TAX REFORM
Is there a silver lining for California in the GOP push, or is it a looming storm?
The Republicans in Congress are on the verge of enacting a historic tax reform program that will lead to radical change in California politics. The law taking shape will eliminate much of the federal deductions for state taxes and mortgage interest. California voters initially will react with fury, but when the dust settles, they will then turn on state and local governments to ask how all this tax money is being spent and who approved these programs and taxes.
California taxpayers have been a sleeping giant since 1978, the year of Proposition 13, the last, great, statewide tax revolt. But the coming federal tax bill will create a national political earthquake, rumbling from California.
Here’s the silver lining of Republican federal tax reform. Just as Hollywood, the media and liberal Democrats are suddenly eating their own in the age of sexual harassment scandals, so too will California voters:
Turn on their overspending, overtaxing state and local politicians. As federal tax deductions will no longer subsidize excessive spending by California’s state, county and city governments, millions of Californians will not get a 20 to 30 percent reduction in their federal tax bill by deducting their California tax payments. This suddenly will make their state income tax bill look much bigger.
Reconsider their state and local spending when they find they have to pay the full bill. With no federal offset for local property taxes above $10,000 a year, property taxes will be higher for many Californians, making our highpriced houses even more unaffordable.
Go after those who advocate spending quadruple the amount of the state budget for a mindless, single-payer health care scheme.
Vilify those who conned the taxpayers into approving Proposition 1, the water bond, passed on the heels of the drought to promote water conservation. Very little of that money has been awarded to water conservation projects, and certainly not to a high-priority project such as repairs to the Oroville Dam, which almost burst, potentially losing enormous quantities of water
and, ironically, flooding the state government in Sacramento.
Turn out of office those who promoted its sister measure, Proposition 2, the cleverly named Rainy Day Fund — an $8 billion political slush fund.
Ask for more transparency from
local agencies to see they are not spending to provide undocumented immigrants with health and welfare services as a part of sanctuary policies. The largest state spending item is health and human services.
Look more closely at energy and
environmental policies that promote highly inefficient approaches to energy generation such as solar and wind power, and lead to high taxes and highenergy bills. There is a good reason the rest of the country is not following California’s lead. The cap-and-trade program and the recently enacted gas tax offer little environmental protection but add high costs to Californians.
Ask about the high-speed train to nowhere.
Demand a “Prop. 13 reset” to begin to bring property taxes on similar properties of newly purchased and longerterm homeowners into closer parity, i.e., a second taxpayer revolt.
Ask tougher questions about county and city budgets and spending and reserves (which might also be construed as a surplus), especially in hightax counties, such as San Mateo.
Look at government employee pensions that are bankrupting cities and counties. California has the nation’s highest state income tax rate (13.3 percent) by a large margin (the next highest is Oregon, at 9.9 percent). Also, because of the high home prices in the state, it has hundreds of thousands of voters who will be caught with mortgages above the allowed cut-off levels for federal mortgage interest deductibility. As a result of Prop. 13, which caps property tax rate increases at 1 percent, California has relatively low property taxes, but many counties still gouge their taxpayers with additional, albeit voter-approved, property tax assessments. California has the highest sales tax rate (7.25 percent) in the country, and additional local sales taxes typically raise the rate, e.g., Santa Clara County’s rate is 9.25 percent.
History repeats itself. In 1978, the governor was, drumroll, Jerry Brown. After the taxpayer revolt of Prop. 13, he was followed by two center-right Republican governors (George Deukmejian and Pete Wilson), then a Democrat (Gray Davis, a Brown protege and only the second governor in U.S. history to be recalled by the voters), followed by yet another center-right Republican governor, Arnold Schwarzenegger.
California has a wonderfully generous and socially conscious population, but we are not the complete morons politicians take us for. Although the California Republican Party couldn’t find a vote with a pack of hunting dogs and a searchlight, we are about to enter a world that should lead to the rise of traditional center-right politicians and/or a full-on taxpayer revolt that will change California politics.