Exposing Gavin’s Dishonesty: California Tops State Individual Income Tax Rates

In addition to soaking its rich, California imposes a 6% top marginal income tax rate on individuals

Even as California faces a record $68 billion budget deficit – after blowing a supposed $100 billion surplus last year – Gov. Gavin Newsom continues to lie about the state’s income taxes, claiming that they are not the highest in the country.

Notably, the $68 billion budget deficit does not include the state’s more than $1 trillion unfunded pension and health care liability for its retired government employees, or the massive debt California owes to the federal government for the EDD unemployment fraud during the COVID pandemic.

Not only are new taxes being imposed on January 1, 2024 to cover Newsom’s and Democrats’ deficit spending, Newsom claims that Florida “taxes low-income workers more than we tax millionaires and billionaires in the state of California.”

The Wall Street Journal cut to the chase and responded:

“How’s that possible when California imposes higher income, sales and gasoline taxes than Florida? California’s gas tax is 77.9 cents a gallon compared to 35.2 cents in Florida. The average state-and-local sales tax rate in California is 8.85% versus 7.02% in Florida.

In addition to soaking its rich, California imposes a 6% top marginal income tax rate on individuals earnings more than $37,789 and 9.3% over $66,296. Florida has no income tax.”

California’s overall tax burden on middle – and lower-income folks is higher than Florida’s.

Here is the Tax Foundation’s proof, state by state:

When pressed, Newsom’s office said he was referring to a 2018 study by the leftwing Institute on Taxation and Economic Policy, “which says the top 1% of Californians paid 12.4% of their income in state and local taxes while the bottom 20% of earners in Florida paid 12.7%. But this statistical artifact owes to the wealthy spending relatively less of their income than lower-earners. That means California’s high earners aren’t walloped as much by the state’s high gasoline and sales taxes.”

Gov. Gavin Newsom also claims that “95% of Texans pay higher taxes than Californians.”

And again, Newsom’s office used the 2018 study by the Institute on Taxation and Economic Policy.

2018? Really? Newsom could not be more disingenuous – it is bold dishonesty and he and his staff know it.

Newsom made this absurd claim in January at a budget news conference, and has repeated it many times. “Our tax rates, again, are lower than the state of Texas,” the governor said. “I just want to remind everybody out there, 95% of Texans pay higher taxes than Californians.” Newsom noted that while the state’s tax rates on the very wealthy are among the nation’s highest, “not everybody lives in that rarified world.” LESS INCOME, LESS TAX The ITEP report found California had the nation’s most equitable tax system, and it cited Texas as the second most unfair, after Washington, the SacBee reported.

The Tax Foundation breaks down California’s actual income tax structure:

The Tax Foundation compares all 50 states on over 40 measures of tax rates, collections, burdens, and more, and reports in its State Tax Collections per Capita, California is number #2, and in its State Individual Income Tax Collections per Capita, California is number #1. They also note that Florida and Texas have no individual income tax, along with Washington state, South Dakota, Wyoming, Tennessee, New Hampshire and Alaska.

In their 2024 State Business Tax Climate:

The 10 lowest-ranked, or worst, states in this year’s Index are:

  1. Rhode Island
  2. Hawaii
  3. Vermont
  4. Minnesota
  5. Maryland
  6. Massachusetts
  7. Connecticut
  8. California
  9. New York
  10. New Jersey

Here’s why: “The states in the bottom 10 tend to have a number of afflictions in common: complex, nonneutral taxes with comparatively high rates. New Jersey, for example, is hampered by some of the highest property tax burdens in the country, has the highest-rate corporate income taxes in the country, and has one of the highest-rate individual income taxes. Additionally, the state has a particularly aggressive treatment of international income, levies an inheritance tax, and maintains some of the nation’s worst-structured individual income taxes.”

The 10 best states in this year’s Index are:

  1. Wyoming
  2. South Dakota
  3. Alaska
  4. Florida
  5. Montana
  6. New Hampshire
  7. Nevada
  8. Utah
  9. North Carolina
  10. Indiana

Here’s why: “The absence of a major tax is a common factor among many of the top 10 states. Property taxes and unemployment insurance taxes are levied in every state, but there are several states that do without one or more of the major taxes: the corporate income tax, the individual income tax, or the sales tax. Nevada, South Dakota, and Wyoming have no corporate or individual income tax (though Nevada imposes gross receipts taxes); Alaska has no individual income or state-level sales tax; Florida has no individual income tax; and New Hampshire and Montana have no sales tax.”

Since the 2018 report by the leftwing Institute on Taxation and Economic Policy, they have done numerous other reports on California including these doozies:

Click here to read the full article in the California Globe

Michael Smolens:  California Ballot Measures Could Give Republicans Strong Anti-Tax Argument

As California Democrats head into the 2024 election, several things seem to be going their way.

A measure on the ballot defending same-sex marriage could be an added turnout magnet in a presidential election year that already is expected to bring more Democratic-leaning voters to the polls.

Republicans in Congress, despite their current disarray, continue to ponder further limits or a ban on abortion — another Democratic motivator.

And the Republican Democrats love to hate, Donald Trump, may well be on the ballot again.

But California Republicans may have at least one ace in the hole: a potentially compelling anti-tax argument.

Three tax-related measures are targeted for the ballot, though none actually raises taxes.

A Democratic proposal would lower the voter-approval threshold to 55 percent for local taxes and bonds that now require a two-thirds majority to pass.

measure sponsored by the California Business Roundtable would require all local taxes and bonds to be approved by a two-thirds majority, including fees and charges that currently don’t require a public vote. The proposal also calls for voters to approve all state taxes.

To counter that, Assemblymember Chris Ward, D-San Diego, authored a ballot proposition that would require measures raising the approval threshold to be approved by that same threshold. In other words, the business proposal would need a two-thirds majority.

The two Democratic measures were placed on the ballot by the Legislature, while the business proposal qualified through the signature-gathering initiative process.

The support among Democratic lawmakers for the two legislative measures might suggest broad backing across deep blue California.

But support for — or opposition to — tax increases, among other things, don’t always fall along partisan lines. Majorities of California voters in 2020 sided with the GOP rather than the Democratic leadership position on a handful of ballot measures involving property taxes, rent control, criminal justice, affirmative action and the gig economy.

Whether that dynamic spilled over to candidate races, or whether it would next year, is far from clear.

But it certainly gives credence to what some Republican leaders for years have been saying is needed to improve the party’s fortunes in California: focus on pocketbook, quality of life, and state and local issues that cut across party lines, and avoid the divisive culture wars and national politics.

Easier said than done.

That approach was the Republican hope for the 2021 recall election of Gov. Gavin Newsom. But arguments about homelessness, crime and cost of living lost their steam once right-wing lightning rod Larry Elder jumped into the race to replace Newsom, who made Elder the issue and handily defeated the recall bid.

Plus, there’s no getting away from Trump, who can bolster Republican turnout but, more significantly, energize Democrats.

Some frustrated Republicans complain Democrats and the media overly focus on social issues and Trump. But it’s the conservative-dominated Supreme Court that scuttled a half-century of precedent supporting the constitutionality of abortion by overturning Roe v. Wade. And it’s Republicans pushing limits on LGBTQ rights across the nation.

True, Democrats led by Newsom and Senate president Toni Atkins, D-San Diego, did put a successful measure on the 2022 ballot to enshrine abortion rights in the state constitution. A “right to marry” law is planned for the 2024 ballot that would repeal the same-sex marriage ban under Proposition 8, even though the language of the 2008 voter-approved measure was invalidated in court.

But the Supreme Court’s Roe reversal suggests future rulings could override existing abortion protections and reactivate Proposition 8, which remains on the books.

Meanwhile, a move by some Republicans to drop opposition to abortion and same-sex marriage from the California GOP platform was swiftly rejected during the party’s convention last weekend. Granted, not many people pay attention to party platforms, but the short-lived challenge is emblematic of the state party’s struggle to move forward.

Arguments to protect the 1978 landmark tax-cutting initiative Proposition 13 may have lost some resonance over time. But concerns about taxes and economic burdens in general are evergreen political issues.

Democrats contend the high bar to raise taxes is unfair, pointing to numerous measures that were supported by large majorities yet failed the two-thirds test. They contend that has deprived governments of revenue for infrastructure and services desired by the public.

To what degree state and local tax increase proposals will appear on the ballot next year remains to be seen. In April, the governor rejected a state Senate proposal to raise business taxes as part of a budget package.

Democrats and many city and school officials are clearly concerned about the business-backed ballot measure. Last month, Newsom, Atkins and others filed an emergency petition with the state Supreme Court in an effort to keep the proposal off the ballot.

They contend the proposition would illegally revise the state constitution and cripple local government finances, in part because the measure is retroactive to Jan. 1, 2022, and would threaten taxes and fees enacted since then.

Should the current economic discontent roll over into the election year, Republicans may have a strong case for high voting thresholds as a safeguard against over-taxation in already-expensive California, where the cost of housing and gasoline trigger near-constant ire.

Carrying the anti-tax theme a step further, Republicans could point out the business measure also would ban road use charges, also known as vehicle miles traveled fees — which have proved unpopular in some regions.

Such fees are being considered in California and across the country as a replacement for gas tax revenues that are shrinking with the increase of fuel-efficient vehicles and electric vehicles.

A long-range transportation plan drawn up by the San Diego Association of Governments included road charges, but the political fallout jarred supporters.

The SANDAG board, including some Democrats, officially removed the mileage tax from the plan last month.

Click here to read the full article in the San Diego Union Tribune

Why Higher-Income Workers in California May Get Surprised by This Tax Hike in 2024

A payroll tax increase that has gone largely unnoticed will hit high-earning employees in California starting Jan. 1.

The tax hike will pay for an increase in benefits under California’s State Disability Insurance and Paid Family Leave programs starting Jan. 1, 2025. At that point, the wage-replacement rate – how much of their weekly pay participating workers get in benefits – will rise to up to 70% to 90% depending on income. That’s up from 60% to 70% today.

These two programs are funded entirely by the contributions from participating employees and administered by the California Employment Development Department. 

Most private-sector employees in California have this tax, often labeled CASDI, withheld from their paychecks. Most public-sector employees and self-employed people don’t pay into the program and are not eligible for benefits.

In 2023, the tax or “contribution” rate is 0.9% of pay on up to $153,164 in annual wages. Any pay over that limit is exempt, so the maximum tax is $1,378.48.

Starting next year, the rate is expected to rise to 1.1%, resulting in a small tax increase for most employees. Someone making $85,000 a year would pay an extra $170.

But the big change is that the wage ceiling will be abolished, so the tax will apply to an unlimited amount of pay in 2024 and beyond. A worker making $200,000 would see an increase of roughly $822 next year.

These worker contributions fund the two statewide programs that provide a percentage of an employee’s pay, up to a maximum dollar limit, when they take time off work for disability or family leave.  

State Disability Insurance covers an employee’s non-work-related injury, illness or pregnancy. Paid Family Leave kicks in when an employee needs time off to care for a seriously ill family member, bond with a new child or participate in certain military events. 

Both programs have the same formula for calculating benefit amounts, but the duration of benefits differs depending on the reason for leave.

SB 951, signed into law in September 2022, authorized the tax increase starting next year and an increase in the wage-replacement rate starting in 2025.

How much of their normal wage participating employees get depends on their pay (subject to CASDI) during their 12-month “base period.”  This period spans the roughly five to 17 months before they filed a claim for disability or family leave. They must have had at least $300 in pay during their base period to get any benefit. 

Their benefit is based on the average weekly wage they earned during the highest-earning quarter (three months) of their base period.

Since 2018, those whose pay during this high quarter was at least one-third of the statewide average weekly wage have been getting 60% of their pay in benefits, up to the maximum dollar limits.

Those who earned less than one-third of the statewide average got 70% of their pay in benefits.

In 2023, the statewide average weekly wage is $1,651, so those making about $550 a week or less would get the 70% replacement rate.

The maximum weekly benefit is set by the Department of Industrial Relations each year. In 2023, the cap is $1,620 a week. Anyone earning roughly $140,000 or more this year would hit the benefit limit, said Katherine Wutchiett, a senior staff attorney with Legal Aid at Work in San Francisco. “It’s designed so people feel like they can take time off when they are sick and take care of their family,” she said.

Starting in 2025, workers who earn more than 70% of the average statewide wage will get up to 70% of their pay in benefits while those earning 70% or less than the average wage will receive up to 90% of their pay. 

High-income earners will bear most of the tax increase, while low- and middle-income earners will reap most of the benefits. That was designed to address an imbalance in leave-taking.

In 2020, workers earning less than $20,000 a year were four times less likely to use Paid Family Leave than those earning $80,000 and $99,999, according to a study by the California Budget and Policy Center. Those making more than $100,000 also had a relatively low utilization rate, but their rate was still nearly three times that of the lowest-wage workers.

 “This is a really important equity issue,” Wutchiett said. Lower-wage workers “were not taking time off because they couldn’t afford to have that 30% to 40% pay cut.”

To get disability benefits, participating employees must be out of work or working less than usual for more than a week because of an illness, injury or pregnancy that prevents them from doing their job. No benefits will be paid this one-week “waiting period,” but workers can use sick leave.

A health care professional must certify the need for leave. Some injuries that disable a bricklayer might not disable an office worker, Wutchiett said. 

Workers can generally collect up to 52 weeks of disability benefits or the full amount of wages paid during their base period, whichever is less. 

For a typical pregnancy, providers will certify benefits for up to four weeks before and six weeks after delivery, or eight weeks after a C-section. This could be extended for complications of postpartum depression, Wutchiett said. After this period, new moms can file for Paid Family Leave. Dads and moms who do not give birth can apply for family leave as soon as the baby arrives.

Workers can also apply for Paid Family Leave if they are unable to work or working less because they need time off to care for a seriously ill family member; bond with a new child; or participate in a qualifying event resulting from a family member’s military deployment to a foreign country. Bonding leave must be taken within 12 months of a child entering the family by birth, adoption or foster care placement.

Paid Family Leave lasts for up to eight weeks, but there is no waiting period before benefits begin. Employees are not required to use up all their sick leave before getting paid family leave. 

(San Francisco workers with new children might be able to get additional paid parental leave from their employer under a separate program.) 

In 2019, about 4% of employees covered by the programs filed a claim for disability insurance and 1.6% filed a family-leave claim, according to the EDD

The average weekly benefit amount in 2022 was around $840 for Paid Family Leave and $750 for state disability, according to an analysis of EDD data .

Citizenship and immigration status do not affect eligibility for state disability or family leave benefits.

Almost all private-sector employees pay into and benefit from these plans,  unless their employers have sent up a state-approved “voluntary” plan that provides better benefits.  Federal workers do not participate in the state plan. State- and local-government workers may or may not; most public-school employees do not.

Self-employed people who want to be covered by state disability insurance and Paid Family Leave can opt into a plan called Disability Insurance Elective Coverage for a minimum of two calendar years.

Click here to read the full article in the San Francisco Chronicle

After 16 years, California Roads and Transit are No longer labeled ‘high risk’

Getting roadways and transit removed from the State of California watch list took 16 years

While Southern California drivers may not have noticed due to the plethora of potholes created by excessive rainfall, the state’s roads are no longer sounding alarm bells.

That’s because for the first time in 16 years, the state’s highways, freeways and transit systems are off the “high-risk list.”

On Thursday, the California State Auditor removed the designation, attributing the passing grade to progress in repaving freeways, adding on-ramp and off-ramp meters, fixing bridges and unclogging culverts that results in better drainage.

“The auditor’s findings are a testament to the substantial progress Caltrans, the California Transportation Commission and our partners have made as we work together to improve and rebuild our state’s critical transportation infrastructure,” said California Transportation Secretary Toks Omishakin in a prepared statement.

Omishakin attributes the improvements to SB 1, the 2017 law that increased the gasoline excise tax and funnels about $5.4 billion each year toward transportation improvements. It was the first increase in the gasoline tax in 23 years and established a steady transportation funding source.

Since the state first was declared “high risk” in 2007, trade groups and the state auditor have been making dire predictions about a crumbling transportation infrastructure. In 2013, the auditor said it would take $290 billion to improve the state’s highways, roads and transit systems by 2023.

“We were at a high risk for not having enough money to maintain our roads,” explained Lauren Wonder, Caltrans spokesperson, on Thursday, Aug. 24. “SB1 gave us the stable funding source, adjusted the gas tax for inflation and established an inspector general who monitored progress each year.”

Caltrans listed the following projects completed with SB1 dollars:

• Repaved 15,000 lane miles on the state highway system resulting in 99% of pavement in good or fair condition.

• Fixed 1,512 bridges — bypassing the goal of repairing 500 bridges that was set in SB1.

• Repaired 578,285 linear feet of culverts, a three-fold jump from before SB1 became law, and cleaned out 1.6 million linear feet of culverts. About 90% of state highway and freeway drainage systems are listed in good or fair condition.

“Culverts are where the storm water goes,” said Wonder. “If you don’t have the proper-sized culverts, you will have water backed up onto the highway.”

But potholes are still making drivers’ lives miserable.

The Los Angeles Bureau of Street Services reported receiving 19,279 requests from December 2022 through early April 2023 to fix potholes. In early spring, it had repaired 17,459 of them.

Besides roads, SB1 funding also reached LA Metro, which uses the tax dollars for a variety of capital projects.

SB1 has contributed to funding the Gold Line (now A Line) extension to Pomona; and is adding funding to use for designing and eventually constructing the West Santa Ana Branch light-rail (from downtown Los Angeles to Artesia) and for improvements on the G (Orange) Line in the San Fernando Valley.

In addition, the added gasoline tax is helping to fund a new 57 Freeway and 60 Freeway interchange in Diamond Bar and City of Industry, improving truck lanes on the 5 Freeway in the Santa Clarita Valley and upgrading the 71 Freeway in Pomona.

Now that the state is no longer officially “high risk,” what’s next?

“It just means we are not being watched as ‘high risk.’ But we are not going to take the pedal off the metal. Caltrans will still make sure the transportation infrastructure is in working order,” Wonder said.

Besides state funding, California also has received federal transportation dollars.

Click here to read the full article in the Press Enterprise

California Loses Nearly 700,000 Residents Since 2020

The California exodus is no surprise to most – except maybe Gov. Gavin Newsom under whose scurrilous control the 700,000 residents chose to leave for freer states

The California exodus to other states is even worse than we realized; the state’s population dropped by more than 500,000 people between April 2020 and July 2022, with the number of residents leaving surpassing those moving in by nearly 700,000 the Los Angeles Times reported.

This news isn’t new – the Globe has been reporting for several years about California’s exodus of businesses to economically friendlier states, and residents seeking economic freedom and liberty.

In 2021, the Globe reported that California ranked as one of the top Outbound migration states, along with four other blue Democrat-run states, while the top Inbound migration states were all red Republican states:

Top Outbound States

Illinois – 68%
Michigan – 63%
New Jersey – 63%
California – 60%
New York – 59%

Top Inbound States 

Arizona – 68%
South Carolina – 60%
Tennessee – 59%
North Carolina – 58%
Texas – 58%

Worth noting is that in 2018 California was one of the top Inbound destination states, according to  Allied Van Lines Company data. By 2020, only two years later, California’s inbound migration was 40%, while its outbound migration was nearly 60%, which leads us to California’s bleeding residents and businesses today.

“The primary reason for the exodus is the state’s high housing costs, but other reasons include the long commutes and the crowds, crime and pollution in the larger urban centers,” the LA Times said. “The increased ability to work remotely — and not having to live near a big city — has also been a factor.”

They forgot to include the hundreds of thousands of homeless populating LA, San Francisco, Sacramento, San Diego, and smaller cities, the highest taxes in the nation, a failing electricity grid and rolling blackouts, wildfire “season,” government ordered water shortages, half of the state’s small businesses closed from Covid, 76,000 prisoners let out of state prisons, California’s failing public schools ranked at the bottom of all of the states at number #48.

Last week, Utah’s Governor told California residents who are looking to join the recent population exodus into red, Republican-led states like Utah should stay in California. “We’re having the opposite problem, this last census confirmed that Utah was the fastest-growing state in the last ten years,” Utah Gov. Spencer Cox told reporters outside the White House after New Jersey Gov. Phil Murphy discussed ways he will encourage people to move to his state,” Fox News reported.

Gov. Spencer wasn’t being provocative – he explained that Utah doesn’t have the necessary housing and infrastructure yet to accommodate so many new residents.

What a nice problem to have.

Los Angeles and San Francisco counties lost the most residents. This is no surprise either as Los Angeles and San Francisco had the harshest, most draconian Covid restrictions, masking, lockdowns, school closures and vaccine mandates. Los Angeles and San Francisco counties also have the most crime.

In fact, San Francisco County and the State of California are still operating under Covid emergency orders – three years after declaring the Covid State of Emergency, or nearly 1,100 days later. San Francisco initially declared its emergency order in late February 2020 – ahead of Gov. Newsom’s March 4, 2020.

The San Francisco Department of Public Health (SFDPH) just announced Thursday that it will will finally end their COVID-19 public health emergency declaration at the end of the month, on the same day as Gov. Newsom’s vowed to end to the California Covid State of Emergency.

People can’t live like that – wondering if on any day the county public health or state Department of Public health tyrants would impose new masking mandates, or impose vaccine or booster mandates again. Or their children would be required to mask in school, as many schools districts threatened.

In late December 2021, the Globe reported: “with California Governor Gavin Newsom extending his emergency powers and a ‘State of Emergency,’ enforced mask mandates, vaccine mandates, and lockdowns for nearly two years, almost 400,000 Californians picked up and moved to red states opened for business and education – and no mask or vaccine mandates, according to the U.S. Census Bureau.”

“New Census Bureau population data show that California’s population decreased in 2021 by -367,299, or 1% of the population.”

Between 2020 and 2021, a total of 33 states saw population increases via inbound migration, while 17 states saw population decline via outbound migration. New York, California and Illinois suffered the largest population declines. Texas, Florida and Arizona enjoyed the largest numeric growth, and Idaho, Utah and Montana enjoyed the largest percentage growth.

Click here to read the full article in the California Globe

What California Taxpayers Need to Know About Unemployment Insurance

I sincerely hope that readers aren’t turned off by the title of this column. While most taxpayers aren’t directly responsible for paying unemployment insurance taxes, the truth is we all pay and, in California, we pay a great deal more than we should.

Last week I received an email from a dentist who operates a small dental office and is required to pay the unemployment insurance tax and, sadly, is paying much more than he should because our unemployment insurance program is insolvent. Like so many other measurements of California’s performance relative to other states, our businesses – both large and small – are paying a penalty for the incompetence of our elected officials and bureaucrats.

Here’s what taxpayers should know about unemployment insurance.

California’s unemployment insurance program (UI) is funded by a tax imposed on employers. The proceeds are deposited in the Unemployment Trust Fund of the U.S. Treasury Department. States may withdraw funds from their accounts to pay unemployment benefits.

Here’s the kicker: If a state’s trust fund does not have adequate funds to pay benefits, it must borrow money from the federal fund to satisfy unemployment claims. But if a state’s UI Fund is insolvent for more than two years, that tax rate increases each year. The tax can be hefty, as much as $420 per employee per year.

Like other states, California was slammed by the pandemic. Low unemployment quickly became unprecedented levels of high unemployment. While few dispute the need for workplace closures early in the pandemic, California was much slower in reopening than more freedom-oriented states like Texas and Florida. This had a direct impact on the further decimation of the UI fund.

That’s just one reason why, by the spring of 2020, California’s UI Fund was depleted and continued to fall further behind. This required even more borrowing from the federal government.

Even worse, California was suffering from a second epidemic: an epidemic of massive fraud in the administration of unemployment insurance claims. On Gov. Gavin Newsom’s watch, the Employment Development Department (EDD) failed to process a backlog of claims for hundreds of thousands of unemployed Californians while sending out as much as $30 billion in unemployment benefits for phony claims, including fraudulent claims paid to death row inmates.

Much too late, after several legislative hearings on the lack of oversight of EDD, there were modest corrective actions taken. But this was the epitome of closing the barn door after the horses bolted.

If anyone believes that the massive EDD fraud didn’t impact ordinary taxpayers, they couldn’t be more wrong. California’s employers are directly responsible for the cost of EDD providing benefits on fraudulent claims, which means that all of us must absorb the cost of this inexcusable lack of oversight.

Perhaps the most important thing for taxpayers to know about California’s unemployment insurance program is how insolvent it is. EDD itself projects that at year’s end the UI Fund’s total debt will exceed $19 billion. Moreover, the U.S. Department of Labor confirms that California’s debt problem is the worst of any state, with an accumulated debt that exceeds the debt of all other states combined.

Again, in the competition between states, it is notable that most other states have no outstanding debt because they used Covid relief funds from Washington to pay down their Ul loans. For example, Texas approved a $7.2 billion payment and has eliminated its UI debt entirely.

What about California? Because of its insolvency, it must pay $470 million in interest payments alone to the federal government. That’s nearly half a billion that could otherwise go to education, transportation, or public safety. Worse yet, this is an annually recurring expense.

Remember just last June when California had a $95 billion surplus? That would have been the time to increase the payments to the federal government to reduce our UI debt. But now, the LAO tells us we have a $25 billion deficit “problem.”

Click here to read the full article in the OC Register

Californians can’t catch a break as gas prices spike again

The ongoing heat wave is raising the risk of blackouts on top of perennial drought and fires. And now, after enduring record pump prices in June that were much higher than the national average, Californians face surging gasoline costs again at the end of the summer travel season when they typically fall.

Pump prices jumped 10 cents a gallon in a week in Los Angeles County and the Inland Empire and 13 cents in Orange County, according to auto club AAA. Record wholesale premiums signal they could rise even further. At the state level, retail prices average $5.34 a gallon on Friday, 4 cents more than the previous day.

The confluence of bad news highlights how vulnerable California’s energy systems are to supply disruptions. The state is an energy island, cut off from crude and fuel hubs in the Gulf Coast and Midwest by the Rocky Mountains. Regulators require a boutique grade of cleaner-burning fuel that few refineries are geared to produce outside of the state. As a result, fuel shortages take time to resolve and price spikes are far more common than elsewhere in the country.

Gasoline stockpiles on the US West Coast have fallen by 11% since the beginning of August amid a lack of imports to their lowest level in about seven years, data from the Energy Information Administration show. The California grade of gasoline known as Carbob also saw inventories drop to 8% below the five-year average for this time of year, according to the California Energy Commission.

Refiners in the state are running harder, but hot weather and a stressed power grid may be causing some problems. Excess heat challenges the water cooling system in refineries, and one way to handle it is to cut operation rates, said John Auers, managing director at RBN Energy.

“Heat, along with the way the power grid is being managed, can be contributing to the refinery issues,” Auers said in a phone interview. A string of incidents recently surfaced in Southern California and may have spooked traders in the spot market, which sets the basis for retail prices.

Click here to read the full article at the OC Register

Congress Just Passed the Inflation Reduction Act. It Will Hike Taxes on Some Middle-class Households.

It also spends billions on new green energy programs, and it lets the IRS hire 87,000 new agents.

Congressional Democrats have put the finishing touches on a questionable bet: that higher taxes will help tame rising prices, and that voters will reward the effort.

On Friday afternoon, the House of Representatives approved a $300 billion tax hike with a party-line vote, 220–207, sending the Inflation Reduction Act to President Joe Biden’s desk. It passed the Senate with a similar party-line vote on Sunday.

Despite the bill’s name, independent analysts have found it will have virtually no impact on inflation. In reality, it is a pared-down version of what Biden originally pitched as the “Build Back Better” plan—it leaves aside much of the original bill’s spending, but it maintains a huge corporate tax increase, huge spending on green energy initiatives, and a plan to swell the ranks of IRS agents. What was originally a roughly $4 trillion proposal that would have relied heavily on borrowing ended up being something of a rarity in Washington: a bill that will raise more revenue than it spends.

And where will it get that revenue? Quite possibly from you. Households earning as little as $50,000 annually are more likely to see a tax increase than a tax break from the legislation.

In the final hours before the House vote, the Joint Committee on Taxation (JCT) completed a breakdown of how the bill’s corporate tax increases would affect households at various income levels. The JTC, a nonpartisan number-crunching agency within Congress, found that households earning between $50,000 and $75,000 are more likely to see a tax increase than a tax decrease next year.

Higher-earning households are more likely to see tax increases, but households earning more than $1 million next year are actually far more likely than lower-earning households to get a tax break.

That fits with what The Tax Foundation, a tax policy think tank, found when it analyzed the bill. The Inflation Reduction Act will “would also reduce average after-tax incomes for taxpayers across every income quintile over the long run,” the Tax Foundation reported on Wednesday. Those tax increases will reduce long-term economic output by about 0.2 percent and could eliminate 29,000 jobs, the group found.

Democrats pushed the bill as a cost-cutting measure that would help Americans make ends meet, reduce the federal budget deficit, and help protect the environment.

“It makes a difference at the kitchen table,” Pelosi said at a press conference on Friday morning. “And at the board room table, corporations will now have to pay their fair share.”

If only those two things could be separated as cleanly as Pelosi implies. Tax increases on corporations get passed along from the board room table to the kitchen table in a variety of ways: lower pay for workers, higher prices for consumers, and smaller investment returns for shareholders.

As Reason has detailed a length in recent weeks, other aspects of the bill also leave much to be desired. It would dedicate about $300 billion of new revenue to reduce the long-term budget deficit, but that aspect of the bill is probably better understood as a plan to actually pay for about an eighth of the borrowing that Congress has approved since Biden took office. Meanwhile, giving the IRS a massive budget boost so it can hire 87,000 new agents likely means more tax audits aimed at the middle class, no matter what Democrats are currently claiming. The expanded subsidies for purchasing of health insurance via the Affordable Care Act’s marketplaces is likely to push inflation higher. And the bill’s aim to reduce carbon emissions to 40 percent below 2005 levels by 2031 may be plausible, but just barely.

Perhaps the only aspect of the Inflation Reduction Act that’s as bizarre as its name is the meta-analysis of the bill that’s been taking place in political media. Its passage is a “win” that “could give Democrats a boost heading into the midterms,” according to NPR. It “will help validate the Democrats’ monopoly on political power in Washington and hand Joe Biden a notable presidential legacy ahead of November’s midterm elections,” gushed CNN’s Stephen Collinson.

Time will tell, but this sounds like a reprise of the claims that were made after last year’s bipartisan infrastructure package—which, regardless of what you think about its merits, plainly hasn’t done much to reverse Biden’s flagging approval rating.

Click here to read the full article at Reason

A Win for Direct Democracy and Taxpayers in San Bernardino County

Entrenched politicians loathe the tools of direct democracy, which include the powers of initiative, referendum, and recall. Both at the state and local levels, they do everything they can to limit the exercise of those powers, including going to court to nullify what voters do at the ballot box.

That’s what happened with Measure K in San Bernardino, which amended the County Charter to impose a one-term limit on members of the Board of Supervisors and reduce their pay from more than $200,000 per year to $5,000 per month. The Red Brennan Group, which spearheaded Measure K, said it puts the Board of Supervisors’ salary on par with the median household income in the county, and that a one-term limit would incentivize elected officials to focus on serving the public rather than maneuvering for reelection.

Unsurprisingly, Measure K was extraordinarily popular with voters who passed it by a two-thirds majority (66.84%). But while the citizens of San Bernardino County were celebrating, the Board of Supervisors launched a counter-attack by filing a lawsuit to get Measure K nullified. The Red Brennan Group stepped up to defend their initiative and the Howard Jarvis Taxpayers Foundation sent a friend-of-the-court brief supporting the legality of the measure.

Along with their lawsuit challenging Measure K, the Board of Supervisors ran to their allies in Sacramento to change the law in a way that would undercut the initiative. Assembly Bill 428 would prohibit term limits of less than two terms for a County Board of Supervisors and further provided that a Board can set the pay of its own members. The Howard Jarvis Taxpayers Association objected to the bill and argued that it thwarted the will of the voters in San Bernardino. The author of the bill, Assemblyman Chad Mayes, I-Yucca Valley, denied that his bill would have that impact but his representations lacked credibility. Eventually, he relented and agreed to insert language into the bill that made clear it would “not affect any term limits that were legally in effect prior to January 1, 2022, in any county.”

Last week, an appeals court issued a tentative ruling in the lawsuit and sided with the voters, upholding Measure K’s one-term limit and the cut to the supervisors’ pay. The court also vindicated HJTF’s interpretation that the original version of AB 428 was an attempt to thwart the will of the voters in San Bernardino.

Noting that the amendment resolved any ambiguity, the court wrote, “Plainly, then, the Legislature did not contemplate that AB 428 would undo Measure K. To the contrary, it agreed with the Jarvis Association that the unamended version threatened Measure K, and thus it amended AB 428 so as to let Measure K stand.”

It’s satisfying to be recognized for the work HJTA does in defense of taxpayers, not only the hundreds of thousands of HJTA members, but all the California taxpayers whose interests are rarely represented by their elected officials.

Click here to read the full article in this the OC Register

California’s Budget Substance is as Bad as the Process

This column addresses budget issues frequently and, most recently, reported on how broken the budget process is. While the “budget bill” is constitutionally mandated to be enacted by June 15, it only passed by that date for one reason — so the legislators could continue to receive their paychecks.

Photo courtesy Franco Folini, flickr

Moreover, since the enactment of the budget, there have been two so-called “junior budget bills” amending the fake June 15th budget and around 30 so-called “budget trailer bills” directing the spending of billions in ways that the budget bill itself did not direct.

But it isn’t just the budget process that is wholly broken, the actual substance of the bill reveals perverse spending priorities. Let’s start with the size of this gargantuan budget. One veteran political reporter, who has followed state budgets since the 1960s, remembers when the budget was $3 billion. It has grown since then by 100-fold to a staggering $300 billion.

The old saying that the bigger they are, the harder they fall, can be applied to the California state budget. There remains a legitimate question whether massive new spending programs can be sustained when, not if, we have a major recession, as more and more economists and business leaders are predicting.

For taxpayers, priority number-one in this year’s budget was the long-promised gas tax relief. This is especially important since, on Friday, California’s gas tax went up by about three cents. That might not seem like a lot, but we already had the highest gas tax in the nation. So, while other states are providing immediate gas tax relief directly at the pump, California will not.

Rather than do the right thing and suspend the gas tax for a year — a quick, simple and low-cost solution recommended by Republicans—the governor and Democrats in the legislature agreed on a $9.5 billion tax rebate program which will attempt to target refunds based not on the amount of taxes paid, but on need and family size; and not now, but just before the November election.

Another example is Assembly Bill 208 that will create a new excise tax on lithium extraction. Why? Because lithium is crucially important for battery manufacturing and there is something of a gold rush on lithium occurring in the Salton Sea. The Legislature intends to get in on the action.

The Legislature’s plan would impose a tax of $400 to $800 per metric ton of lithium extracted in California. The industry says that could discourage investment and make locally sourced lithium more expensive than imports coming from half a world away. Currently, lithium is imported from countries including China, where the lithium industry has been tied to forced labor and environmental degradation.

Meanwhile, the California Energy Commission estimates that there is enough lithium in the Salton Sea to meet America’s lithium needs and up to 40% of the world’s demand. Further, it has been reported that the Salton Sea could produce the world’s “greenest” lithium and that the lithium industry has the potential of breathing economic life back into a region that faces high rates of unemployment and suffers health impacts from the drying sea.

Disincentivizing our local lithium industry through taxation is counter to California’s climate and labor values and bad for Riverside and Imperial counties, our state, the United States, and the world.

Space limitations prevent a full airing of all the silliness to be found in the state budget, but this one caught our eye. One of the post-budget “trailer” bills revealed Gov. Newsom’s obsession with poking at pro-business states like Texas and Florida. The bill would give special consideration to businesses seeking state “Go-Biz” grants if they’re relocating jobs away from a state that limits access to abortion or “permits discrimination” on the basis of sexual orientation, gender identity, or gender expression. Apparently, Newsom believes businesses will be more attracted to California for its woke purity than they are repelled by its high taxes and burdensome regulations.

Click here to read the full article in the Redlands Daily Facts