Speaker’s Scholarship Plan Too Good to Be True

As published in the Inland Valley Daily Bulletin, San Bernardino Sun, Visalia Times-Delta and at Fox & Hounds Daily.

There’s an old adage that if something sounds too good to be true, it probably is. When it comes to politics, it nearly always is.

Say for instance a politician told you he could lower the cost of sending your kids to college by 2/3rds. You’d probably respond, “Great. What’s the catch?”

Your caution would be warranted. If a recent proposal by Speaker John Pérez becomes law, you might get some help with those soaring college fees, but don’t count on your kids finding jobs once they get that diploma.

The Speaker’s proposal, which he’s dubbed the “The California Middle Class Scholarship,” would impose a $1 billion dollar tax hike on “out-of-state” businesses to provide financial aid for college students. The  plan targets a 2009 tax formula change that only became effective last year—after California voters rejected a November 2010 ballot measure that aimed to repeal it.

In his own words, the Speaker claims: “We’re closing that loophole that only benefits out-of-state corporations at the expense of the rest of us in the state. And we’re taking that benefit and directing it to middle-class families who are struggling to put their kids through college.”

Sounds good, right?

But there’s always a “catch.” This time there’s at least three:

First, many “out-of-state” companies, including manufacturers, retailers and others, have significant investments in California and employ millions of Californians. Like it or not, imposing a billion dollars in new taxes—without offsetting tax cuts—will tempt these companies to downsize their California presence, costing countless jobs. Given that California already has the second highest unemployment rate in the nation, that’s not the brightest idea.

Second, college costs aren’t fixed. When Californians lack jobs, revenues fall. When revenues fall, politicians raise college fees. Imposing new taxes on struggling job creators will only make this cycle worse, increasing college fees further. Plus, if the state’s revenue picture gets worse, the Speaker’s program could be cut too.

Third, taxpayers are footing the bill, but California’s hostile business climate increasingly means college graduates must leave California in order to find jobs. The Speaker’s “middle class scholarship” won’t create middle-class jobs in California; instead, the tax hike will educate the future workforce of Arizona, Oregon and Texas, to name a few.

Don’t get me wrong. Education is vital to the future of our state and a college education significantly improves one’s prospects of finding a job. California’s problem, which stems from our high tax and onerous regulatory climate, is that there simply aren’t enough jobs.

This scarcity means that college students with significant debt end up with jobs that only require a high school diploma. They displace the kids who only have high school diplomas. So now those kids must also go to college to have a chance of getting a job that only requires a high school diploma.

For California to succeed, our politicians need an education too. Even a basic understanding of economics would help them understand that rising college fees are a symptom, not the source of California’s problems. To solve the real problem, we need to attract middle-class jobs back to California, rather than drive them away. A billion dollar tax increase is not the solution.

And who knows? With good jobs, Californians might even be able to afford to send their kids to college without Speaker Pérez’s help.

Californians reject higher taxes for a reason

As published in the San Jose Mercury News

In Jerry Brown’s California, you have two choices: Embrace the governor’s agenda, or become the object of ridicule.

In his State of the State address, Brown contrasted “declinists” who see California as a “failed state” with him and others who see “unspent potential and incredible opportunity.” The implication being that those who support his proposals are bold visionaries, while the rest of us simply lack courage and foresight.

The governor’s agenda includes tax hikes, a costly rail plan and burdensome energy policies aimed at spurring so-called “green jobs.” At its essence, it is a call for more public subsidies to fund more government programs.

What’s missing is a sense of reality. Our choice is not between utopia and dystopia, between courage and cowardice. Rather we must choose between wisdom and foolishness and between caution and haste. We must live in the real world, soberly evaluating each proposed policy on its merits.

Ponder the following questions:

• Why have California voters consistently rejected tax increases? Do they lack faith in our state?
• Why has support for high-speed rail plummeted in recent years? Have Californians become cowardly?
• Why did California’s unemployment rate rise higher than other states? Shouldn’t California’s rate be lower given our huge share of venture capital and successful startups, not to mention our inviting climate?

It isn’t that Californians lack faith in themselves, our state or the future. It’s that we’ve lost faith in politicians and government programs. We’ve been promised the moon time and again but end up with little to show for our significant tax investments.There are two competing visions of how to best spur job creation and California’s recovery. The first, espoused by Brown, would increase tax rates that are already among the highest in the nation, making our overall revenue picture even more volatile. In just four years, the governor’s plan would increase state spending by 30 percent, and California would take on billions in new debt to fund a dubious high-speed rail plan.

The second vision, shared by the majority of California taxpayers, would insist that government live within its means, doing more with less. State leaders would spur job creation by eliminating needless laws and regulations that make California uncompetitive with other states. Our tax policies would be smart and competitive.

Rather than creating jobs that survive only with ongoing subsidies, taxpayers would keep more of their hard-earned dollars. After all, it wasn’t the government that created the success stories of Apple, Intel, Hewlett-Packard, Oracle, Qualcomm, Twitter, Facebook and others cited by Brown.

An obvious place to start would be to reform our tax laws to help stop the exodus of manufacturing jobs. Did you know that California is one of only three states in the nation that fully taxes both the input and output of the manufacturing process? According to the Milken Institute, a five-cent reduction in this tax would yield net tax revenue within three years and bring 500,000 jobs to our state within ten.

It should be a top priority.

Let’s put some faith in the people of California. Let’s help the job creators who are forced to comply with what even Brown admits is a “plethora of complex laws and regulations.”

California’s best years are yet to come. But the credit will go to the hard working citizens of this state, not higher taxes and more government programs.

New Tax Interpretation Aids Farm Solar Power

As published in the Ag Alert, Fox & Hounds Daily, Inland Valley Daily Bulletin and San Bernardino Sun.

As an elected member of the California State Board of Equalization, I have the unique privilege of serving as a taxpayer advocate for the citizens of California.

California is the only state in the nation that has an elected tax board that is directly accountable to voters. The five-member board on which I serve administers more than 30 tax programs and fees, including sales and use tax, tobacco tax, fuel taxes and timber yield taxes. My fellow board members and I hear appeals relating to these taxes and fees, as well as state personal income tax appeals that originate from the Franchise Tax Board.

Each day, my staff and I work hard to ensure that taxpayers are treated fairly when dealing with California tax bureaucracies. Whether the issue is a tax appeal or an audit, we want to see taxpayers treated with the respect they deserve.

The district I represent is comprised of more than 9 million Californians and more than half of the state’s land mass. The district spans much of inland California—from the Oregon border to Southern California—and includes the entire Central Valley. As you might suspect, tax issues impacting California farmers are of great interest and concern to me.

One of the issues my office has worked on this past year relates to the agricultural exemption for farm equipment. Current California law provides a partial sales and use tax exemption for equipment and machinery primarily used in agricultural activities. Farmers who purchase this equipment need not pay the state General Fund portion of the sales tax, but must still pay local sales taxes.

The definition of farm equipment and machinery is fairly broad and includes, among other things, agricultural heating and cooling equipment, livestock systems, irrigation systems and wind machines.

This seems straightforward enough, but someone must decide which specific equipment qualifies for the exemption, and which does not. The Board of Equalization makes these calls. Given the high cost of farm equipment, the financial impact of even a seemingly small decision can have a huge impact on taxpayers.

Here’s a real-life example: A growing number of California farmers are purchasing solar panels to help lower their irrigation system energy costs. Given that diesel generators receive a tax exemption, it came as a complete surprise when they were told that their new solar systems would not qualify for the same tax exemption.

This initial interpretation hinged on the fact that California law requires that these new solar systems be directly connected to utility distribution lines rather than to the irrigation systems they are purchased to power. Because there was no direct connection, farmers were initially denied the tax exemption.

Considering our state policymakers’ enthusiasm for alternative and renewable energy solutions, this interpretation seemed simply absurd.

It is at times like this that taxpayers need a friend they can call for help. When I learned of this issue, I directed the staff to take a closer look. Working closely with the impacted farmers and the California Farm Bureau, my office was able to provide additional information to bring about a more reasonable outcome for California farmers.

I’m pleased to report that the Board of Equalization staff has released an opinion clarifying that the tax exemption can be applied to solar equipment if the taxpayer can “demonstrate that the solar facility is specifically designed to provide power to qualifying machinery.”
Now that we’ve found a pathway to ensure this tax exemption is available, it’s important for farmers to ensure they will qualify for the exemption before they make a purchase. However, farmers who have already purchased a solar system and paid the full tax should be aware that they may file a claim for refund for up to three years after a purchase.

I look forward to working with staff, the Farm Bureau and other interested parties to ensure that this information is available in a clear and concise manner.

As always, my office stands ready and willing to assist taxpayers who encounter problems with the board or other state tax agencies. Please do not hesitate to contact me should you need assistance.

Vote again on high-speed rail

As published in the Inland Valley Daily Bulletin, Modesto Bee, San Bernardino Sun, Santa Clarita Valley Signal, Ventura County Star, Fox & Hounds Daily and at PublicCEO.com

Imagine you found the house of your dreams. The price is $450,000. You sign papers only to later learn the sellers made a mistake. The price for the house is actually $1 million. Fortunately, under California real estate law, you can back out of the deal. But if you were a California voter buying a train instead of a house, you might be out of luck.

In November 2008 California voters narrowly approved – by a vote of 52.7 percent to 47.3% percent – Proposition 1A. The measure authorizes nearly $20 billion in state spending to establish high-speed train service linking Southern California counties, the Sacramento/San Joaquin Valley and the San Francisco Bay Area.

At the time, the entire project was expected to cost about $45 billion.

Proponents claimed funds from other public and private sources would cover the project’s remaining costs.

Tom McClintock, Jon Coupal and I co-authored the opposition ballot argument. We called the measure a “boondoggle” that “could cost $90 billion – the most expensive railroad in history.” We warned that no one really knew how much the project would ultimately cost.

After years of waste and mismanagement, California’s High Speed Rail Authority (CHSRA) has finally admitted what critics like us warned all along: “Building the entire system will take longer and cost more than previously estimated.”

In fact, the price tag for this risky transit gamble is now nearly $100 billion – more than twice the original estimate. The new number is greater than California’s entire annual state budget. To fund the entire project today, every Californian, including men, women and children, would need to write a check for more than $2,500.

Without those checks, existing funding will only be enough to cover the first phase of the project connecting Fresno and Bakersfield. Should additional funding materialize, Merced and San Jose will be the next stops.

Despite the uncertainty, the folks at CHSRA claim California voters still want to buy this train. At a recent press conference, CHSRA chair and former Democrat Assemblyman Tom Umberg said, “There are some things that do change – development changes, cost changes. But the will of the California voter, I believe, remains the same today…”

Mr. Umberg might believe California voters are still on board, but I’m not so sure. Much has changed since 2008. California’s unemployment rate has risen from single to double digits, the state’s budget has become much, much tighter, and our credit rating has been downgraded to the worst of any state in the nation.

Further, the deadly collision of two high-speed trains in China earlier this year has prompted new worries about the safety of high-speed rail and led to the recall of 54 trains, reduced speed limits and a moratorium on new projects in that country.

Finally, renewed concerns about our nation’s debt and overall government spending make the outlook for federal funding far less certain. Congressman Kevin McCarthy has introduced a measure that would freeze federal funding and require a thorough audit of the project. The measure, introduced last month, is being co-sponsored by nine other California congressmen.

Perhaps California voters support high-speed rail regardless of the cost.

If so, high-speed rail proponents shouldn’t fear a new vote on their new plan. If not, it would be a breach of contract – or as liberal columnist Tom Elias puts it – “a bait and switch” – to move forward with a costly plan that is little like the one Californians voted for three years ago.

As even Mr. Umberg admits, there are other options for improving California’s crumbling transportation infrastructure. One hundred billion dollars – or even a smaller portion of that number – could do much to improve the roads, freeways, ports and airports Californians use every day. The taxpayers who will foot the bill should make this call.

To that end, state Sen. Doug LaMalfa plans to introduce legislation putting the project back on the ballot. California taxpayers should support his effort and urge Gov. Jerry Brown, the Legislature and the CHSRA board to do the same.

Amazon saga did little to help state finances

As published in the Sacramento Bee:

Gov. Jerry Brown recently signed compromise legislation aimed at avoiding a costly ballot fight between Amazon and in-state retailers. This compromise opens the door for Amazon to build distribution centers in our state that could provide thousands of jobs for out-of-work Californians. That’s very good news.

But it’s hard to dismiss the nagging suspicion that while the “Amazon tax” saga created political intrigue and drew media interest, it has done little to move our state toward economic recovery.

The compromise measure, while welcome, provides only a short-term delay to a bad law that lawmakers approved as part of California’s budget this summer. The constitutionally questionable law was supposed to produce $200 million a year in revenue by forcing more out-of-state online sellers to serve as California’s tax collectors.

The law was doomed to fail from the start. It did not produce the revenue, or provide the level playing field, its proponents envisioned. Even so, it took a well-funded referendum effort to force lawmakers to negotiate a delay to allow time for Congress to act on the issue.

Absent a highly unlikely federal solution, we’ll be right back in the same mess in a year. The state of California will again be killing jobs, driving away investment and inviting costly litigation.

A recent survey by the Performance Marketing Association found that in just two months, the Amazon tax wreaked havoc on an estimated 25,000 California-based Internet affiliate businesses: 37 percent lost more than half of their income, 22 percent closed their businesses, and almost 32 percent moved or plan to move out of state.

Given Amazon’s plans to reinstate affiliates, some of these folks will soon get a new lease on life. But for the estimated 15,000 affiliates who don’t have ties with Amazon the news means they will be able to work for an additional year only if they are reinstated. There’s no guarantee that will happen.

Those who have already left California are unlikely to return. In early August, successful online entrepreneur Erica Douglass blogged “Dear California: I’m Leaving You. Here’s Why.” In her blog post, she describes several “examples of the crap” California’s government has put her through. She writes that the Amazon tax was the “final straw” that prompted her to relocate her business from San Diego to Austin, Texas.

Julia Wessels founded the website “The Frugal Find” as a hobby, but it quickly became a full-time family business based out of her and her husband’s home in Antioch. After losing 40 percent of their gross monthly income after the Amazon tax became law, they decided to move their kids and business to Oregon. In just four weeks they were gone.

These are just two of the many entrepreneurs who have decided to leave our state as a direct result of legislative malpractice. But each is a significant loss for our state.

Some might argue that the loss of these entrepreneurs is a small price to pay in order to achieve greater sales tax collection for the state of California. I disagree.

The only way to provide lasting revenue for our state’s budget problems is by growing our state’s economy and jobs. To achieve this end, we must provide a stable business climate that helps entrepreneurs like Erica Douglass and Julia Wessels stay, grow and thrive in California.

California now ranks a dismal 50th in net business creation; we have the second highest unemployment rate in the nation. If California’s leaders spent more time talking to job creators instead of attacking them, they might find ways to legislate without inflicting pain on Californian entrepreneurs in the process. A jobs deal with Amazon and other companies could have easily been reached months ago – without an Amazon tax.

California once was a land of opportunity. Unfortunately, high taxes and excessive regulations have driven California’s unemployment rate to record highs. Our state continues to chase out employers, entrepreneurs and even workers – just about anyone who can’t afford to fund ballot measures to repeal the bad laws and regulations that drive them crazy.

It’s a good thing Amazon is coming to California. Unfortunately, the Amazon compromise provides no model for our state’s future job creation efforts. By creating an uncertain future for entrepreneurs and investors, it will only reinforce the notion that job creators enter California at their own risk.

Protect Main Street: Keep Proposition 13 Whole

As published in the Bakersfield Californian, Los Angeles Daily News, Fox & Hounds Daily, North County Times, Inland Valley Daily Bulletin, Pasadena Star News, Redding Record Searchlight, San Bernardino Sun and San Gabriel Valley Tribune

Give Gov. Jerry Brown credit. He’s smart enough to recognize that imposing massive property tax hikes on California’s struggling job creators will hurt, not help, our state’s economy. And he’s willing to take heat from members of his own party for his stand.

Last month, Los Angeles Mayor Antonio Villaraigosa gave a speech to the Sacramento Press Club urging “progressives” to “start thinking and acting big again” in order to “invest…in our economy.” He challenged Brown to have “the courage” to “strengthen” Proposition 13, an important taxpayer protection measure approved by voters in 1978.

Lest anyone be confused, let me translate: Mayor Villaraigosa has no intention of “strengthening” the property tax protections in Proposition 13. Instead he wants to strip away those protections for business owners, including Main Street mom-and-pop businesses like hair salons, hardware stores and restaurants.

According to the Howard Jarvis Taxpayers Association, an organization that exists to defend Proposition 13, prior to that measure there were no limits on property tax rates and assessments. Taxpayers’ properties could be reassessed 50 percent to 100 percent in a single year and see their bills jump accordingly. As a result many taxpayers lost their homes and businesses.

At a time when taxpayers are once again losing homes and businesses, there’s no sense in making the problem worse. The businesses we see when we drive down the street are survivors of the Great Recession, but that’s no guarantee they will be able to continue to keep their doors open and workers employed.

Yet Villaraigosa and others want to target these survivors. Apparently for “progressives” the definition of “progress” is to make California first in taxes and unemployment.

According to the Tax Foundation, Californians bear the sixth highest overall tax burden in the nation. Our state’s income taxes, sales taxes and fuel taxes rank at or near the top. Even property taxes aren’t particularly low — California ranks 14th — but without Proposition 13, they would be much, much higher.

Taking even more money from private taxpayers to “invest” in more government bureaucracy doesn’t grow our economy. Instead, it would shrink it. The taxpayer would have less money to spend, invest, and hire workers. And our state would end up with even higher unemployment.

The vast majority of jobs and investment in our state come from the private sector, not from government. In fact, public sector jobs and investments only exist because the private sector pays for them.

Like it or not, California is in a global competition for jobs. Many California businesses can no longer afford to expand. The cost of doing business in our state is already too high compared to other states. As a result, many taxpayers are leaving for greater economic freedom elsewhere. According to a recent study, California is experiencing a net loss in new business startups, falling from first in the nation to a dismal rank of 50th last year.

If our state’s leaders want more revenue for public sector investments, they need to attract more private sector investment. There are no shortcuts. Only a healthy, vibrant economy that creates jobs for Californians will produce tax revenue in abundance.

A good place to start would be for the governor and the Legislature to launch a comprehensive review of the costly regulations burdening private sector businesses. Commonsense reforms could free up millions of public and private sector dollars. A similar effort at the federal level recently found savings of $14 billion.

Big thinking is good, but bad thinking is not. If we truly want progress, we need to start viewing private sector taxpayers as a partner, not a piggybank. And if we truly care about Main Street, we’ll keep Proposition 13 whole.

Government is greediest actor in “Amazon Tax” debate

As published in the North County Times:

Editorial boards and newspaper columnists are quick to assign “greed” as the motive driving Amazon, eBay and others to oppose a new law aimed at making more out-of-state online retailers collect sales tax on behalf of the State of California. But the greediest actor in this drama isn’t Amazon —- it’s the government.

You see, online retailers didn’t pick this fight. State lawmakers did —- out of misguided lust for revenue they’ll never see.

Put aside the rhetoric and consider the facts. Under the U.S. Constitution, state lawmakers can’t compel out-of-state retailers to collect sales tax unless those retailers have a physical retail presence —- known as “nexus” —- in our state. Californians are supposed to pay use tax —- the equivalent of sales tax —- on out-of-state purchases, but few do.

It works the same way in reverse. California businesses making out-of-state sales in states where they have no brick-and-mortar retail presence don’t have to register with the tax bureaucracies in those states, collect and remit sales tax or be subject to audits. In five states where Amazon collects and remits sales tax, many California businesses don’t.

But rather than educate Californians on how sales and use tax law works, lawmakers have managed to confuse the issue. The so-called “Amazon Tax” distorts the definition of nexus in three devilish ways.

Under this new law, out-of-state companies that share income with California-based affiliate advertisers or create jobs in our state via subsidiaries are now suddenly deemed in-state companies if they continue those relationships.

And that’s just the start. The “Amazon Tax” also contains an insidious “long-arm” provision granting sweeping power to the State Board of Equalization to further expand what constitutes nexus. No one knows yet what that will look like, and the resulting uncertainty could make out-of-state companies wary of contracting with Californians for years to come.

At a time when California’s unemployment rate is already among the worst in the nation, the “Amazon Tax” sends the entirely wrong message to out-of-state job creators, entrepreneurs and investors. The unfortunate but unsurprising result is lost jobs and income for our state.

It’s not too early to declare the “Amazon Tax” a failure. Out-of-state online retailers have already overwhelmingly chosen to opt out of the new law by ending their affiliate advertising relationships with Californians. They continue to sell into California without collecting sales tax. The “playing field” for retailers has become no more level but is certainly now much more confusing.

A recent USC/LA Times poll found that a majority of young people, Blacks and Latinos, and a plurality of all Californians, oppose this new law. Why? Perhaps they understand better than our tax-hungry Legislature that driving away jobs and investment won’t solve our problems.

For the sake of our state, let’s hope sanity prevails in this debate.

State heading toward highest unemployment

As published in the Press Enterprise:

The state of Nevada has the highest unemployment rate in the nation, but California is a close second. Unfortunately, recent employment trends show California could soon swap places with Nevada, assuming the dubious distinction of having the worst unemployment rate in America. This is discouraging news for California’s more than two million unemployed workers.

Adding insult to injury, California’s liberal political leaders are like a flock of ostriches with their heads in the sand when it comes to getting California’s economy back on track. As lawmakers continue their annual tradition of sending “job killer” bills to the governor’s desk, California’s economy remains stuck in neutral even as other states pass us by.

Take Nevada, for instance. Nevada’s unemployment rate, which peaked at 14.9 percent — considerably higher than California’s 12.5 percent peak — has fallen to just 12.1 percent. That’s only four tenths of 1 percent higher than our state’s current unemployment rate.

Nevada isn’t the only high unemployment state recovering faster than California. Michigan’s peak unemployment rate of 14.9 percent has fallen more than four points to 10.3 percent.

Clearly, the economic recoveries of Nevada, Michigan and many other states are outshining our own.

This reality is underscored by the flight of California’s work force. Between 2005 and 2009 more than 870,000 Californians packed their bags and departed our state. The top destinations were Arizona, Texas and Oregon, but even Oklahoma attracted nearly 30,000 transplants.

Warning signs

But it’s not just California workers who are leaving. Our employers are as well. According to business relocation coach Joe Vranich, the number of California business relocations is five times higher this year than in 2009. He also warns that at least 14 states are actively recruiting California business owners, encouraging them to expand or relocate for cost savings of up to 40 percent.

The warning signs of California’s jobs problems are everywhere, yet the California Legislature seems oblivious. Lawmakers waste their time on nonpriorities or churn out new taxes, fees, mandates and ridiculous regulations on business owners who are barely surviving.

The Sacramento Bee recently identified 10 bills to watch in the California Legislature. Nine of the 10 bills have nothing to do with jobs. Instead these bills seek to regulate unloaded guns, shark fins, cell phones, ski helmets, smoking and tanning. Given our Legislature’s propensity to regulate every facet of our lives, it’s no wonder the Mercatus Center recently ranked California as the third “least free” state in the nation.

A tenth bill on The Bee’s list, dubbed the “Amazon tax,” was recently approved by the Legislature as a budget measure and signed into law by Gov. Jerry Brown. This measure is just the sort of misguided law that may guarantee California soon becomes the nation’s leader in unemployment.

Losing income

Proponents of the so-called “Amazon tax” claim it will “create fairness” by “leveling the playing field” between California’s brick-and-mortar retailers and out-of-state online sellers. They claim it will generate $200 million in new revenues for the state. But evidence shows this measure will actually cause California to lose, not gain, millions of dollars.

Amazon.com and other out-of-state online retailers have already terminated their California-based affiliate programs and are taking other steps to ensure that they have no legal connection to California that would force them to collect sales tax here. These out-of-state retailers continue to sell into California without collecting sales tax.

Meanwhile, the true victims of the “Amazon tax” are California job creators who will suffer an unavoidable loss of income if they continue to do business in this state. As many as 25,000 California affiliates who pay an estimated $124 million in state income taxes are impacted. Small businesses that currently benefit from affiliate referrals will also suffer lost revenue.

Another surprising victim of this new law is eBay , a homegrown California success story and major private sector employer. Ironically, the “Amazon tax” will actually disadvantage eBay and drive online sellers away from eBay toward to other platforms, like Amazon. As sellers living outside California discover that continued sales on eBay trigger new, unwelcome relationships with California’s tax auditors, they will take their business elsewhere. And I can’t blame them.

Unless California’s leaders want to make California the nation’s unemployment leader, they need to radically transform their priorities. They need to stop making California offensive to business, and instead start wooing private sector jobs by extending a welcome mat to entrepreneurs and businesses of all kinds.

A Temporary Tax That Never Went Away

As published at FlashReport.org:

California taxpayers are celebrating a rare victory. Despite Democrat efforts to extend them, the sweeping “temporary” tax increases of 2009 have gone away. This is an uncommon treat, as many prior tax hikes sold as “temporary” are still with us today.

As Californians enjoy the benefits of this victory, today marks the 20th anniversary of a prior sales tax increase that is still with us. On July 15, 1991 Californians were impaled with a “temporary” sales tax increase of 1.25%. This measure was enacted by the Legislature to address the state budget shortfall during the early 1990s economic downturn.

Fast forward to June of this year. A 2009 sales tax rate increase of 1% was set to expire on July 1, 2011. Despite a vote of the people against extending this and other temporary tax increases, Governor Jerry Brown and Democrat legislators unsuccessfully sought a five year extension of these taxes.

These higher taxes amounted to billions of dollars per year out of the pockets of struggling Californians and into the hands of wasteful government. Combine the 2009 temporary sales tax increase with the 1991 temporary sales tax increase, and we’re talking about $11 billion dollars per year taken from the people. And that’s not even counting the other tax hikes.

For most of our state’s existence California prospered with either no sales tax, or much lower rates than we have today. Today five states—Alaska, Montana, Oregon, Delaware and New Hampshire—still have no sales tax at all. Of these states, two—Alaska and Montana—are among only four states which have no budget deficit.

California opened its doors to the sales tax in 1933 with the Riley-Stuart Act, as did several other states. It was sold as an “emergency measure” during the Great Depression, at a rate of just 2%. As late as 1977 the sales tax rate in California was still only 4.75%. Despite our recent tax reduction, our 7.25% statewide rate remains the highest in the nation, not including over 130 different local governments imposing their own sales tax—raising the tax rate to nearly 10% in some areas.

The answer to California’s problems isn’t higher taxes. Californians already bear the sixth highest tax burden in the nation. Rather we must reduce taxes and limit regulations to create an environment where job creators can expand and thrive.

As today’s somber tax anniversary passes with little notice, let it be a reminder that the government’s appetite for your money is insatiable, and “temporary” taxes rarely go away.

New Law Creates a “Qualified” Mess

As published in the Inland Valley Daily Bulletin, Los Angeles Daily News, Salinas Californian, San Bernardino Sun and Fox & Hounds Daily:

Two years ago, the California Legislature enacted an onerous law requiring business owners dubbed “qualified purchasers” to register with the State Board of Equalization for the purpose of reporting “use tax.” Like many bad laws, this one was cooked up in an attempt to help balance the state’s budget. As you might suspect, it hasn’t worked.

I was serving as a senator at the time and voted against this legislation. Now, as an elected member of the State Board of Equalization, I’m seeing firsthand the mess this law has created.

The “Qualified Purchaser Program” was supposed to bring in $200 million in new revenue during its first two years; so far, it has yielded only a fraction of that total, barely covering related expenses, including new staff and other program costs.

The program has registered 500,000 California small business owners, including Avon sellers, dentists and real estate agents. Most of these registrations have been involuntary, meaning that if BOE staff thinks you meet the definition of a “qualified purchaser,” then you’re automatically registered, whether you like it or not. Under the program’s terms, any “service enterprise” that grossed more than $100,000 in a single calendar year and had no prior relationship with BOE must now annually report its “use tax” on a new form.

By and large, Californians, including many of these business owners, are unfamiliar with “use tax.” The use tax is similar to the sales tax, but it is the obligation of the purchaser to remit the tax directly to the BOE, instead of paying it at the point of sale. The use tax applies when you purchase items from a retailer who is not located in California and is not registered to remit tax to California. Purchases subject to use tax include those made on the Internet from sellers outside the state.

What’s particularly frustrating about the Qualified Purchaser Program is that it isn’t even necessary. There already were two different ways for Californians to report use tax: (1) BOE form 79b and (2) a dedicated line on state income tax forms. Now, an arbitrary but rather large group of small business owners must report use tax in a completely unique way. This serves only to make California a more confusing place for our state’s most important job creators: small business owners and entrepreneurs.

Of the 500,000 business owners registered as qualified purchasers, more than 60 percent were so confused by the new program that they didn’t return the paperwork that the BOE sent them. So in May of this year, without my prior knowledge or approval, BOE staff mailed “final” delinquency notices to 305,000 business owners, threatening an “estimated” tax bill for failure to respond.

Not surprisingly, BOE was flooded with thousands of phone calls from angry, confused and frustrated taxpayers, many of whom were forced to endure wait times of several hours or more to talk to a BOE representative. In the past year and a half, BOE has received more than 175,000 calls from qualified purchasers seeking assistance.

Of those qualified purchasers who actually submitted a return, an overwhelming 87 percent reported that they owe zero use tax. Of the few who did owe, the average amount was so small that they likely paid more to their accountant to comply with this program than they paid in tax. And that doesn’t count the taxpayer’s time and frustration.

Impacted business owners have been providing my office with helpful feedback, and I welcome more. I am inviting qualified purchasers to take a survey on my website at http://www.boe.ca.gov/Runner. I plan to share the feedback with my fellow board members and other interested parties.

In the meantime, I will be working with my colleagues on the board to ensure reasonable implementation of this law. But, to be clear, I also will be calling for a complete repeal of the program.

The Qualified Purchaser Program is wasting taxpayers’ time and money with no benefit to the state. Like other Californians, these taxpayers should be able to pay use tax on their income tax forms or on Form 79b, which BOE has made available for years. The law makes no sense, and is yet another example of pointless government interference in the lives of Californians and our economy.