estimated $15.4-billion shortfall by projecting $5 billion more in tax receipts than Brown assumed in January, when he released his initial plan. Tax collections have outpaced forecasts by roughly $2.5 billion in the last four months, and Republicans said they expect the trend to continue.”[/i]
Yeah, I really should thank the state GOP.
This all comes down to a fight over the public sector retaining their rich pay and benefits, or successful private sector people getting socked with more taxes in a state that already socks them with high taxes. Schools and programs for the needy are emotive marketing proxies to sway voters away from recognizing the real fight.
That’s fine Don, you support retaining more big fat pay and pensions and bloated government bureauracracies; and I want them significantly cut to help balance the budget. I support letting successful people keep more of the wealth they earn to attract more business and capital to the state to provide more jobs so state residents can take better care of themselves and broaden our tax base; and you want to increase their taxes to balance the budget.
I understand the difference, I just think you are terribly wrong.
Speaking of taxing the rich… you know it is bad news for Obama when the SNL cast starts turning on him…
[url]http://dailycaller.com/2012/05/01/lovitz-explains-his-anti-obama-taxation-rant-to-dr-drew-video/[/url]
So, you’re just going to gloss over the state GOP budget? How do you think the May revise would be looking if they’d had their budget in place?
[i]That’s fine Don, you support retaining more big fat pay and pensions and bloated government bureauracracies; [/i]
You know that California Republicans have been going on and on about “bloated government bureaucracies” since Reagan was governor? And in that time there have been more Republican governors than Democratic? Somehow Reagan, Deukmejian, Wilson, and Schwarzenegger never managed to pare down those bureaucracies.
“Big fat pay and pensions and bloated government bureaucracies” are the tired rhetoric of conservatives, who have never taken them on even when in office.
Look at the state budget. Tell me what you’d cut that Brown hasn’t cut.
In the past, you’ve stated that you would drastically cut funding for the public schools in order to spark a popular revolt and force vouchers and charter schools. It is clear that you would drastically curtail funds for mental health programs and other social welfare programs, even more than Brown has already proposed. Ask your county supervisor — heck, ask the conservative on the Board, Matt Rexroad — how it works when the state cuts funding for those programs.
I have different priorities than you do. And it is worth noting that the governor’s proposal for the ballot spreads the tax increase across the whole population since it includes sales tax increases as well.
[i]I support letting successful people keep more of the wealth they earn to attract more business and capital to the state[/i]
I have no problem with tax incentives for job creation. Most wealthy people aren’t job creators.
Jeff, so I take it you are against the governor’s tax proposal? How do you square that with your stated opposition to Measure C?
You said you opposed Measure C because it was money that was only helping Davis schools, and you felt that it was unfair that other districts would not or could not pass a local school parcel tax.
Seems like the governor’s proposal is something that would provide the fairness that you seek in funding K-12 schools throughout the state.
Jeff Boone
“I support letting successful people keep more of the wealth they earn to attract more business and capital to the state to provide more jobs so state residents can take better care of themselves and broaden our tax base; and you want to increase their taxes to balance the budget. “
And what about the wealthy who are not job creators? They just get to keep their wealth regardless because they somehow managed to get lucky or through unethical if not illegal means ? Are they just amongst the “winners” as you like to say ? You have frequently made the observation that “life is not fair”. I completely agree with this assessment. However, what it ignores is that people can choose to be more “fair”. This is a choice that is within our grasp. We simply choose as a society not to do so. If as you have also proposed, the needs of the truly needy should be met by charity and generosity, then why is that not the case ? Would it not also broaden our tax base if the poor and almost poor had more money to spend by earning higher wages rather than the extremely wealthy perpetuating the extreme disparity by paying as little as possible to as few workers as possible ? And would we not ultimately broaden our tax base if we were to invest in our educational system now so as to train higher payed workers in the future ?
[i]Most wealthy people aren’t job creators.[/i]
Don, huh? Wealthy people spend and invest. What do you think they do with their money sit on big piles of it and thumb their nose at all the less wealthy people? Do you think poor people are job creators?
Of course wealthy people are job creators. Remember we are talking about those $250k-$500k people… do you now consider them wealthy like Obama and Brown? They are the job creators unless the government takes their wealth and uses it to create more PEU jobs… but then the government is tremendously less efficient on a per unit basis.
[i]”Seems like the governor’s proposal is something that would provide the fairness that you seek in funding K-12 schools throughout the state.”[/i]
wdf1, my issue is that our level of state spending is way past sustainable. The Brown plan would be a temporary solution to a permanent problem. We need to grow the state economy and broaden the tax base. Income tax is the largest part of our state inflows… but it is down because not enough people are working. Also, it does not make much difference to throw money into an education system when there are not enough jobs for students graduating.
It is a two-step process…
Step-1 – Grow the economy while cutting spending.
Step-2 – Realize the increased tax revenue from a larger economy with more working wage earners paying taxes.
If 100% of the revenue from the proposed tax increase went to paying down our state debt and we did it while also making spending cuts with a goal to pay of our debt and then lower tax rates, I could get behind that plan. However, I cannot support any tax increase to make up spending gaps. It not only does not solve our fiscal problems, it exacerbates them.
Think about it this way… there are business plans sitting on a table. Some are for business expansion, some are new businesses. They have to be analyzed for financial feasibility and some will go in the “yes” pile and some will go in the “no” pile. Now tax rates go up. As a result, a larger percentage of those plans will not pencil out and end up in the “no” pile. Also, for those that penciled out, the cost of capital just went up and it causes some of them to go to the “no” pile. Now those in the now pile will look at other states with lower tax and less expensive capital. Remember, taxes are just expenses to business and people that invest in business.
Everybody spends, creating jobs indirectly in the same sense that “wealthy” people do. Many people invest as well, largely through their retirement plans. “Job creators” to me means people who actually hire people, like you and I do. We hire people when there is demand. We expand our businesses when there is demand and opportunity. Tax rates have practically nothing to do with it. Regulatory environment might have some impact, highly variable across different sectors. You could raise or lower tax rates on the wealthiest taxpayers by 10% or 20% or more and it would have negligible effect on job creation.
Cutting taxes will not grow the economy. Raising taxes will not stifle the economy. The macro factors that drive economic growth are way bigger than the impact of state tax rates. I think you vastly overstate the effect of capital flight from California. When you increase taxes, Laffer tells us that you won’t get 100% of what you expected. It might be 70 – 80%. But you still increase revenues to the state by raising taxes. So your Step 1 is not affected by tax policy.
[i]there are business plans sitting on a table. Some are for business expansion, some are new businesses.[/i]
If the demand is there, they will happen. Find me one millionaire who has said “I won’t expand my business because I only get to take home 90% of the income I was expecting from the net profits.”
Here’s the governor’s proposal that we will be voting on:
“Part of the Governor’s plan includes a quarter cent sales tax increase for four years. Governor Brown also plans to create a graduated surcharge on incomes of more than $250,000 for seven years.
High earners making over $250,000 would be taxed an extra one percent, over $300,000 would be taxed an extra two percent, and individuals making more than $500,000 would be taxed an extra three percent.”
[url]http://www.atvn.org/news/2012/03/governor-browns-tax-hike-finds-broad-support-says-new-poll[/url]
Don: I think you and I need to meet and I will show you how this works. People decide what to do taking risks based on how their limited time and capital will perform. Taxes are expenses. On the P&L we have gross income before taxes, and then there is net income. Net income is the return or earnings. Some of the returns might be retained for business expansion, but if it is paid in taxes there will be less or no retained earnings for expansion.
Taxes are some of the highest expenses for business. Tax avoidance is a big part of strategic planning since it helps pay the bills and allows more business ventures to pencil out.
Also, without adequate returns, why would business owners give up more of their time to expand?
I think you are a bit naïve or uninformed or prone to wishful thinking on some of this. I deal with small business finance for a living, and can tell you that the California economy is still bleak. There are some good businesses that are holding on to their expansion plans to see what will happen on taxation. If taxes go higher, many of them will forgo expansion. If taxes go higher some businesses barely holding on will fold. I have several loans in my portfolio where the owner is using the income from one business to barely make the payments on his other business. If his taxes go up, he will likely fold the problem business and more people will lose their jobs.
You can’t have it both ways… either you take money from private-sector people and damage them, or you reduce the payments to public-sector people and damage them. The latter makes more sense since goverment has grown too large and the pay and benefits of the public sector has grown way out of sync with the private sector.
One last point… if you increase taxes, business will just pass the cost increases to consumers… who will also be paying higher sales taxes… who will then purchase less… that will then cause more business to fail and people to lose their jobs.
You want to do all this why? So public sector employees continue to make six figures and retire at 55 with 90 percent of the pay and all their healthcare covered for the rest of their life?
Note that this isn’t just about another 1%, 2% or 3%… this is increasing CA marginal tax rates so that the wealthy are paying the highest income taxes in the country. One thing I know about wealthy people, or people that are working to become wealthy. They like trends and gravitate toward what delivers them appreciation. They will leave the state in droves, and it will become a trendy thing to flip off California and Brown on their way out the door. That is already happening. Raise taxes and see what happens… I double-dog dare ya!
Believe it or not, Jeff, I actually know how business accounting works.
[i]”Taxes are some of the highest expenses for business.”
[/i]Not the taxes we are talking about here. Payroll taxes, maybe. Any business for which the tax on their net income is a major expense needs better accountants. And we aren’t talking about tax on business net profits. We are talking about personal income tax. The people whose businesses might be affected by that are the professionals who function as corporations (doctors, lawyers, etc.).
[i] On the P&L we have gross income before taxes, and then there is net income
[/i]
For those who are following along; in retail:
Gross sales – Cost of Goods Sold = Gross Income.
Gross Income – Expenses = Net Income. Expenses are deductible. Businesses are taxed on their net income.
Expenses include rent/lease/mortgage, insurance, payroll, payroll taxes, utilities, and lots of misc. stuff. But the ones I just listed are usually the largest. Tax on net income is way down on the list. I don’t know what Jeff is talking about when he says “taxes are some of the highest expenses for a business.”
[i]They will leave the state in droves, and it will become a trendy thing to flip off California and Brown on their way out the door. That is already happening. Raise taxes and see what happens… I double-dog dare ya![/i]
See my link on this topic above. No they won’t. A few will. You won’t get 100% of what you expected. You won’t get zero, either.
To put it simply, Jeff, I think you are vastly overstating the impact of a 1 – 3% increase in the personal income tax rate for those with incomes over $250K, and are underestimating the continuing impact of state budget cuts on those who make a lot less.
If we cut the budget, community college fees will go up again. State college costs will go up. Payments to counties to reimburse costs for mental health programs will go down. Many, many poor and low-income people will be adversely affected. Just ask your county supervisors. State funds to school districts will be cut. I’m not thrilled about the state of negotiations (as I understand them) between DJUSD and DTA, but cutting funds to districts cuts programs, cuts services, affects the infrastructure of schools.
JB: [i]wdf1, my issue is that our level of state spending is way past sustainable.[/i]
Tax rates were higher last year. Do you feel freer this year now that you’re paying less?
[i]The Brown plan would be a temporary solution to a permanent problem.[/i]
The only thing that is certain is uncertainty. You are looking for perfect, again. Funding education adequately is better than bringing on the flood. Your position is very easy for you to take, because your kids are mostly insulated from this issue, having recently graduated.
[i]Also, it does not make much difference to throw money into an education system when there are not enough jobs for students graduating. [/i]
2012 college grads enter improving job market ([url]http://hosted.ap.org/dynamic/stories/U/US_JOBS_CLASS_OF_2012_?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT[/url])
Denying current students access to adequate education does not improve the situation.
Don: [i]”I don’t know what Jeff is talking about when he says “taxes are some of the highest expenses for a business.”[/i]
Here is an incomplete list of taxes paid by businesses:
-Property taxes
-Payroll taxes
-Regulatory compliance expenses (taxes)
-Energy taxes
-Sale taxes
These are all expenses, yes that can be deducted but the value of the deduction is the marginal tax rate paid on the following tax… and the following two taxes if the business is a sol prop:
-Corporate taxes
-Income taxes
Add these all up and taxes are one of the largest expense categories for most businesses. Taxes are also one of the largest expense items for individuals too.
What you are failing to understand, is that increases in income tax impacts the cash flow of most small businesses as it impacts owner’s draws.
I get the point of the “tax on wealthy” idea. A family making $250-$500k is a ripe target for those that can use class envy to help their cause. But let’s consider that this $250-$500k family also has expenses. They have a mortgage or two. They have car payments. They actually pay for the cost of their children’s education (since they are too “rich” for all the free tuition money the government doles out) out of their own pockets. They invest… in the businesses they own, or in other instruments that provide capital that funds other business expansion. They are also hit with AMT, so they lose a large percent of these tax expense deductions you like to point out.
Even with all these tax expense, can they afford to pay another percent or two of income tax, and another 1/2 percent of sales tax? Probably, but it will have consequences. They will spend less, they will invest less, and some will have reached a decision point that their net returns are too low to justify taking additional risks for business expansion. They will be more motivated to double-down on tax avoidance strategies. Some will move out of the state.
It is not just the incremental tax increase that should be considered, it is the total tax liability versus the alternative for tax avoidance. In this, the MAIN problem California has in respect to the rate of taxation is competition from other states.
Don, I think you are relying too much on a statist mindset… that people are going to just stay where they are and put up with so much fiscal abuse. I do a lot of traveling around the state for business, and there are a lot of other real nice places to live. The primary consideration for where a business is located is often where the owners want to live. California is a brand, and all brands are subject to either positive or negative movement. California’s brand is already suffering… increase taxes and it will take another hit.
Looking at this, if the Brown initiative passes, I think California will become the highest-taxed state in the country. It is already the least business-friendly. That can’t be a good thing. It will have immediate and long-term consequences that will only increase our fiscal problems.
[i]-Property taxes
-Payroll taxes
-Regulatory compliance expenses (taxes)
-Energy taxes
-Sale taxes
-Corporate taxes
-[b]Income taxes [/b][/i]
I have highlighted the one that if affected by the governor’s proposal.
[i]increases in income tax impacts the cash flow of most small businesses as it impacts owner’s draws.[/i]
NOT “most small businesses.” This is one of the great myths of conservatives. Do you really think “most small businesses” have take-home income over $250,000 a year? The governor’s income tax proposal has ZERO effect on anyone whose taxable income is less than $250,000.
As to whether if affects the owner’s draw, that depends on whether they are a corporation or a proprietorship. And we are talking about a 1 – 3% increase.
[i]They have a mortgage or two. They have car payments. They actually pay for the cost of their children’s education…[/i]
What do you think the income and expense levels are for the families that budget cuts will affect most?
“the average S corp generated about $100,000 income on about $1.5 million in sales in the last year before the Great Recession.”
“In 2008, the average nonfarm sole proprietorship had revenues of only $58,256 and net income of only $11,696.”
Only SubChapterS corporations have income that averages $250K or more.
[img]http://smallbiztrends.com/wp-content/uploads/2010/11/scorp-651.jpg[/img]
The reality is that a relatively small number of individuals in a relatively small number of industries will be affected by the income tax change.
[i]”The reality is that a relatively small number of individuals in a relatively small number of industries will be affected by the income tax change.”[/i]
Don, I have a lot of work to do today so I will not be able to respond in detail to your detailed response. But I have to respond to this comment above because frankly it is weird. If this change is only going to affect so few people and businesses, then it is not going to generate much increases tax revenue. Why even do it then? The fact is that it IS GOING TO AFFECT A LOT OF PEOPLE… and those affects are going to trickle down to affect the economy in general.
You really don’t appear to have enough of the picture for what comprises the business world that is the source of what keeps the economy going to feed the government beast. You are making a case that somehow these higher-income individuals and families are impervious to the next increase to their already high tax load. You apparently have bought the left rhetoric about the rich not paying taxes (a huge lie because it singles out passive income from investments and not earned income from things like real businesses that pay a cash bonus to owners based on profitability). Look at it this way, when a lawyer, doctor or other private practice professional goes to collect her annual bonus-draw from her business… regardless it is an S-corp, an LLC or LLP… whatever… she will see another 1-3% disappear and head to government. She will then spend less, she will donate less, she will feel less happy about working 10-hour days 6 days a week and will decide to reduce her effort based on a time-value-money consideration. She will play the stock market rather than invest in expanding her practice.
These are how real people respond to government increasing their taxes. You can Google information bits all day to back your desire to not have to admit it, but you will still be wrong about it.
[i]You can Google information bits all day to back your desire to not have to admit it, but you will still be wrong about it.[/i]
An amazing way of dismissing facts, Jeff. You have stated things that are factually incorrect. I provided you with links to prove you were wrong.
Your deep concern for the wealthy is remarkable. Try having some for the people who are being affected by the state budget cuts.
[i]”You apparently have bought the left rhetoric about the rich not paying taxes” [/i]
No I haven’t. I just believe that we all can pay a little more in sales tax, and the wealthy can pay a little more in income tax.
Don and Jeff:
There is a fundamental difference regarding the role of government in our lives. It appears that Don believes that the role of government is to take care of its people. I know Jeff and, risking putting words into his mouth, he believes that the role of government is to provide a framework for people to allow them the opportunity to take care of themselves. Liberals tend to misunderstand the motivation behind the conservative thinking that leads us to say NO to higher taxes and the propensity to throw someone else’s hard earned money at every citizen’s struggle. They cast it off as due to a lack of care, selfishness, stupidity, being brainwashed by the so called wealthy, being wealthy and self-serving or some other less than respectful understanding of what motivates the thinking that would cause us to say “NO” to more tax, spending and more regulation.
The truth is that most conservative’s that I know care very deeply about limiting poverty and those struggling. They are motivated by concern for group survival and group sustainability as well as for the struggle of individuals. Conservatives believe that the best way to limit poverty is to give respect to the sustainability of the group as well as the individual. Since man began cooperating in groups and dividing labor as a survival strategy, he also developed moral guidelines and ethics to protect against the freeloader that would undermine the long term survival of the group and its way of life. Conservatives believe that liberals have the luxury of focusing on individuals struggles only because of the protection of the group. Conservatives give respect to values such as loyalty, sanctity, self responsibility because they are important survival elements for the people living in concert in groups. Conservatives tend to accept that individual struggle is not only a part of life but essential and important for individual development and for human survival. Conservative’s do not believe that shelter, food, transportation and electronics for access to information are basic human rights. Conservatives do not tend to believe that wealth is just a resource that existed in the world for “equal distribution” but believe that wealth is created by risk takers through risky investment and application of effort and ingenuity. Conservatives believe that the structural foundation of the economy in a free society is incentive for investment and risk taking that creates enterprise and jobs.
The truth is that there is an optimum tax rate that will provide the optimum tax revenue. We do not know exactly where that is. Before Reagan took office when the top marginal federal income tax rate was 70%, the top 10% of earners paid less than 50% of the total taxes collected. After Reagan when the top federal marginal income tax rate was reduced to roughly 32%, the top 10% of tax payers paid greater than 70% of the total taxes collected and the federal tax revenues grew. Tax revenue grew when tax rates were decreased. Don please take note of this. The goal is higher tax revenue. The formula for tax revenue is: tax rates times income taxed. Laffer was right, higher rates can impact the incentive for investment and actually reduce income by such a magnitude that the tax revenue will actually decline. We are playing a dangerous game when the economy is struggling. It is as if we jumped off a “debt” cliff that takes years to hit bottom if we are not flying and liberals are flapping their wings and saying, “see we have not hit bottom.” It is a high cliff and if we do hit bottom, the good news is we may not feel anything.
Yes, after the Reagan tax cuts, the divide between the average earner and the top 1% got bigger. But at the same time the standard of living for the average American got bigger and the economy thrived (much to the dismay of the naysayers that now, decades later, want to blame the current crisis on those reduced taxes and reduced regulation).
Higher taxes and squeezing a little bit more and a little bit more out of the so called “wealthy” is a false promise. Look at the numbers: assuming that the top 1% would continue to earn the same with such a tax increase, you could tax the top 1% at 100% and still not close the gap between revenue and spending. The premise that our borders need to be open and that the government’s role is to take care of all who struggle is a formula for disaster and if you look, the only class of people that can bail us out are the middle class and the tens of millions of American’s who currently pay not taxes. We have to cut spending and the current administrations in California and Washington are making false promises to people to pander for votes.
Good day.
Don, I sent my bother the link and asked him to chime in. As usuall he has done a much better job articulating the points… which is why I asked him to chime in. You made good points and I wanted his take on them.
I don’t want to be dismissive of your arguments, but this may be one we have to agree to disagree on. Unfortunately though, because I think it is one of the most important root topics facing us today. As Brian points out, it incorporates the current ideological differences that are key. Our worldviews differ and I think we will never agree until and unless one of us changes our worldview. I doubt you will. I know I will not.
[i]“It appears that Don believes that the role of government is to take care of its people.”[/i]
I think the government provides a safety net to its citizens. Even Reagan agreed with that. It does seem, given what I’ve read of the Ryan budget, that conservatives no longer accept the premise of the safety net. But for many years there was a consensus across political parties that we provided for our elderly, ill, and those who could not care for themselves. Most differences were of degree: I supported the welfare reform passed under Bill Clinton with his support and that of the Republicans; liberal Democrats opposed it.
We also have generally agreed, as a society, that public secondary education at a reasonable cost is something we value. And that K-12 education should be of the best quality possible, and free. Perhaps you and conservatives disagree with that now.
[i]“I know Jeff and, risking putting words into his mouth, he believes that the role of government is to provide a framework for people to allow them the opportunity to take care of themselves.”[/i]
It isn’t an either/or proposition. Some people can’t take care of themselves. They may be mentally ill, or physically incapable, or simply lack the job skills. Some people have temporary setbacks. Much of the current debate at the state and national level has to do with how much help we provide, and for how long.
[i]“Conservative’s do not believe that shelter, food, transportation and electronics for access to information are basic human rights.”[/i]
Then I disagree with those conservatives, at least with respect to the first two (the others seem like useful resources for helping people find ways to care for themselves). I also believe access to primary and emergency health care is a basic human right. If they aren’t basic rights, are we do just let people without the means starve, go homeless, or die from lack of medical care? I don’t think we should. That becomes, in my view, a fitting role for government. On that, I expect we will continue to disagree. To accomplish that end, we tax people according to their ability to pay.
[i]“The truth is that there is an optimum tax rate that will provide the optimum tax revenue. We do not know exactly where that is.”[/i]
Reagan reduced it from 70% to 32%. The argument you and Jeff seem to be making is that we have already reached the optimum tax rate (the A on the chart above). Yet we ‘do not know exactly where’ that rate is.
So your primary point seems to be that wealthy people are paying too much tax, so people who rely on state funds for the safety net need to endure even more cuts. You are saying that the state’s investment climate will be so harmed by this 1 – 3% increase in personal income tax, that we should avoid that and instead cut spending on K-12 education and the myriad social programs that state taxes pay for.
[i]“The premise that our borders need to be open and that the government’s role is to take care of all who struggle is a formula for disaster…”[/i]
Our borders don’t need to be open, nor do they need to be closed. They need to be regulated. We do need a reliable supply of agricultural labor. I’d be perfectly happy to see a compromise immigration reform proposal again. That would include provisions for allowing long-term residents to achieve citizenship, perhaps developing a labor system. You know, the sort of thing Bush and McCain supported, once upon a time. But at the moment, the party that isn’t coming to the table on immigration reform is the Republican party.
What would be the result of cutting off the safety net? Privatizing Social Security and Medicare? Privatizing the university system? Cutting funding for public schools? For many people, that would be a disaster.
Don, conservatives beleive in a true safety net for those that absolutely cannot take care of themselves, but we draw the line much further from where a modern liberals draw the line. We also think that private charities can do a much better job providing many of the safety net services than does the government.
It is really liberal’s choice… they can go lean:
– Cut many programs like that ones paying scientists to study obscure bug in the desert. Cut the departments like the department of energy. We cannot afford these types of things.
– Cut the excessive spending on government employee wages and benefits. We cannot afford it.
– Privatize some government services to save money and improve service delivery. We cannot afford not to.
– Much more affectively police the borders and send back the millions of illegal immigrants that currently cost us many of billions. We cannot afford not to.
…and then use the savings to fund their loved social programs.
But failing to allow those types of cuts, they have do decide what else to cut. Conservatives are just giving liberals the option of what to cut. Cutting is the only viable option.
Brian Boone: [i]”Conservative’s do not believe that shelter, food, transportation and electronics for access to information are basic human rights.”[/i]
Don Shor: [i]”Then I disagree with those conservatives”[/i]
There we have it… the fundamental difference responsible for so much debt and division.
Then you go on to add free education, free wifi and free healthcare too.
Free
Free
Free
Free
So many people like free stuff.
Get enough of it and you lose incentives to strive for self-sufficiency.
That works for Democrats though, because once addicted to the free stuff and incapable of self-sufficiency, a person should become a reliable Democrat vote for life. The only problem is when the liberals run out of other-people’s money… which, by the way, has happened.
I believe that food and shelter are basic human rights. I believe free public education is not just a basic right, but essential to a functioning, literate, economically viable society. I believe nobody should be bankrupted by medical misfortune. I am open to pragmatic ways of providing those things efficiently and effectively, and agree government can be cumbersome. But private charities are least able to provide them when the economy is bad, which is when they are needed most. And private charities are also not even in their distribution of their resources.
I am willing to pay taxes to provide those things. Fortunately, I think a majority of Americans, and a majority of Californians, are also willing to pay taxes for those things.
JB: [i]Conservatives are just giving liberals the option of what to cut.[/i]
Like Don, I would have liked the opportunity to vote on whether to extend taxes last November. Republicans didn’t want to give California voters the opportunity to decide that. Seems patronizing to me.
I would be happy to be given the opportunity to decide this November.
JB: [i]Then you go on to add free education,…[/i]
You and your family benefited from a public K-12 education, to some reasonable success. May others also get the chance.
Here’s a moment when it seemed the conservative “force” was weak within you, Jedi Jeff:
[quote]Jeff Boone on Measure C ([url]https://davisvanguard.org/index.php?option=com_content&view=article&id=5150:commentary-opposition-to-the-measure-c-has-let-us-down&catid=69:elections&Itemid=121[/url]):
So, what you are saying that we should take care of our own because it is easier to do this instead of joining together to demand a state-wide change in spending priorities for competing interests. Those parents and kids in less affluent districts just have to suffer their own fate for failing to approve supplemental taxes. I’m sorry, but I cannot stomach that approach. As you know, I am all about self-determination and individual competition when it comes to able-bodied adults and economic prosperity. Where my egalitarian senses kick in is with school-age children. Every single child should have the same access to education opportunities.[/quote] Children are not going to stop growing up for a moment while you, I or others try to figure out the perfect approach or wait for the economy to grow enough revenue. Our economy was doing fine before the taxes expired; it will do fine if they are reinstated. But I’m certain that our education system will suffer with further cuts.
JB: [i]Get enough of it and you lose incentives to strive for self-sufficiency.[/i]
Like California resident, Republican actor, Craig T. Nelson ([url]http://www.youtube.com/watch?v=yTwpBLzxe4U[/url])?: “We are a capitalistic society. I go into business. I don’t make it, I go bankrupt. They’re not going to bail me out. [b]I’ve been on food stamps and welfare. Anybody bail me out? No.[/b]”
To his credit, he has supported the funding of public education as a priority. I guess that fact would actually makes him a RINO?
wdf1,
Last point first… so your point is that Craig T. Nelson is a conservative that was on food stamps and welfare so he is a hypocrite?
First, I didn’t know he was a conservative. Most Hollywood actors are liberal. Those that are conservative generally keep it to themselves so they are not discriminated against in their industry (there are a few exceptions, but far less than the number of mouthy liberal actors and entertainers). They also have greater sensibility to not voice their political opinions because of their potential potential influence to a doting public. However, in any case, I don’t trust too many actors/entertainers to have any common sense when it comes to politics. Most of them live in a world so far removed from the normal lives of ordinary humans, they have a skewed perspective. Also, they are artists and their brain wiring is that of an artist… and artists do not run the world for a good reason. They make the world a better place as long as they focus on their art and stay out of politics.
Second, I don’t have too much a problem with welfare and food stamps for a temporary help for a person temporarily down on his/her luck and able and willing to get back on his/her feet. What I object to is welfare and food stamps being a way of life… multiple generations of families “requiring” them. I also object to a system that encourages people to not work so they can get their free benefits. It is destructive altruism.
On your first point… I can read your difficulty resolving your perception of me being that mean old conservative dude and writing things that demonstrate I have a heart for children’s education.
The thing is… Brown’s tax increase plan only ensures we continue the status quo for K-12 education. There is no reform. You are asking me to sink more of my hard-earned dollars into the same crappy system. How is that going to help the kids that need help? It is like you are saying… we are abusing some of the kids but if you don’t give us more money, we will start ignoring more of them! Show me a plan that committs to significant improvements and I will open my wallet to help pay for it.
The fact is that the K-12 education system is a broken system. It is a union-controlled dinosaur of low-service that needs drastic reform. The system uses the kids as pawns in a game of chicken to protect itself from having to reform (other than little test projects here and there… mostly designed to either fail, or to allow the school system to hire even more union members). If we tax ourselves more, the entrenched system wins and the status quo continues. If we don’t then all hell breaks lose and we HAVE to reform. I wish there was another way, but there is not. Blame the teacher unions for being so inflexible to have landed us at this point of terrible options.
My point about “free” education was directed at higher learning. I support affordable college education, not free college education. I think college expenses ideally should be right at the level that a student needs to work the equivalent of 20-hours per week to pay for about half, and the other half should be student loans. Then the student gets to also learn about the value of money, work and debt… three things that are as important in life as any degree attained. I would rather we stop giving money to our state colleges, and instead start issuing vouchers to students to spend on the school of their choice. Reduce the voucher amount available for out-of-state schools.
There is an out of control entitlement mentality that has formed over the years from politicians giving away far too much free stuff. It is more evidence of destructive altruism. It mostly comes from the left, but also from the RINO right.
JB: [i]…so your point is that Craig T. Nelson is a conservative that was on food stamps and welfare so he is a hypocrite?[/i]
His hypocrisy is that his statement is at odds with his own “rugged individualist” framework. If he survived a period in his life when he relied on food stamps and welfare, he didn’t exactly survive exclusively on his own resources. He received a helping hand from the federal government, and, indirectly, from fellow American citizens. You’re welcome.
There is a lack of gratitude for the current social infrastructure that pervades a certain thread of conservative narrative that is represented in Nelson’s statement.
Ayn Rand libertarianism has a profound problem recognizing that human beings are usually at their best when we acknowledge that we are social beings.
JB: [i]The thing is… Brown’s tax increase plan only ensures we continue the status quo for K-12 education. There is no reform. You are asking me to sink more of my hard-earned dollars into the same crappy system. How is that going to help the kids that need help?[/i]
Can you point to a time in U.S. history when the public education system was spot on in addressing societal needs, and everyone was satisfied? I doubt it. Every decade had some major issue with education and a call for education reform in some way. And yet here we are as the most powerful economic and cultural force in the world. I think education can improve, but to label it a failure is hyperbole. It is a necessary investment, just as paying for water infrastructure (which you seem to support) is a necessary investment. If we don’t invest appropriately, then we all suffer down the road.
JB: [i]Blame the teacher unions for being so inflexible to have landed us at this point of terrible options.[/i]
Obviously we’ve gone round and round on this. The evidence for your position on this is really weak. If teachers were compensated like certain firefighters in many places in California, I would be a lot closer to your position.
Bipartisan, But Unfounded: The Assault on Teachers’ Unions ([url]http://www.aft.org/pdfs/americaneducator/winter1112/Kahlenberg.pdf[/url])
Yep.
[img]http://img.scoop.it/QkJ4oyCsoPKz28CqGVxtUjl72eJkfbmt4t8yenImKBVaiQDB_Rd1H6kmuBWtceBJ[/img]
Jeff
“Show me a plan that committs to significant improvements and I will open my wallet to help pay for it. “
DaVinci Academy.
Jeff
“However, in any case, I don’t trust too many actors/entertainers to have any common sense when it comes to politics.”
That’s interesting. I don’t trust many businessmen to have any common sense when it comes to politics.
Or many doctors for that matter.
Businessmen seem to feel that the world revolves around making money and everything else is secondary.
Doctors tend to feel that the world revolves around health and wellness and that everything else is secondary.
Maybe that is why we really need career politicians. They are the only ones whose job in life is to consider the needs of a wide variety of constituents rather than just viewing the world the way that they see it. At least this is true for the moderates, although not for those at the political extremes, who are the true believers who believe that there is only one truth…..theirs.
[i]Jeff
“Show me a plan that committs to significant improvements and I will open my wallet to help pay for it. ”
DaVinci Academy.[/i]
We’ve shown him repeatedly. He just ignores it.
Very good point Medwoman. As much people think about professional politicians negatively, I remember listening to Garamendi talk to a group of us and he just understood public policy and how to get things one. Then the next day I watched a bunch of amateurs struggle to get a deal done.
Nice try medwoman. Our system of governance was designed primarily by business men and a few doctors. Some of the largest contribiutors were quite bad business men… like Jefferson… however, they were businessmen none the same. The historical award for actors in politics goes to John Wilkes Booth. That episode is an example of how far actors go to satiate the need for attention and adulation at the blind expense of everyone else around them.
I challenge David’s point that we have a need for professional politicians. They certainly understand “how to get things done”… but we would be much better off today if they had not.
I also challenge medwoman’s assertion that businessmen “seem to feel that the world revolvers around making money and everything else is secondary”. Most successful businessmen and business women are driven for something much greater than making money… they are driven to create value and to improve something profound. Money is only the reward. Some politicians are drive the same way too, but driven to do it with other people’s money.
Obligatory intro comment:
[img]http://weknowmemes.com/wp-content/uploads/2011/10/educational-system-comic.jpg[/img]