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There Would Be Plenty of Money If …

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by Howard Baldwin

There Would Be Plenty of Money If …

Just to recap, there are currently a bunch of hypocrites in Washington who voted to spend money on a couple of wars on the other side of the world, not to mention numerous homeland security efforts. But they have now decided, having spent taxpayers’ money with an abandon only the truly clueless can muster, that no, we must have no more debt. Imagine an alcoholic forbidding everyone else from imbibing.

But why is the government having so much trouble with money? Because – speaking of cluelessness – it spends too much, wastes too much, allows the undeserving to benefit from government largesse, and protects its own far beyond the boundaries of appropriateness. I’m going to use my home state of California as an example, not only because I know them well but because they’re so blisteringly stark in their egregiousness. There would be plenty of money if not for …

Loopholes. We have a charming piece of legislation called Proposition 13. It was originally enacted because when housing values first skyrocketed, they pulled property values along with them. Senior citizens were being priced out of their homes, so it was determined that property taxes could rise no more than 2 percent per year, and only re-set when the home was sold.

But for reasons I don’t quite understand, Prop. 13 included two other provisions. It also covers commercial buildings, so that long-time businesses – like, say, banks, whose buildings don’t change hands that often – also get the benefit of the lowered tax rate. And my favorite – if parents bequeath children those properties, whether residential or commercial, the children get the continued benefit of the lower tax rate. And it doesn’t matter if it’s a primary residence or not. This means that when my father passes away, my siblings and I will retain the benefit of his wisdom in purchasing rental properties. He’s had the benefits for 30-plus years and, as long as we don’t sell them, we’ll have them for 30 more. How is that fair? But according to a letter I received from Gov. Jerry Brown’s office soon after his inauguration this year, he has no intention of trying to close these loopholes.

Nest-Feathering. The most famous example here in California of politicians voting each other huge salaries is in the small city of Bell, in Southern California. According to the Los Angeles Times, the city of 37,000 paid $787,637 in annual salary to its Chief Administrative Officer and $457,000 to its police chief, which was 50% more than the Los Angeles Police Chief or Los Angeles County Sheriff got and 100% more than the salary of the New York City police commissioner. The same article noted that Bell’s part-time city council members got $96,000 per year, compared to $4800 in most cities of that size.

Another way politicians cement their self-interest is through offering pensions to other public-sector employees. But importance of pensions for public safety officials who have put their lives on the line seems to have been conflated with other public service positions (disclosure: my sister-in-law is a firefighter, and my sisters are teachers).

This was highlighted this past week in an article in City Journal -- admittedly by a research fellow with the National Tax Limitation Foundation. But he noted that when an AFL-CIO official said, “The average state worker gets a pension of $24,000 and often without Social Security,” that official failed to add that the figures included “retirees who hadn’t worked full-time, as well as those who worked barely more than the minimum vesting period of five years and those who retired over a decade ago, back when pay rates and pension formulas were still within reason.” The actual figure: “A retiree with more than 30 years of service could expect $66,828 per year, on average.” That’s more than two of me is getting from social security.

And don’t get me started on severance packages. When the most recent general manager of Bay Area Rapid Transit, one of the local transit systems, was fired, she received almost a million dollars: Approximately $600,000 in a severance package, and $350,000 to ensure she didn’t sue. Now, I’ve been laid off several times in my career, and I never had a severance package like that.

Unnecessary Spending. According to June 2011 California Travel & Tourism Commission white paper, California is the number one travel destination in the United States. “In 2010, approximately 200 million visitors generated $95.1 billion in spending on goods and services in the state.” If that’s true, then why did the state legislature feel compelled to enact the California Tourism Marketing Act, which created the California Tourism Office, whose employees' sole responsibilities seem to be to bring tourists to a state that already has scads of them, and doing so by working with a non-profit with the exact same goal, the California Travel and Tourism Commission. Okay, so the CTO only has six people. But how many other duplicative or unnecessary or bloated state departments have also been created?

And speaking of tourist attractions, the city of Palm Desert took state redevelopment funds and refurbished its golf course  to the tune of $16.7 million. This was revealed in a March 2011 report issued by state Controller John Chiang's office, which audited 18 redevelopment agencies. As quoted in the San Francisco Chronicle article, the report showed a "lack of accountability and transparency (that) is a breeding ground for waste, abuse and impropriety.” To be fair, I should note that Gov. Brown eliminated the redevelopment agencies in the most recent state budget.

Another recent example comes from Alameda County, across the bay from San Francisco. The Chronicle noted in July that it had created a government recycling program providing “strategic planning, research, education and technical assistance to the public, businesses and local governments" on recycling. The office has 39 full-time employees, half of which make between $70,000 and $155,000 per year. The director of the program makes $213,000 per year. Please tell me why this is a county responsibility (though it would seem excessive even as a state agency).

Tax Evaders. Let me wrap up with of my favorite recent stories, one that shows that government could actually find its own money if it applied some intelligence to the search. Conventional wisdom states that people try to evade taxes all the time. The state has started clamping down on businesses that don’t pay what’s called the use tax – taxes on goods purchased from outside the state, as I wrote about  a while ago.

Earlier this year, according to an article in the San Francisco Chronicle, the California Franchise Tax Board started comparing luxury car registration records against the records of those that did not file tax returns (in my trade, that’s known as “business intelligence”). By March of 2011, it had found 6,000 luxury-car owners, resulting in $3 million from additional returns and $14 million “from the owners of high-priced automobiles who had previously pleaded for relief, saying they could no longer afford to pay their taxes.”

These are just some highly egregious examples that I’ve found in the past few months I’ve been getting cranky about this. They’re just ones that journalists – a profession that doesn’t make that much money and has been subject to extensive cutbacks recently – have uncovered. Multiply these by the number of cities, counties, states, and then roll in the unnecessary money the feds spend (some appalling examples of which I didn’t cite here), and start getting rid of unnecessary expenses – the way households would – and pretty soon, there would be plenty of money.




Tags: commercial buildings property values rental properties state of california tax rate

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