May 2019 Archives

Let's talk TAXES Part 2

Quoting from a June 15, 2018 commentary by Dan Walters: Politicians give voters a double dose of sneakiness:

"When voters decreed a few years back that the state budget no longer needed a two- thirds legislative vote to pass, they unwittingly applied that looser standard to those ancillary measures that traditionally were written to implement the budget's appropriations.

Since the budget and its trailer bills take effect immediately upon being signed by the governor, and therefore are immune to a challenge by referendum, it was an invitation for governors and legislators to load them up with decrees un- related to the budget.

Dozens of trailer bills are drafted only a few days, and sometimes a few hours, before their enactment. Because they are also exempt from the usual legislative procedures, such as waiting periods and committee hearings, they have become vehicles for doing things on the Sly. It's why some folks around the Capitol call them "mushroom bills" that sprout in the dark, fertilized with manure."

            Several news sources have issued warnings to the public that they should beware of increased taxes by State politicians because Democrats solidified their supermajority in State government. 

As if on cue, the current legislature has proposed taxes on sodas, tires, drinking water, firearms, dialysis centers, lead-acid batteries, the 911 system and Governor Gavin Newsom has requested a tax on phones and higher payroll taxes.

            According to an Associated Press article by Kathleen Ronayne (March 28, 2019), California voters will see a constitutional amendment on the 2020 ballot which seeks to lower the voter percentage from two-thirds to 55 percent on taxes and bonds identified as infrastructure repairs by local cities and counties.  Many provisions of Proposition 13 have been under attack because it placed restrictions upon how government could raise taxes.  If this new Legislative Amendment should pass, one more protection from unlimited taxation by Proposition 13 will be effectively eliminated.

But there's more.  The CalPERS and CalSTRS (a pension program for public employees and teachers), have a common thread: They each lack sufficient money to pay for pension benefits workers have already earned.  These pension funds have a combined unfunded liability of more than $200 billion.

Your city, county or state has entered into agreement with employee unions establishing an unrealistic pension formula.  The public employee pension is not calculated in accordance to actual contributions made, as is the case with social security, but instead offers the reverse formula whereby the participant can be awarded retirement based upon a percentage (2 or 3%) times an average of his highest income years, times the number of years served.

A Hidden Tax:  The alarming reality is, in the event there is not sufficient funds to handle retirement pay, the California taxpayer is on the hook to pay for any losses or shortfalls to the system - which currently amounts to more than $200 billion. 

It is time for California voters to pay more attention to what State and local politicians are doing.

Piper's Papers

Let's talk TAXES

            According to a May 10, 2019 Associated Press news item, Governor Gavin Newsom has increased his budget from the original spending plan of $208.5 Billion to $213 Billion.

            He is proposing - among other things - to add $150 million more in grants to communities to help the homeless, $40 million to public colleges and an additional $20 million to help renters facing eviction.  He is also suggesting our State should tax drinking water and increase taxes for the State 911 system. 

            Frankly, I don't get it.  California is already ranked tenth highest when comparing the tax burden with other states.  We have an estimated $21.5 billion surplus, so why is anyone suggesting a "water tax?"

            According to a Sacramento Bee article written by Dale Kasler June 18, 2018, it was Senator Bill Monning who introduced SB 623 (in 2017) which would impose a .95 cent tax on California water users ($11.40 per year) to correct approximately 360,000 residents who are served by water systems that violate State law.  This bill did not get out of legislature.

            The vast majority of California's 39-million-plus residents have access to safe drinking water so why should the entire state pick up the tab for this small percentage of water users when alternative funding solutions exist and the state has a huge budget surplus?

            Much like Gov. Jerry Brown, Newsom continues the argument that a "rainy day" fund is necessary and plans to add $16.5 billion to that fund as well as starting the new "education reserve fund" with an opening balance of $400 million.

            Why put any more money in this so-called "rainy day" fund, when California has approximately $83 billion of General Fund-supported bonds on which it is paying $6 billion in annual principal and interest.  In addition, the voters and the Legislature have approved another $39 billion of General Fund-supported bonds that have not yet been sold.

            Add to this the four voter approved bond measures which appeared on the November 6, 2018 Ballot.  Together, these measures would authorize the state to borrow an additional $14.4 billion.  It will cost approximately $26 billion (including interest over a period of 40 years) to pay off these new bond measures with annual general fund payments of $650 million.

            It does not take a financial genius to recognize that borrowed money costs far more than a direct payment of cash . . . and yet, this State persists in putting cash in a rainy day fund that does not offer anywhere near the interest income that the State is paying out (well over $6 billion per year) in principal and interest on these bonds.

            It is well established that California suffers from periodic recessions as does every State in the Union.  It would appear to me that if California did not have a huge debt obligation amounting to $billions in annual payments, another recession might be a bit easier to handle.

Piper's Papers

The Age of Unreason.

            I awakened one morning to find myself in a strange new world.  As I look around the neighborhood, I discover adults and children wondering about on our streets, gazing at a small electronic gadget and communicating in some sort of butchered form of language called "texting."

            Even the radio explodes with "hip hop" which is supposed to be music and often is followed by some dude who talks in rhyme  - a commentary which is often dark and abrasive.  Incredibly, some of this unintelligible stuff is presented with a prize by an annual music award ceremony.

            I am informed that thousands of strangers from foreign lands are trespassing across our Southern border and claiming sanctuary when apprehended.  Holding cells are overwhelmed and the court system is so backed up that thousands of these migrants are turned loose in the US pending a court date sometime between three and five years down the road.  Administrative costs related to this illegal migrant activity has exceeded $90 billion during the 2019 calendar year with no end in sight.

            Meantime, several States have offered sanctuary and protection from deportation so long as illegal aliens limit their criminal activities to a non-violent variety or a misdemeanor.   Silly me: I thought it was a crime to take up residence in the United States without first obtaining some sort of Visa, Green Card or otherwise legal consent by our government to be here.

            In spite of the fact this nation has amassed a national debt of more than $21 trillion with annual interest payments exceeding $400 billion "we" give away more than $40 billion in foreign aid every year. 

            Recently the President, republicans and democrats managed to agree to spend $2 trillion for infrastructure repairs within the US, but they could not agree to spend a few $-billion for a Southern border wall.  No one has identified where the money is coming from.

Under the so-called "modern monetary theory" advanced by some Democrats: "deficits are not nearly as dangerous as we've been led to believe."

Stephanie Kelton, an economist at Stoney Brook University, was quoted: "The biggest mistake we make is thinking of the federal government as a household that has to repay its debt."   Ms. Kelton contends the United States won't default on its governmental debts because it can always print more money through the Federal Reserve.

            Ignoring the shootings at schools, churches and synagogues, the thousands of illegal migrants at our door, the horrific national debt, our federal government remains in grid lock between two warring political parties.

            Sadly, my country has fallen into a new era we could call the "Age of Unreason" where planning, intellect and policy appears to have nothing to do with basic intelligent thought or the fiduciary responsibility of legislators to act in the best interests of our nation.