Los Angeles Laboratory for Local Tax Increases

taxesIn the primary election this month 89 local taxes and bonds faced voters. The total is expected to increase in November. In some jurisdictions voters likely will face multiple tax increases dedicated for different purposes.

Los Angeles is a prime example.

Today, the transportation agency known as Metro is considering a half-cent sales tax to fund transportation projects. Los Angeles already has a sales tax for transportation but it has an end date approaching. No end date on the new tax proposal. In a change of tactics, Metro leaders decided to extend the sales tax on a permanent basis.

Los Angeles city residents will probably also face a bond or parcel taxes to fund homeless remedies. The city council plans to move both measures forward, making the final decision on which mechanism to advance to the ballot once council members can further “study” the issue.

Consider that shorthand for which version polls better.

In fact, polling already seems to be moving the decision makers to consider a bond to benefit the homeless. Voters often look at bonds as free money, not realizing that they are funded by property tax increases. Polling shows greater acceptance for bonds than parcel taxes, which have the dreaded “tax” word attached.

In reality, a $1 billion bond would cost twice as much as the $1 billion parcel tax program because of the interest to pay the bond. Parcel taxes have their own issues that could upset a campaign to achieve the necessary two-thirds voter for passage, the same mark bonds must hit. Would a parcel tax be levied per parcel or per square footage? Square foot charges are aimed at collecting more revenue from larger, commercial properties, which likely would open the door for an opposition campaign funded by business. In addition, a square footage tax may be challenged as unconstitutional.

Despite the economics of the more expensive bond proposal, the politics favor pursuing that approach.

Meanwhile, Los Angeles County is considering a parcel tax for parks. The county also considered raising an income tax for the homeless but that plan has sputtered. It required state approval which it did not get. The parks proposal would more than double revenue now brought in by the property assessments that currently help fund county parks. Again, business is opposed to the square foot method and has informed county supervisors that so many, varied tax measures cannot be justified.

In addition to local taxes, voters will face statewide tax measures on the ballot. The $2 a pack cigarette tax increase and the Proposition 30 income tax extension initiatives are both expected to be on the ballot. And, let’s not forget that the marijuana legalization measure has a tax attached to the growth and sale of cannabis.

Analysts wonder how voters will react to an onslaught of taxes. The question is particularly of concern in localities like Los Angeles if all the taxes are placed on the ballot. Many of the local taxes and bonds, unlike the state measures, require a two-thirds vote to pass.

My guess is that multiple tax measures will benefit opponents who need just over one-third of the vote to defeat most tax measures.

ditor of Fox & Hounds and president of the Small Business Action Committee.

This piece was originally published by Fox and Hounds Daily

New Sales Tax Hike for Transit Doesn’t Add Up for Taxpayers

http://www.dreamstime.com/-image18514272Math is a funny thing.

Take averaging, for example. Mark Twain observed that if you have one foot in a bucket of ice and one foot in a bucket of boiling water, on average you’re pretty comfortable.

Similarly, consider subtraction. Somehow, government officials have calculated that subtracting money from your wallet for taxes actually puts more money in your pocket.

That’s the conclusion of a recent study of the economic effects of Measure R, the 2008 increase in the L.A. County sales tax of one-half of one percent to fund transportation projects.

The Los Angeles County Economic Development Corporation determined that over its 30-year lifespan, the Measure R sales tax will create $80.7 billion in economic output while costing each resident just $25 a year in higher taxes.

The Society of American Magicians prohibits them from revealing how this trick is done, but they can’t stop me from exposing the secret.

It’s done with mirrors. A typical dollar spent by the Los Angeles County Metropolitan Transportation Authority (Metro) is counted three times: once when Metro hands it to a contractor, once when the contractor hands it to a union construction worker, and once when the worker spends it on rent, food, car payments or entertainment. They call these reflections the “direct,” “indirect” and “induced” effects of spending.

This “multiplier effect” would work if the money spent by Metro was earned by Metro. But it’s not. It’s earned by you, and then taken from you with a higher sales tax.

The study uses another trick, division, to determine that this higher tax costs each resident only $25 per year. Using multiplication instead, the 30-year cost of Measure R comes out to $3,000 for a family of four.

Figured another way, if the 10 million residents of L.A. County didn’t have to pay that $25 per year in extra taxes, they would have an extra $250 million annually, $7.5 billion over 30 years, to spend on whatever they personally find useful. Add the multiplier effect to those numbers, without government middlemen, for a true picture of what’s lost to higher taxes.

Now Metro wants taxpayers to cough up another $120 billion for more transit projects. The money would come from adding more years to the 30-year Measure R tax and hiking the sales tax by another half-cent per dollar, raising L.A. County’s sales tax rate to 9.5 percent for 40 years.

The transit agency would then borrow against the future sales tax revenues to start spending the $120 billion immediately.

Just how much is $120 billion?

It’s enough to pay for the repairs and deferred maintenance of every freeway in California for the next 10 years, twice.

It’s enough to build 120 desalinization plants like the one in Carlsbad that’s supplying 7 percent of San Diego’s water.

It’s enough to pay off the student debt of everyone who was enrolled in a four-year college or university in California in 2014. Seven times.

But Metro wants to spend $120 billion on a long list of public transit projects, even though ridership on public transit is declining. Metro boardings are down 10 percent since 2006 despite $9 billion of spending on rail.

Metro CEO Philip Washington says ridership will increase when the system is fully built out. “We’re not building for today,” he said recently, “We’re building for 100 years down the road.”

A hundred years ago, a telephone looked like a black candlestick. It didn’t have GPS or a camera. It didn’t have a keypad, or a dial, or Angry Birds. It didn’t even have a ringtone unless you count the bell in the box on the wall.

If the people of 1916 had designed a communications system for “100 years down the road” and racked up $120 billion in debt to pay for it, we’d still be paying taxes for something that was long gone; and we’d be wondering why our taxes are so high, and why there’s never enough money for road repair or water projects or education.

That’s what happens when governments run up too much debt, as ours already have—local, state and federal alike.

Multiply that by your children’s future, and then by your grandchildren’s future.

And when you see Metro’s sales tax increase for transit projects on your November ballot, don’t get taken for a ride.

WP2Social Auto Publish Powered By : XYZScripts.com