Taxable Talk

Proposition 89 increases corporate tax rates by 0.2% to fund political campaigns. Ignoring the issue of whether or not state-funded campaigns are good ideas, increasing California's corporate tax rate (already one of the highest in the United States) will do nothing to draw business to the Bronze Golden State.

In my view, anything that restricts freedom of speech is a bad idea. This measure does that. It's supported by Common Cause; it's opposed by the California Chamber of Commerce and the California Taxpayers Association.

Proposition 88 would increase education funding by taxing every real estate parcel $50. If you live on a 4,000 square foot parcel, you would pay an extra $50. If you live on a two-acre parcel, you would pay an extra $50.

A parcel tax would be an entirely new kind of property tax for California. Supporters of the measure state that the funds would be used to reduce class size; that the funds would be controlled locally; and that schools need the money. Opponents argue that the funds won't be spent where raised; that the funds raised would be controlled by the education establishment in Sacramento; and that this tax would start a slippery slope of new property taxes.

It's interesting to see who supports and opposes this measure. The supporters are the education establishment (government) in Sacramento. It's opposed by the Howard Jarvis Taxpayers Association and most Chambers of Commerce.

Proposition 87 is the next on the agenda. The proposition is titled, "Alternative Energy, Research, Production, Tax on California Oil Producers." The initiative would increase the tax on oil pumped from California (or, under the state) by at least 25%. The measure also bans oil producers from passing the tax on to consumers.

Allow me to make some points about basic economics. Assume that Joe has a barrel of oil that costs $50, but I have a barrel that costs $50 + $8 in taxes. BigOilCo is going to purchase a barrel; which barrel will they purchase? The $50 barrel, of course. And if they do buy the $58 barrel of oil, they have to pass that cost on to consumers, either directly or indirectly. You can't legislate gainst economics.

Looking at this logically, this measure, if passed, will decrease California oil production, increase the amount of imported oil into California, and will likely increase the cost of petroleum-based products in California. It's simple economics, something that those who wrote this initiative appear to have flunked.

And don't get me started on the new bureaucracy that this initiative, if passed, would thrust on the state.

Proposition 86 would impose a new cigarette tax of $0.13/cigarette sold in California. The funds raised would be used for everything from hospital trauma centers to funding for cancer research.

The argument for Proposition 86 is that smoking kills, and increasing the tax will (a) lessen the number of smokers, (b) allow funding for lots of needed programs, and (c) lead to research that might cure cancer and other diseases. The argument against Proposition 86 is that (a) we would create another bureaucracy, (b) most of the funding doesn't go towards stopping smoking but goes toward hospitals that don't need the money, and (c) increasing the tax on cigarettes to the nation's highest will lead to an increase in black market cigarettes and crime.

As always, read the initiative and make up your own mind.

Next up on the list of California ballot measures that impact taxes is Proposition 84. (We're not going to comment about Proposition 83, which deals with sex offenders, and Proposition 85, which deals with parental notification for a child's abortion, as they do not have direct tax impacts.)

Proposition 84 is another water quality bond measure. If passed, $5.388 billion in bonds would be issued, with repayments costing around $350 million per year for 30 years.

The measure funds a hodgepodge of water issues: some dealing with water safety, some with water purification, some with water habitat, and some with water conservation. Additionally, there's another water bond measure: Proposition 1E. If both pass, both will be implemented.

Those in favor of Proposition 84 state that the measure will help the economy, help with water purification and safety, and help with the levees. Those against it believe it only helps special interests with their pet projects. We'll find out in two weeks what the voters think.

The last of the five of the Governator's infrastructure initiatives deals with disaster preparedness and levee repairs. This measure would allow the issuance of $4.09 billion in bonds, with payback costing about $266 million per year for 30 years.

Most Californians are unaware of the huge levee system in the Central Valley. The levees are quite fragile and old; one article about the system can be found here. The Weather Channel also recently had a special on the fragile nature of the system.

As much as I hate bond measures, this is one that is vital for California. The failure of the levee system could endanger drinking water throughout the state and the huge farm crops from the Central Valley.

The fourth of five of the Governator's infrastructure initiatives is a school funding bond act. If approved, $10.416 billion of bonds would be issued, costing around $680 million a year for 30 years to payoff. Yikes!

Again, the goal of the act is laudable: repair and upgrade of old schools, increasing classrooms where needed due to growth, and seismic retrofitting. The question that I have is could this be done without the issuance of a huge new bond measure? Unfortunately, in California's political climate, the answer is likely no.

Proposition 1C is the third of five of the Governator's infrastructure bills on the November ballot. Titled "Housing and Emergency Trust Fund Act of 2006", it's yet another monstrous bond act. This measure would allow the issuance of $2.6 billion of bonds, used for housing for battered women, low-income seniors, and similar uses.

While the goals of the initiative are laudable, this bond would cost $204 million a year for the next 30 years (for repayment). As Assemblyman Chuck DeVore (R-Irvine) notes, "[it] grows bureaucracy with almost $3 billion in borrowed money, burdening everyone with debt to benefi t a small number of people selected by government, including financially eligible illegal immigrants."