Bold tax re­form would rely less on the top 1%

Los Angeles Times - - CALIFORNIA - GE­ORGE SKEL­TON in sacra­mento

New state Con­troller Betty Yee is not your typ­i­cal politi­cian. She’s boldly stick­ing her neck out on a con­tin­u­ous is­sue bound to cause grief.

The is­sue is tax re­form, a taboo sub­ject for most elected of­fi­cials. At least, the com­pre­hen­sive re­form — not merely cut­ting taxes and cre­at­ing loop­holes — she’s talk­ing about. She wants to broaden the tax base, col­lect­ing from more peo­ple and re­ly­ing less on the top 1%.

“It’s not be­cause I don’t want to tax the rich,” the Demo­crat says. “It’s just that I don’t think it’s sus­tain­able” to per­pet­u­ally bank on the wealthy as cash cows for the state trea­sury.

There’s plenty of proof for that con­cern. Cal­i­for­nia’s state tax sys­tem func- tions like a yo-yo, per­form­ing er­rat­i­cally depend­ing on whether the econ­omy is boom­ing or bust­ing.

There’s no way to plan con­sis­tent fund­ing for schools, uni­ver­si­ties, so­cial ser­vices, public works and law en­force­ment. So when the in­evitable re­ces­sion hits, th­ese and other pro­grams get whacked.

Es­pe­cially dicey are in­comes of the rich, which fluc­tu­ate wildly based on whether their in­vest­ments — their cap­i­tal gains — soar or sour.

The lat­est fig­ures, for 2013, show the top 1% ac­count­ing for 21.8% of Cal­i­for­nia’s ad­justed gross in­come but pro­vid­ing 45.4% of the state’s per­sonal in­come tax. The top 10% earned 49% of the in­come and paid 78% of the tax re­ceipts.

Yee wants to sta­bi­lize the rev­enue flow by mak­ing the tax sys­tem less pro­gres­sive, less soak-the-rich. But — and here’s a key point — she also says the state should spend more on the mid­dle class and work­ing poor.

She men­tions pump­ing more funds into higher ed­u­ca­tion to stem tu­ition hikes, into health­care for the poor and into af­ford­able hous­ing.

“It’s re­ally hard to blame all our ills on the tax sys­tem,” Yee says, adding that spend­ing also is to blame.

She crit­i­cizes some “tax ex­pen­di­tures” — breaks and loop­holes that cost the trea­sury money. “Once th­ese things are en­acted,” she says, “they’re there for­ever, although they may have out­lived their use­ful­ness.”

One ex­am­ple she cites: The mort­gage in­ter­est de­duc­tion for va­ca­tion homes. “What’s the pol­icy ra­tio­nale for that?” she asks. “That’s a ben­e­fit for the rich. But we can’t af­ford to build low-in­come hous­ing for peo­ple who don’t have a roof over their heads.”

She also plans to se­ri­ously look into spread­ing the sales tax to ser­vices, as many states have done. Our econ­omy now is based much more on ser­vices than re­tail goods, but we only tax the lat­ter.

Cal­i­for­nia’s tax sys­tem is stuck back in the mid-20th cen­tury.

Hardly any other politi­cian, how­ever, is try­ing to match taxes to 21st-cen­tury re­al­i­ties. There’s too much grief in it be­cause some vot­ers would wind up pay­ing more.

One ex­cep­tion to this timid­ity is state Sen. Bob Hertzberg (D-Van Nuys), who’s scur­ry­ing about try­ing to build a re­form coali­tion, so far un­suc­cess­fully.

“I don’t think the gover­nor has any plans to do tax re­form,” Yee says. From ev­ery in­di­ca­tion, she’s right.

Yee re­cently cre­ated a nine-mem­ber ad­vi­sory coun­cil to study Cal­i­for­nia’s tax sys­tem. It will an­a­lyze the prac­ti­cal ef­fects, un­in­tended con­se­quences and pos­si­ble al­ter­na­tives of var­i­ous pro­pos­als.

The con­troller isn’t ask­ing the coun­cil to set­tle on a re­form pack­age, although she could even­tu­ally pro­pose one her­self. The group’s pur­pose, she says, is to an­swer “the first ques­tion peo­ple want to know: ‘How does this ap­ply to me?’ ”

Yee, 57, is gutsy, dis­ci­plined and a pol­icy wonk. She’s also pleas­ant and gen­uine, but hardly charis­matic. You won’t hear much of ei­ther small talk or soar­ing rhetoric.

She’s one of those “only in Amer­ica” sto­ries.

Her par­ents em­i­grated from China — her dad in the 1930s af­ter his fam­ily told him he had no fu­ture there, and her mother in the 1950s when she es­caped the new Com­mu­nist regime.

Yee grew up in San Fran­cisco’s foggy Sun­set Dis­trict, keep­ing the books for her par­ents’ laun­dry and dry clean­ing busi­ness. That’s how she got hooked on num­bers. The fam­ily of eight lived in a stu­dio apart­ment be­hind the laun­dry, packed into bunks and a couch.

Her in­tro­duc­tion to pol­i­tics came as a 13-year- old when she ar­gued be­fore the San Fran­cisco school board against bus­ing her sis­ter across town in an in­te­gra­tion pro­gram. “I told them they should take the bus­ing money and in­vest it in schools,” she re­calls.

Yee lost the ar­gu­ment, “but I learned about be­ing a voice for some­one,” she says.

She grad­u­ated from UC Berke­ley and wound up work­ing in the state Capitol crunch­ing num­bers, first for the Leg­is­la­ture and then Gov. Gray Davis as his chief deputy bud­get direc­tor. Then she latched on with the state Board of Equal­iza­tion and even­tu­ally was elected to a seat.

“I never thought I’d run for of­fice,” she says. “But the more I talked to peo­ple, I said, ‘I can do this job.’ ”

Yee took on gi­ant Ama­zon, lead­ing the fight to force the In­ter­net re­tailer to col­lect sales taxes.

When for­mer Con­troller John Chi­ang was termed out last year, Yee ran for that job, beat­ing out ex-As­sem­bly Speaker John A. Perez (D-Los An­ge­les) in a his­tor­i­cally tight pri­mary elec­tion.

Her se­cret: hard work, smarts, pluck and au­then­tic­ity.

Her fu­ture: Two terms as con­troller. Af­ter that, the best bet is trea­surer. But don’t count her out of the mix for gover­nor. We could do worse, and have.

STATE CON­TROLLER Betty Yee, a Demo­crat, is gutsy and dis­ci­plined.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.