April 17 may be the deadline of another tax filing season, but it’s just the start of Democrats’ 2012 tax initiative season. In fact, in less than 60 days, voters must take a stand against and defeat the first round of this year’s tax hike measures: Proposition 29.
Prop. 29, like many other tax increases in recent years, seeks to target an unpopular activity, smoking, and increase taxes to combat something of universal concern, in this case cancer research.
Cut from the same cloth as previous taxpayer-funded ballot-box boondoggles like high-speed rail, the stem-cell research initiative and First 5, Prop. 29 is a $735 million annual tax increase that creates a brand new bureaucracy overseen by unelected political appointees who have unchecked authority to spend billions of taxpayer dollars.
At a time when Democrats are threatening more devastating cuts to education and public safety if voters refuse to approve Governor Brown’s tax measure in November, Prop. 29 raises nearly $1 billion in taxes a year, yet fails to do anything to solve our massive budget deficit or require that Sacramento control its wasteful spending habits.
What advocates for tax increase on specific products like tobacco fail to understand is that tax policy has consequences. At the Board of Equalization, we oversee the collection and implementation of tobacco and other taxes. Every time we increase taxes on products like this we encourage the black market. We’ve seen first-hand the loss of revenue and harm it causes to legitimate business owners.
Investigations into those evading the tobacco taxes are expensive and ultimately reduce any income to the state from those tax increases. Much like every other type of tax increase, it often has the opposite effect. Just a few years ago, tobacco-tax hike author Rob Reiner argued against increasing the tax further, estimating major losses to other pet projects.
Adding insult to injury is the fact that, unlike previous initiatives, nothing in Prop. 29 requires that funds be spent in California or even in the United States. Despite our double-digit unemployment rate and more than 2 million Californians currently out of work, the measure actually allows our tax dollars – and, with them, our jobs – to be shipped out of state. Shouldn’t we be keeping tax dollars here in California to create California jobs?
Written by former Senate President Don Perata, Prop. 29 was drafted to specifically circumvent Proposition 98 education protections. Despite the 20,000 teachers who’ve been issued pink slips in California, Prop. 29 actually cheats schools out of more than $300 million.
But it’s not just education that gets short shrift, Prop. 29 was so poorly written as to put taxpayers at risk for the same kinds of conflicts of interest, waste and mismanagement that have plagued previous agencies and commissions created at the ballot box.
Like the stem cell research and high-speed rail initiatives, Prop. 29 contains no real accountability or oversight provisions. The nine-member commission Prop. 29 creates can spend $110 million a year on real estate and equipment. That’s in addition to the $15 million a year it can spend on administration and overhead for things like consultants, conventions and travel.
Prop. 29 does not contain critical taxpayer protections vital to any measure of this immense magnitude. In fact, the only report required on the commission’s activities is written by the commission itself, no external audits provided. That’s a lot like the fox guarding the hen house. These are not hypothetical scenarios – Prop. 29 specifically lacks the kind of accountability and audit provisions that were called for in the wake of mismanagement and conflicts-of-interest at other commissions, such as the high-speed rail authority, the First 5 Commission or the stem cell agency.
Just in the past few months we’ve seen the horrendous waste at the high-speed rail authority. Yet this proposal makes the same mistakes in terms of lack of accountability and creates an organization destined for inefficiency.
What’s worse, not only did Prop. 29 drafters choose to ignore these valuable lessons, they went a step further and locked in these fatal flaws for 15 years. Not even the governor or Legislature has the authority to amend Prop. 29, even in cases of waste, fraud or abuse.
Every one of us has had our lives affected by cancer in some way, devastating our friends and loved ones. We all support doing what we can to find new, innovative treatments and cures. To accomplish that we must be deliberative and logical in our approach, not create a huge government bureaucracy as an emotional response to painful issue. It is foolish to waste billions of dollars, derails job recovery in our state and leaves no one accountable.