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April 23, 2003

FEES, NOT TAXES....FEES, NOT TAXES....I've never been able to work up a lot of interest in California politics. I don't know exactly why, but I suppose it's mainly because Sacramento politics is such a cesspool that it makes Congress look like a bunch of do-gooding Model UN participants.

Democrats here control both legislative houses by massive margins, but California law requires the annual budget to be passed by a two-thirds vote, and since the Dems don't quite have a two-thirds majority they can't just tell the Republicans to fuck off, as they would dearly like to. The Republicans, for their part, in an effort to somehow make the Democrats actually look good, have flatly refused to consider any tax increases this year despite the fact that we have a $35 billion — and growing every day, it seems — budget shortfall.

What do do? Answer: blackmail. It turns out that although the Democrats can't raise taxes on their own, they can raise fees without Republican help. So they are threatening to unilaterally raise the following potpourri of fees:

  • Diapers — a quarter cent per nappy

  • Cocktails — a nickel a drink

  • Cigarettes — 87 cents per pack

  • Dry cleaning fluid — $3 per gallon

  • Disposable cups — 2 cents per cup

  • Jewelry — new fees on mine operators

  • Munitions — a dime per bullet

  • Gasoline — a buck a barrel

  • Lightbulbs — a nickel each

So what makes a fee a fee? It has to be something that goes toward mitigating things that harm the health of Californians.

Right. But diapers? Landfills, it turns out. Too many disposable diapers in landfills.

Anyway, this is what California politics is like. Are the Democrats serious? Or are they just trying to propose something so horrific that Republicans have no choice except to buckle under and get down to serious negotiating? Who knows. And thanks to term limits, not a single one of these yahoos has more than a few years experience with this stuff. Talk about a toxic combination.

Posted by Kevin Drum at April 23, 2003 08:34 AM | TrackBack


Comments

I remain convinced that the Republican Party in California is suicidal. It keeps adopting positions that make suburban moderates shudder - and this ensures that, no matter how much they can't stand the Democrats, they can't stand the Republicans more.

Posted by: aphrael at April 23, 2003 08:40 AM | PERMALINK

So maybe I'm an environmentalist curmudgeon - but what on earth is so horrific about a tax on disposable cups?

Posted by: yami at April 23, 2003 09:05 AM | PERMALINK

I don't object to most of the fees in and of themselves. But state constitutional law requires that the fees go to fund related programs - which means that there's going to be an immense administrative cost devoted to ensuring that the money from origin X goes to destination Y. That's going to lead to more expensive, less efficient government - and a bizarre bureaucratic maze that will be next to impossible for anyone to navigate in the future.

This is just about the worst imaginable way to handle budgeting.

Posted by: aphrael at April 23, 2003 09:07 AM | PERMALINK

Raising fees on diapers, cocktails, and gas doesn't seem like a great campaign issue to me, but maybe that is why I'm not a politician.

Posted by: Sebastian Holsclaw at April 23, 2003 09:34 AM | PERMALINK

It isn't a particularly good campaign issue. However, it allows the Democrats to portray the state GOP as obstructionist -- hey, look, we have a $35 billion budget gap. We've cut this, this, this, this, and this, but the Republicans think we should cut some more. In a year where public school teachers are getting laid off en masse, drawing a line in the sand and saying 'no taxes!' is just asking to get your head handed to you on a platter in the next election. And the Democrats can defend absurd fee increases by saying 'well, we wanted to raise money by increasing the income tax for the top 10% but the Republicans wouldn't let us and wanted to close all the county public hospitals instead' and be believed.

Posted by: aphrael at April 23, 2003 09:42 AM | PERMALINK

I found the remark about term limits interesting. Supposedly one of the reasons that term limits were enacted was to get Willie Brown out of power in the CA Assembly.

Willie Brown is now nearing the end of two 4-year terms as mayor of San Francisco, and is about to be run out again due to term limits. I will be glad to see him go. City politcs here aren't any better than they are at the state level. His leaving won't fix all (or even most) of the problems, but it will help.

I do understand the effect term limits have on the experience of the members of a governing body. Term limits seem to me a necessary evil, to keep politicians like Willie Brown from accumulating more power than their elected office actually grants them.

Posted by: David Phillips at April 23, 2003 09:46 AM | PERMALINK

Actually, I'm not all that opposed to term limits, but California's, I think, are too short. I'd probably be in favor of, say, a 12-year term limit. This would allow legislators to gain genuine experience before they assumed leadership positions, but would keep people from making careers out of politics.

Posted by: Kevin Drum at April 23, 2003 10:01 AM | PERMALINK

If I understand correctly, the "spirit" of the fees is that the money is used to pay for hidden costs of health care, environmental remediation, etc. I'm not going to debate the validity of that concept, but instead point out that in the case of firearm ammunition, a fee like this is ludicrous.

Munitions — raise fees a dime per bullet

The VAST majority of all ammunition is fired at a range. The spent bullets and empty shell casings are collected so that they can be recycled. This is done at the expense of the range operator and his customers. Firing ranges are monitored by the EPA, must abide by all pollution regulations, and must pay for any necessary remediation when needed.

In the case of outdoor ranges, the range is responsible for complying with EPA regulations that require that the lead does not contaminate the local environment (groundwater, etc). All at the range operators expense. If the range is closed, the EPA mandated cleanup is done at the range operators expense.

Regarding the manufacture, storage etc. of ammuntion. You guessed it, already quite regulated by the EPA, BATF and friends.

In other words, any environmental costs of firearm ammuniton have already been more than covered. Way more.

What this fee really does is unfairly attack a subset of the population that attempts to maintain firearm proficiency for recreation as well as to perform their civic responsiblity of maintaining their ability to defend themselves.

The power to tax is the power to destroy and this "fee" is just another veiled attack on law abiding firearms owners because they are a minority that cannot fight back. Ridiculously high taxes on bullets will dissuade interested individuals from seeking firearm proficiency and existing users from maintaining proficiency. Not even the most zealous anti-gun advocates spend breath attacking the value of proficiency among law-abiding gun owners.

BTW, anyone that thinks the fee is meant to pay for the cost of the other kind of "lead poisoning", get real! The government only institutionalises homocide committed by it's own functionaries, not the public at large.

P.S. the largest consumer of ammunition is the Fed, State, Local governments. They will, obviously, be exempt from this "fee".

Posted by: Jeff K. at April 23, 2003 10:42 AM | PERMALINK

Not cuts and more taxes, the Democrats rallying cry.

The budget mess in California is simple according to Republican State Senator Tom McClintock -

"California's budget crisis is not complicated and it is not intractable and it is not mysterious. Over the last four years, population and inflation have grown at a combined rate of 21 percent. Revenue has grown 28 percent. Spending has grown 36 percent. Our distress is not for lack of revenue but for lack of discipline. And to restore that discipline, three simple acts are all that is needed to put California's financial crisis behind us."

First, the immediate budget shortfall requires policy makers to abide by the first law of holes: When you're in one, stop digging. Most of California's deficit is not the difference between what it is currently spending and what it is currently taking in. It is caused rather by the projected increases in state spending over the next 18 months. Most of the deficit is not a matter of cutting current spending - but rather arresting the growth in future spending.

That growth is driven by a variety of constitutional and statutory mandates. But virtually all of them can be suspended by the Legislature at any time by the same vote that it takes to enact the budget. The principal exception is service on the debt.

Thus, merely suspending these mandates and reducing current expenditures by 9.5 percent - and then holding at that level for 18 months - would eliminate the deficit without the tax increases, raids on local government, and pilfering of pension and special funds that the governor has proposed.

http://www.tommcclintock.com/news/articles/ar20030129a.htm

Seems simple to me.

Posted by: weimdog at April 23, 2003 11:51 AM | PERMALINK

Since nobody else brought it up, I thought I'd ask if you all are comfortable with politicians that hold us hostage whenever they want something. It kind of shows the lack of respect of representatives for their ostensible duty to those that voted them into office.

I remember a recent report where some politician in California said that since the Feds did not pay the bill for homeland security that they were going to have to close classrooms and cut school budgets. As if there was nowhere else to cut before they hold voter's children hostage to justify higher taxes.

I am really amazed that this kind of behavior is allowed to exist unpunished by CA "voters". I suppose people think that our politicians have some ethical line that they won't cross?

Unethical, amoral people do not have internal standards. They push as hard as they can for all they can grab. If you want them to stop something, you need to push back. It's always easier to nip this kind of thing in the bud, but most people don't and they pay more later.

Posted by: Jeff K. at April 23, 2003 12:09 PM | PERMALINK

Diapers. I had the twins. I know about the diaper stuff. We had a diaper service instead of disposable because I really do care about that environmental stuff. My friends who chose disposables said that the environmental impact of all that wash (electricity to run the washer and dryer and the amount of water used and the dirty water going out to the environment) was worse than the landfill impact. Seemed to me I couldn't win.

Posted by: Justene at April 23, 2003 12:10 PM | PERMALINK

I'm sorry Kevin, I think you and David Phillips are both wrong. Term limits certainly haven't cut into Willie's power any; he just goes on to the next job taking his rolodex with him. And it doesn't keep them from making politics a career either; they just move on to another race. Maxed out as state assemblyperson? How about senator or governor or mayor? The only position they *may* work for is POTUS. I don't think term limits make a lick of sense and they don't actually work in encouraging a more even dispersal of power or citizen politicians. We have them, basically, because the American people are lazy slugs who can't be bothered to actually make choices on their own. Yes, I do seem to be feeling a tad misanthropic today.

MKK

Posted by: Mary Kay at April 23, 2003 12:15 PM | PERMALINK

ndog - I don't know how you can claim that the Democrats' rallying cry has been no cuts and more taxes. The proposal currently before the governor includes, among other things, $1.7 billion in cuts to the state's education system; a reduction of 10% in medical provider rates; a $6.5 million cut to the program that prevents the import of exotic pests; a roughly $1 million reduction in programs like the senior companion program; and, overall, a 16.8% reduction in spending touching every facet of the state government except the prison system.

I ahgree with many of the conservative critiques of how we got here; it is certainly clear that we were relying on the boom-era capital gains income to continue indefinitely. But acknowledging that doesn't give us a way out.

As for holding children hostage - well, if you look here you'll see that education is responsible for 57.2% of the state's expenditures. If you hold that as being untouchable, then your across-the-board cut rate will have to double for everything else.

Fundamentally, this is a problem without easy solutions; and it's clearly not exclusive to California. It's just worse here than anywhere else. And yes, some of the reason that it's worse here than elsewhere is that Davis is incompetent. But lets stop pointing fingers and try to figure out how to get out of it, shall we?

Posted by: aphrael at April 23, 2003 12:23 PM | PERMALINK

Comments like "Population and inflation went up 21%, revenue by 28%, and spending by 36%" certainly sounds simple.

But, the devil is always in the details. For example, and I admit I am making this up, what if the majority of the population increase was in those sectors requiring government money (retired gvmt workers collecting pensions, welfare moms, whatever) and the governments spending happens to be in the areas, such as health care, that have gone up faster than inflation?

What I'm saying is that it might be possible to be very disciplined, and have spending needs still outstrip revenue. Should you stop allowing needy people in? Should you stop paying for health care?

There are tough questions, and no simple answers.

Posted by: Tripp at April 23, 2003 01:03 PM | PERMALINK

aphrael. I will not dispute the rather amazing 57.2% CA school expenditure figure you cite. It is not really the point.

I will just point out that the politician wanted to cut school budgets based on an alleged $1.4B bill incurred for "homeland security expenditures" over the $600 million the Feds had agreed to pay. $1.4B is around 1-2% of the CA state budget. Why do you think that a ~1% shortfall causes a politician to cry from the rooftops, "We're cutting school budgets, were closing schools!", when your figure indicates that almost any change in the budget will involve the school budget and so a small adjustment to this line item is a non-issue? If, on the other hand, the school budget is smaller, why is it immediately whacked onto the school budget?

I'll tell you why. Because the state wants to build support for raising taxes so they are bullying the rather credulous and uninformed public by hitting them where it hurts the most - their kids.

Whether or not CA officials ever cut a dime from the budget (highly doubtful in my opinion), they definitely need to soften up the taxpayers for the inevitable tax increases they plan. These tax increases are required because CA squandered amazing amounts of money during a once-in-a-lifetime bull market instead of using the one-time windfall to pay down debt. and now they are caught in a once-in-a-lifetime bear market with swollen budgets used to gorging on the easy money of the 90's.

Now, getting back to the 57% figure you cite, I found other links that place the CA school expenditures at ~$6B or 6% of the state budget http://www.edsource.org/pdf/dollars01.pdf

"Challenges Facing California's Public Schools
California ranks 7th worst in the country in the total taxable resources spent on public education. Education spending by the state of California and its localities amounts to just 3.1% of its gross state product. NRE and BEA"
http://www.nea.org/goodnews/ca01.html

Actually, I'm starting to wonder if you accidentally moved the decimal point.

Anyway you slice it, we're not getting much bang for our buck, are we?
http://www.laep.org/08_11_00/randstudy.html

Posted by: Jeff K at April 23, 2003 01:42 PM | PERMALINK

JeffK - Your EdSource link doesn't say what you claim it does; it appears to be an analysis of how the average school spends the money it gets from the state.
Your NEA link reports a percentage of _gross state product_ not of _government budget_. These are completely different figures and it is unreasonable to link the two.

The link I provided was saying ~43.6% of the state's budget goes to K-12 education and ~13.6% to secondary education. Given that Proposition 98 required that at least 40% of the state's expenditures be on the public schools, and that the university and community college systems are heavily subsidized by the state, I don't see any reason to disbelieve the figure, and your links don't give me any more reason to.

As for 'CA squandered amazing amounts of money during a once-in-a-lifetime bull market instead of using the one-time windfall to pay down debt' --- the state of California is prohibited by the state constitution from running a budget deficit; unless you think the state should have paid off its voter-authorized bonds early, there was no debt to pay down.

I agree with much of what RAND says. But, note: California's program to reduce class size is one of the first things local school districts have been jettisoning as a result of reduced expenditure by the state.

Posted by: aphrael at April 23, 2003 02:20 PM | PERMALINK

A dime a bullet (really, per cartridge, I assume) equates to a roughly 500% fee ("tax") on .22 ammunition.

Dianne Feinstein must be delirious with joy.

Posted by: Sigivald at April 23, 2003 03:35 PM | PERMALINK

Sigivald - why would Feinstein even be aware of it? She's a US Senator, and this is being pushed in the state legislature. *puzzled look*

Posted by: aphrael at April 23, 2003 03:55 PM | PERMALINK

aphrael, you must be right. CA politicians don't want to raise taxes and they aren't using the school budget to try to cajole voters into letting them do it. Or are they?

Like I said before, the exact size of the school budget is a red-herring. If school budget is 35 times larger than the ~$1.4B shortfall, it's a non-issue. Why is being pushed? If school budget is 4 times larger than the shortfall, then why pick on the schools? Either way, the answer is the same: Because the schools are a hot-button for parents and state officials want to extort more taxes so they are jamming their thumbs on that button has hard as they can.

In any case, you have not answered my original question, nor have you denied its premise. I will rephrase: how do you feel about politicians that you elected allying themselves against you once they are in office?

Regarding your statement: "the state of California is prohibited by the state constitution from running a budget deficit; unless you think the state should have paid off its voter-authorized bonds early, there was no debt to pay down."

Cute, but wrong; "It is widely thought that the California constitution mandates that the state’s annual budget be balanced. In fact, the constitution simply says that early in each calendar year, the governor should submit a budget and, if proposed revenues fall short of expenditures, there should be an explanation of where the additional revenues will be obtained. This obligation is itself fuzzy since the additional “revenues” could be obtained by running down reserves or by borrowing. There is no language requiring that the Legislature pass a “balanced” budget, whatever that term might mean. The constitution requires that a prudent reserve fund be established, but leaves it to the Legislature to determine what such a level might be."

"One clause requires a vote of the people for debt issuance of general obligation debt (see below). But it does not hinder issuance revenue anticipation notes and similar short-term securities. Even revenue anticipation warrants – which borrow in one fiscal year against revenue in the next – can be issued without a vote (and were in June 2002).20 In short, there is no balanced budget mandate in the state constitution, at least in any precise terminology."
http://www.harrt.ucla.edu/publications/workingpapers/MitchellHirsch.pdf page 7

And CA has run a deficit for the last few years
http://www.lao.ca.gov/2002/spend_plan_02/0902_spend_plan_chap_1.html

and its getting bigger
http://www.caltax.org/Salladay-SwarmStateFeesProposed.pdf

Posted by: JeffK at April 23, 2003 03:57 PM | PERMALINK

Re. the bullet tax. It really is about the "other" lead-poisoning after all.

"-- Guns: 10 cents per bullet or shotgun shell to pay for trauma centers; $25 registration fee for .50-caliber BMG rifles; $1 firearm transfer fee."

Since 70 percent of trauma cases are auto related, why are we trying to use ammo fired at a shooting range to pay for trauma centers filled with car accident victims? Oh, and lets slip in some new firearm regulations while we're at it.

http://www.caltax.org/Salladay-SwarmStateFeesProposed.pdf

Posted by: Jeff K at April 23, 2003 04:19 PM | PERMALINK

I don't really see these comments getting anywhere.

Obviously to make cuts you have to cut education - because that's where the most money is being spent. The numbers I've always seen were much higher than the ones you guys are bandying about.

I'm also not sure how exactly we're supposed to blame Davis - from what I've seen he's done alot to make the state better off, and head these things off... But what exactly did he do which was so awful? Even electrical deregulation was here before him...

I also think limits are difficult. But at least they encourage politicians to move on the ladder. I didn't vote for them, and they exist in every state I've voted in.

Posted by: Crissa at April 23, 2003 08:25 PM | PERMALINK

Lets apply a little game theory to term limits.

Without term limits we basically have a game with an infinite horizion (i.e. there is no known final stage). This makes backwards induction (i.e. looking at how you'd play in the last stage of the game and progressing back to the first stage to determine how the game would be played) inadmissable to determining the outcome. Further, we can invoke the Folk Theorem to point to a vast array of equilibria that are better than the worst possible outcome (always voting the politician out). So, we can see that without term limits welfare could (note that, I said could) improve.

With term limits there is now a known final stage. We can now use backwards induction. Suppose that there are two basic actions for the politician, work hard for you consituents or slack off. Slacking off increases your chances of being voted out. Now in the very last stage, the politician has little reason to work hard. In fact, economic theory/game theory says, he'll slack off.

Now the voter has two actions, vote for the incumbent, vote for the challenger. Knowing the politician will slack of in the last stage, the voter will vote him out in the stage prior to the last. Knowing the this the politician will slack off in that stage. Knowing this, the voter will vote him out in the previous stage...keep going back to the first stage and you get a very high turn over in political offices.

This means all you get are slacker politicians.

Of course this is a very simple analysis, and a more detailed one might yield different results, but my guess is not by much. Mainly, you'd still get an increase in turn over, and a decrease in the "control" voters have over politicians.

Term limits are a bad idea, in general. First, it deprives the voters of voting for their most preferred candidates in many cases, and also doesn't mean you'll get in increase in the quality of politicians.

Regarding the budget, part of the problem is the politicians spent money during the dotcom era like drunken sailors looking for hookers after a year at sea. Ignoring the possiblity of it all being a bubble economy they increased spending at a massive rate. And why blame them, those we elected years ago are no longer in office...who cares about the long term consequences...ooops there we are back to the term limit thing.

Davis gets blamed for pissing away $12 billion of budget surplus during the elecricity crisis entering long term contracts....long term contracts that are ridiculously over priced. Of course, lets not forget that much of that crisis could have been avoided if Davis had the balls to raise rates (which happened anyways...and which Davis himself acknowledged would have helped mitigate the problem!). Davis is a lying, slimey mutant weasel.

Sure he'll point to the recent FERC ruling that CA is going to get the money back, but don't count on it being anytime soon. That'll be in the courts for years.

Face it, the only reason Davis won was because the alternative was Simon. The Republicans should have nominated the komodo dragon that nearly ate Phil Bronstein's toe. At least it'd have been a much closer election.

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