‘Parking Bill of Rights’ and Other Commonsense Measures to HELP Californians

parking ticketSo much of what comes out of the Capitol hurts average Californians. Efforts to impose new taxes, onerous regulations or laws that dictate lifestyle choices like how much soda one drinks, have citizens ducking for cover. But every now and then, bills are introduced that cut against the stereotype by providing genuine benefit to average folks who don’t have the “juice” in Sacramento as do powerful, well-funded special interests.

Assemblyman Mike Gatto has introduced Assembly Bill 2586, legislation that would make parking, which has become a nightmare in many communities, a bit easier. Titled the “Parking Bill of Rights,” the common sense measure features a package of reforms that include requiring cities to promptly make spaces available to motorists after street-sweeping activities have concluded, prohibiting cities from ticketing motorists who park at broken meters, preventing valet-parking operators from excluding motorists from metered spots, and prohibiting cities from hiring private companies to act as parking “bounty hunters.”

“Occasionally the state needs to step in and remind our local governments that parking a vehicle should be an efficient practice, and not another big hassle designed to separate motorists from their money,” said Gatto. “These simple and practical policy changes will make life easier for Californians who just want to park their cars and go about their business.”

Another bill that will assist middle class families is Senate Bill 874. Authored by Senator Ted Gaines, it would simply increase the dependent child tax credit by 25 percent to $422. That might not seem like a lot of money to big union interests or corporations, but California has one of the highest costs of living in America. For a struggling family, a few hundred bucks buys groceries and shoes for the kids.

Two more bills are sure to be warmly received by older homeowners, a major constituency of Howard Jarvis Taxpayers Association. Senate bill 1126 by Senator Jeff Stone would eliminate the 2 percent inflation allowance for seniors of modest incomes. While the two percent rate cap provides great tax relief for most homeowners, even that modest amount is too high for some seniors who are barely able to hold on to their homes.

The other “senior friendly” bill is Assembly Bill 2691, the Monthly Property Tax Payment Program, by Assemblyman Chris Holden. This measure would permit a County Board of Supervisors to approve an ordinance allowing taxpayers over the age of 62 or a person receiving SSI income for a disability, regardless of age, to pay their property taxes monthly instead of twice a year. While not cutting their tax liability, this would help older folks and the disabled to budget for their property taxes.

We won’t know the ultimate fate of these four legislative proposals for a few months. But the mere fact that they are introduced at least allows a discussion to start about how the California Legislature can help the middle class and retired homeowners instead of looking out for powerful special interests who are the reliable sources of campaign contributions.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

This piece was originally published Fox and Hounds Daily

Fed’s monetary policies stoke income inequality

MoneyIncome inequality has been in the public consciousness recently, causing policymakers to redouble our efforts to remediate poverty and preserve what is left of the middle class. But aside from a small group of contrarian economists, few people, and most certainly few policymakers, have been willing to discuss the primary cause of income inequality in the last generation.

When Congress created our central bank, the Federal Reserve, its missions were to be a “banker’s bank,” a lender of last resort for banks whose deposits were overextended or loans oversubscribed, and to hold enough gold in reserve to meet the needs of the nation during economic panics. Those functions are how it got its now somewhat deceptive name, which implies that the Federal Reserve is a place where money is stored “in reserve.”

In modern times the Federal Reserve’s primary undertaking has been tinkering with interest rates, to fulfill its modernized mandates of controlling inflation and assuring full employment. It hasn’t done a great job at either, and has created a damaging wealth disparity that will affect our nation for generations.

American wealth disparity now exceeds the vast chasm of the Gilded Age, immediately before the Great Depression. Income inequality in the U.S. is so extensive that our own CIA compares us to such kleptocracies as Cameroon and Russia. A short, 10-minute drive through Los Angeles exposes this disparity, in our own backyard. California of the future runs the risk of devolving into Marie Antoinette’s France, where the oblivious rich ostentatiously display their fortunes, while scores of commoners look on with a mix of envy and rage.

The Federal Reserve plays the predominant role in this condition. In the last decade, it has created trillions of dollars and kept interest rates epochally low. “Printing” money invariably leads to inflation somewhere, and for a long time, the Fed’s actions drove up the cost of everything from food to gasoline. To avoid runaway inflation, our nation had to change. The last domino before runaway inflation is wage inflation. To keep up with the rising cost of goods, wages must increase too. But this has not happened. The average family today makes about as much as they did in 1980.

This is because the system — Congress, corporations, and covetous world leaders — instead reacted with globalization, i.e., free-trade agreements and a complete liberalization of trade and tariff policies that took jobs like manufacturing, previously done by well-paid Americans, to sweatshops overseas. Many American families can no longer afford the things we want, from air conditioners to iPhones, unless they are made overseas with $5-a-day labor.

But the Federal Reserve’s biggest contribution to wealth disparity, and the one that will take generations to change, is the effect of its money-printing policies on asset prices. The newly created money cascading down Wall Street must be invested somewhere.

The property and stock-market bubbles, which the Federal Reserve now acknowledges it created, have benefited the gentry, because the rich own far more property and stocks than the poor. When those assets geometrically expand in value but wages stagnate, the result is tremendous wealth disparity. Yet when the Fed-created bubbles contract, the middle-class wage earners foot the bailout bill.

Are there small-scale solutions available to policymakers? Sure. For example, I support raising the minimum wage. But many of these efforts amount to using a squirt bottle to extinguish a three-alarm fire. They are not enough. Raising someone’s pay from $25,000 a year to $29,000 every 10 years will not foster a more egalitarian society if easy-money policies continue to expand geometrically the vast fortunes of the fantastically rich.

The people who created our nation explicitly prohibited royalty, and warned that vast concentrations of wealth could make our nation like the tumultuous societies many Americans tried to escape. Lawmakers at every level of government — and citizens, alike — should question the monetary policies of the unelected Fed bureaucrats. I fear that their far-reaching decisions are enshrining an inequality in our society that no legislation at the federal, state or local level can ameliorate.

Assemblyman Mike Gatto, D-Burbank, represents the 43rd District.

Originally published by the Los Angeles Daily News

Why Taxing Services Is Bad for California

With last fall’s election of former Assembly Speaker Robert Hertzberg to the State Senate, and the introduction of his Senate Bill 8, there is renewed interest in “tax reform” at the California Legislature and specifically expanding the sales tax base to include services. This call for “reform” is premised on the belief that it will address “volatility” in our state’s finances.

However, “volatility” – fluctuations in General Fund revenues – comes instead from our state’s over-reliance on income taxes (primarily stock options, capital gains and dividends) paid by the top income earners (the top 1 percent generate over 40 percent of PIT revenue). Taxing services will not bring stability to the state’s overall revenue streams.

Moreover, a tax on services is a direct tax on labor. California already has the second highest unemployment rate in the nation according to the U.S. Department of Labor in December. Taxing services that are proposed by SB8 will tax services that rise and fall with the economy, but exempt services that are less impacted by the general economy (i.e., medical care and education).

Taxing services has been considered by the state Legislature on multiple occasions, most recently in two different bills in 2012. Those measures were the subject of intense lobbying in the State Capitol.  Assembly Bill 2540, proposed by Assemblyman Mike Gatto, D-Glendale, would have taxed specific services that the author believed would be used only by top income earners in the state.

On the other hand, AB1963, by former Assemblywoman Alyson Huber, D-El Dorado Hills, initially took a broader approach, but ultimately made it through the Legislature to simply have the Legislative Analyst study the taxation of services in this state.  However, Governor Brown vetoed that study bill. No measures were considered during the past two years.

In general, extending the sales tax to services in California could take several forms, such as taxing all services or a select number of them, and possibly lowering the rate for all purchases, although Senator Hertzberg does not contemplate that approach in SB8. Instead, he intends to generate $10 billion annually in new taxes and primarily spend these new tax revenues on education.

Current California law, contained in the Sales and Use Tax Law that is administered by the State Board of Equalization, imposes a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use or other consumption in this state of tangible personal property purchased from a retailer for storage, use or other consumption in this state.

The fundamental argument of those advocating for a tax on services is that California’s economy has changed dramatically from one based upon manufacturing products to one based on providing services.  As such, they argue the sales/use tax does not generate sufficient revenues because it is not taxing services, which account for a large majority of the state’s economic activity. Because of this, proponents argue, our state’s tax system has not “kept up with the times.”  Some even call the lack of a tax on services to be “unfair and unjust.”

However, taxing services would be bad for California’s business climate and would unnecessarily increase state tax revenues despite the fact that we have one of the highest personal income and corporate income tax rates in the nation. To make matters worse, our base sales/use tax rate is the highest in the nation.

California currently imposes a tax on a few services (e.g., printing and fabrication). In fact, only a handful of states tax more than 10 services. Only four states tax all services (Hawaii, New Mexico, South Dakota and West Virginia), and those are not major competitor states to California. Hawaii is the only state that taxes all professional services, with New Mexico and South Dakota taxing a number of professional services.

Several states imposed taxes on services, only to repeal them shortly thereafter (Florida and Michigan).  Maryland and Massachusetts actually repealed their services tax legislation before it went into effect. It is also important to note the entire tax structure of those states.  For example, Delaware taxes 142 listed services. However, Delaware is one of five states that does not impose a sales/use tax on tangible property.  Washington State taxes 152 listed services. However, Washington is one of four states with no personal income or corporate taxes.

We believe there are numerous shortcomings to taxing services in this state. As the state Board of Equalization has pointed out, as well as the Legislative Analyst, there are a number of policy considerations to take into account in considering whether to tax services in California.  Key among the issues raised is the administrative feasibility of such a proposal.  It will be difficult for both business owners and the state BOE to properly identify and track the information required. For example, there are thousands of businesses in this state that are not registered with the BOE because they do not currently have sales/use tax collection and reporting obligations to the state.

Moreover, the BOE notes that taxing services may create “perverse incentives.” The BOE explains that taxing a specific service might encourage consumers to purchase the service from out-of-state providers, thereby creating a competitive disadvantage for California businesses. The more expensive the service, the more in taxes that would be paid which, in turn, will create a stronger incentive to move the business out-of-state.

Furthermore, the BOE and LAO note the general call for avoiding the taxation of services used primarily by businesses. They contend that most economists and tax experts agree that states should avoid expanding the sales tax to cover services used primarily by businesses because any sales tax paid by a business will be factored into the prices it charges for goods and services, which would also potentially be subject to tax, thereby creating “a tax on a tax” scheme.

In addition, California’s existing sales tax law is inherently regressive because lower-income individuals typically spend a larger percentage of their earnings on taxable goods. By expanding the sales tax base to include services, the state’s sales tax will become more regressive as many of the services to be taxed will be paid for by lower-income citizens.

Moreover, a tax on services would harm those companies that have to contract for services, but not affect those that can provide the same services in-house. Small businesses, which most often contract for support services, would be forced to pay sales taxes. As a result, the tax burden would fall more on small and mid-sized businesses.

Finally, this taxing services proposal has to be put in the context of all the other major costs of doing business in this state. Employers in California are already facing significant increased costs of doing business due to increased personal income and sales taxes under Proposition 30, higher workers’ compensation rates, higher minimum wage, reduced federal unemployment insurance credit, higher energy costs, and increased costs due to the implementation of the Affordable Care Act. California has the highest personal income tax rate, highest state sales tax rate, highest corporate taxes in the western U.S., and the second highest gas tax in the nation.

Chris Micheli is a Principal with the government relations firm of Aprea & Micheli Inc.

4 Online Poker Bills Square Off in CA Legislature

This year could bring gambling to Internet users in California. For years, online poker has been legal in the United States, but not in the Golden State. Now, amidst a host of competing interests, a spate of new bills has emerged in the hope of changing that.

Four pieces of legislation have been put into play: AB9AB167, and two identical bills, AB431 and SB278. Of these, AB9 and AB167 have attracted the most attention.

Lawmakers have hesitated to act boldly, unsure which constituencies should be treated most favorably. But after so much wrangling, some kind of consensus has seemed inevitable: as analysts have agreed, the money in online gambling is too big to ignore.

Tough choices

The market for Internet poker has grown large enough that its would-be masters haven’t hesitated to push and pull for influence in Sacramento. As U-T San Diego reported, legislators still disagree strongly, however, about how to choose among “card clubs, Indian tribes, race tracks and out-of-state gaming companies,” all of which want to play a leading role:

“Lawmakers and these groups have failed for nearly a decade to craft rules for who should control state-regulated poker sites and how much they should pay to do so. During this time, thousands of California poker players have migrated to playing online through unauthorized, often untrustworthy sites based overseas, letting industry and tax money slip away.”

Much of the uncertainty in the Legislature revolved around the way the law should treat California’s Indian tribes, some of which have proven especially eager to get in on the action. That question, in turn, has long been tangled up with controversies over federal policy.

Attention has focused around America’s biggest online poker website, an out-of-state business called Pokerstars. Because it has been working with California’s Morongo Band of Mission Indians and San Manuel Band of Mission Indians, Pokerstars has a vested interest in taking a robust share of the online poker business under a new regulatory regime.

But as the Sacramento Business Journal noted, a rival group of Indian interests, including the Pechanga Band of Luiseno Indians and the Agua Caliente Band of Cahuilla Indians, has accused Pokerstars of raking in illegal profits between 2006 and 2011, when Congress briefly had outlawed online poker as a matter of federal law.

Rival tribes, rival bills

As a result, divisions on legislation have gathered around the battle lines set by the tribes. Pechanga and Agua Caliente have sided with AB9 — authored by Assemblyman Mike Gatto, D-Glendale — because it contains a so-called “bad actor” clause, barring Pokerstars from entering California’s online gambling market.

Morongo and San Manuel, meanwhile, have rallied around AB167, introduced by Assemblyman Reggie Jones-Sawyer, D-Los Angeles. In lieu of a bad actor clause, that bill would punt to the state Department of Justice on which companies could and couldn’t participate.

In an effort to break the impasse, yet another alternative was recently introduced by State Sen. Isadore Hall, D-South Bay, and Assemblyman Adam Gray, D-Merced. Their identical bills are AB 431 and SB 278.

In a statement, the two allies played up their potential to reach a consensus through their legislative authority:

“Hall and Gray serve as Chairmen of each legislative house’s policy committee that oversees gaming within the state and are best positioned to lead a productive dialogue on an iPoker regulatory framework. By working together, their legislation seeks to build consensus on a public policy matter that has eluded California for years.”

Persistent challenges

Despite the substantial market, the lack of movement on online gambling has been attributed to several stubborn factors. As Gatto explained at the recent iGaming Legislative Symposium, legislators have proven risk-averse, and Californians haven’t exactly pushed them to action:

“If we pass a great bill, this isn’t going to make my career in terms of the voting public, and if we don’t pass a bill it’s not going to break anyone’s career. If you went to the average person on the street, I don’t think they’d even have an opinion on this and they would just want to know am I going to see some tax dollars go to my school and my neighborhood.”

Last year, Gatto noted, no more than five constituent emails out of 57,263 sent to him concerned online poker.

Originally published on CalWatchdog.com

Bill Aims to Crack Open SoCal Carpool Lanes

carpool-lane

As reported in the San Diego Union-Tribune:

 — State lawmakers again this year will debate whether to crack open some of Southern California’s carpool lanes to all drivers before and after rush hours.

Most of the region’s carpool lanes, including stretches on San Diego County’s Interstates 5 and 805, are restricted 24/7 to vehicles with at least two occupants. Not so in Northern California, where the diamond lanes are open to all outside of commute hours, and have been for decades.

Assemblyman Mike Gatto, D-Glendale, introduced AB 210 last week that would require Caltrans to open diamond lanes along portions of state Routes 210 and 134 in Los Angeles County to all drivers during non-commute hours. It would be a pilot program, though Gatto has said he would like to see the change made statewide. …

Click here to read the full story

Ending the DNA Storing and Tracking CA Kids

A new bill seeks to eliminate the California “biobank” created last year over strenuous objections from privacy advocates and some judges.

Assembly Bill 170, introduced by Assemblyman Mike Gatto, D-Glendale, aims to curb the broad and longstanding practice of acquiring and storing the DNA of children born here. The bill, California Newswire reports:

“would strengthen the notice requirements when dried blood spot (DBS) samples are taken from newborns to screen for diseases.

“Gatto’s proposal would require that parents be provided information regarding the retention of DBS samples, including the parents’ right to request the destruction of their child’s DBS. The bill would further permit children to request the destruction of their DBS when they reach adulthood.”

In a press release, Gatto cast AB170 as a defense of Californians’ fundamental privacy interests. “Whenever data is stored, data can fall into the wrong hands. Imagine the discrimination a person might face if their HIV status, or genetic predisposition to a mental disorder, were revealed to the public,” he said. “Parents should have the right to protect their children and people should have the right to control how their personal medical records are used once they reach adulthood.”

Courting controversy

With the bill, Gatto has stepped squarely into a major debate over a rights issue that reaches to the highest levels of the U.S. courts. In Maryland v. King, a 2013 case, the U.S. Supreme Court narrowly upheld a Maryland law that permitted cops to sample DNA in the course of arrest for serious crimes.

As the Washington Post summarized the decision, the justices “ruled 5 to 4 that government has a legitimate interest in collecting DNA from arrestees, just as it takes photographs and collects fingerprints. Rejecting the view that the practice constitutes an unlawful search, the majority said it was justified to establish the identity of the person in custody.”

But that was not the end to legal challenges of DNA takings. In Haskell v. Harris, in March 2014 the 9th Circuit Court of Appeal confronted a class action lawsuit claiming California’s genetic swab policy amounted to an unconstitutional search and seizure. The law authorizing cops to swab after a felony arrest dated to 1998, when the DNA and Forensic Identification Database and Data Bank Act was approved by voters for inclusion in the criminal code.

But the 9th Circuit ruled strongly in favor of the law in light of Maryland v. King.

The plaintiffs had argued “that California’s law is broader than Maryland’s and threatens privacy rights more,” as the San Jose Mercury News reported. But the 9th Circuit rejected that reasoning.

To the frustration of civil liberties advocates, both the Obama administration and California Attorney General Kamala Harris sided with the state of California and against the plaintiff, “citing the national importance of DNA collection laws that 28 states have enacted.”

Despite these setbacks for civil libertarians, the matter was still not settled. In Dec. 2014, a panel of the First Appellate District Court in San Francisco ruled 3-0 that the collection of DNA in the course of an arrest was unconstitutional. The trial court in the case had authorized police to use “reasonable force” to obtain a sample of the plaintiff’s DNA.

So the matter of DNA collection still is not entirely settled.

Security vs. choice

Similar claims to take DNA samples based on the public good have come into play in the brewing fight over Gatto’s legislation. California’s biobank, the Los Angeles Times notes, “holds blood taken with the prick of a heel from almost every baby born in California for the last three decades. It is used to screen for 80 health disorders, such as cystic fibrosis and sickle cell anemia. Unlike most states, California keeps the frozen samples indefinitely and shares them with genetic researchers, for a fee.”

Supporters of the procedure, including state officials, argue “the samples are secure and are used to save lives,” supplying researchers with an adequate supply of genetic material to conduct important tests and work toward advancing public health.

In that way, the fight over AB170 pits two big public policy objectives against one another: security versus choice. This creates yet another uncomfortable cleavage between Democrats.

While one wing of the party has fully embraced a role for government in the details of everyday life, another wing has bridled against what it perceives to be invasive violations of individual rights. For the former, the debate over DNA comes down to the importance of security; for the latter, it comes down to the primacy of informed choice.

Originally published on CalWatchdog.com

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