FUNDING THE FUTURE OF CALIFORNIA: WHERE WILL THE REVENUE COME FROM?Lenny Goldberg

California Tax Reform Association

9.26.15, for Reclaim Higher Education

A new narrative on taxation

The old: “price to pay for civilized society”/burden that must be borne (D) Instrument of oppression (R) Lower priority for activists than issues/services/programs Too technical to engage politically

The new: Fighting inequality: taxes are the front line Piketty: “Taxation is not a technical matter. It is preeminently a

political and philosophical issue, perhaps the most important of all political issues. Without taxes, society has no common destiny, and collective action is impossible…Precisely what concrete form taxes take is therefore the crux of political conflict in any society.”

Need broad-based engagement on tax policy itself

California: Current discussion of potential revenues for…

State budget and schools: Prop 30 (top brackets of income tax, sales tax) continuation

Cities, counties, schools, community colleges and infrastructure: Commercial property tax reform

Roads and transportation: gas tax, local sales taxes, cap and trade revenue

Healthcare: tobacco tax, managed care taxes Higher education: oil severance tax, Prop 30 Environment: cap and trade revenue Broader tax reform and revenue: taxing services

State tax legacy of Prop. 13: 2/3 vote requirement

Oil severance: $1-2 billion Higher Education/tuition vs Texas Possible ballot measure 2016? Received strong majorities for years: victim of 2/3

Tobacco/managed care tax: $1-2 billion Health care and First Five Possible ballot measure Again, strong majorities in legislature

Gas tax: $2-3 billion Roads, transportation Strong majorities for increases, business/developer support but

no 2/3 Cap and Trade Revenue: fee (majority)

Must be spent on programs related to climate change (e.g. transit)

Prop. 30 extension

Again, strong majority in the legislature, no 2/3 Two proposals for 2016 ballot Prop 30: brackets up to 13.3% for over $1 million

through 2018, plus ¼ cent sales tax (ends 2016) New: extend brackets, add 1% over $5m (one

proposal) $6 billion annually “California is back!” Evidence re: millionaires: economy, stock market

Taxing services: fair, reliable tax base?

Broaden sales tax base to virtually all transactions Attorneys, accountants, architects, advertising… consultants…

programmers, etc Digital downloads in all forms, and telecom services (Internet?) Admissions and Hotels/Uber and Airbnb Labor services vs. intangibles

Raise huge revenues ($30 billion +--double current sales tax) and…

Lower sales tax rate Lower income tax rates plus EITC Lower and/or eliminate corporation tax Raise net $10 billion for state and local government

Rationale: income tax volatility and over-dependence (Income tax = 70% of

state general fund) Better reflection of modern economy

Commercial property tax reform: system failure, movement for change

Most broken part of tax system: would never have been invented and cannot be defended; accidental by-product of Prop 13

Loophole-ridden law: “change of ownership” works for residences, not for complex commercial properties or corporations

Counter-productive economics: taxes new investment instead of windfalls, bad for economic development

Bad land use: promotes speculation and sprawl, the opposite of smart growth necessary for climate change

Fiscal failure: property tax fails to keep up with growth for counties, schools, infrastructure, shifts property tax share to residential property

Inequality: major beneficiaries are large landowners, wealthy investors, publicly-traded corporations

Burden shift to residential property in 55 of 58 counties: Santa Clara

Benefits of change

$9 billion in revenue for cities, counties schools, community colleges, special districts

Greatly improved land use, regulatory process, infrastructure, transit: environmental and economic benefits

Issues to be addressed: transition after 40 years, small business

Inevitability of reform

What will it take?

Growing coalition: already a good base, needs deepening and broadening

Mitigation of business opposition Take it local, make it real: deeper public

understanding of impacts Broadened coalition and expanded public

discussion--business, environment, students, public safety, etc

Take it to your campuses, engage the discussion