MOORLACH UPDATE — Measure EE Parcel Tax Rebuff — June 16, 2019

Happy Father’s Day!

Fathers are great about teaching us independence, allowing us to fail in order to learn valuable life lessons, and encouraging us to tough it out and see the task through to completion. Maybe that’s why my father took me backpacking. You learn to carry weight and to press on to the peak. No easy solutions. No pain, no gain.

In Sacramento, however, the solution to every concern seems to be a tax increase. Do you want to give better health care to undocumented immigrants? Then tax Californians who either can’t afford health care, or chose to be “naked,” with a mandate penalty. Want to give a larger earned income tax credit to the poor? Then make selected income tax conformity changes that raise enough in new income tax revenues from the hard working, sacrificial producers. Don’t worry that 17 percent of Californians pay 87 percent of the personal income tax.

For Los Angeles Unified School District, if you want to give a long overdue raise to the teachers, then ask the residents to vote themselves a tax increase. After all, renters wouldn’t be affected by a real estate parcel tax, right? Wrong.

You cannot have a combination of high salaries, excellent medical benefits, an attractive defined benefit pension plan, and lifetime health benefits (retiree medical). The math doesn’t work.

The teachers union needs to go to the bargaining table and make major modifications to the retiree medical plan. Orange County did in 2006 and reduced its unfunded liability by 71 percent. Following this approach would reduce LAUSD’s Other Post Employment Benefits by more than $10 billion. That would give some room for pay increases.

Modifying the defined benefit pension plan prospectively with the provision of a defined contribution plan option, or a blend of both, would also provide some funding for a pay raise.

Someone at LAUSD needs to do the heavy lifting, tough it out, and solve the math problem that was self created by the district. Going to the taxpayers only earns a failing grade.

The Los Angeles Daily News and the OC Register provide my perspective in the editorial submission below.

Measure EE’s defeat gives hope to California’s taxpayers


Howard Jarvis lives! The spirit of his Proposition 13 tax revolt in 1978 animated the June 4 demise of Measure EE in Los Angeles. Needing a two-thirds majority vote to win, it fell short by 21 points to garner only 46 percent.

“We’re mad as hell and we’re not going to take it anymore!” voters effectively shouted, echoing Jarvis’ signature phrase of rage.

Measure EE would have imposed a tax of $500 million a year on real-estate parcels. Voters rejected the contention the money was needed to patch up the failing Los Angeles Unified School District.

In January, the United Teachers of Los Angeles went out on strike for six days. The strike ended when the LAUSD agreed to a new contract with a 6 percent raise for teachers and a promise to support Measure EE and a statewide “split roll” property tax increase on the 2020 ballot that would sharply alter Proposition 13, the 1978 property tax limitation initiative.

But the money just would have gone to underfunded teacher pension plans.

The desperateness of Measure EE reminded me of the Measure R campaign in Orange County, a half-cent sales tax to fund a bailout. In 1994, as a candidate for county treasurer-tax collector, I warned incumbent Bob Citron’s risky investments were driving the county off a cliff. I also campaigned for a more prudent government and against tax increases.

Bankruptcy struck that December. Citron resigned. And the board of supervisors appointed me to the post.

Some county political and business leaders insisted tax increases were needed to “save” the county. They scheduled an election for June 27, 1995 on Measure R, a half-cent sales tax to fund a bailout.

I opposed the tax increase, which got just 39 percent of the vote, to 61 percent opposed. Similar to Measure EE, it fell short by 12 points of the majority needed.

The County of Orange and the cities and school districts slammed by the bankruptcy laid off hundreds of workers and tightened their belts in other ways. The county not only survived, it thrived.

Measure R’s defeat sent a hopeful message to businesses: Government mistakes will not result in slamming the private sector. Consequently, the OC remains the most business-friendly place in California. Measure EE’s demise is good news for taxpayers.

In 2020, state voters will get to decide whether to alter Proposition 13, the 1978 initiative that capped annual tax increases at 2 percent of assessed value on real property, until the property was sold. The proposed “split roll” ballot measure would allow steeper increases for commercial real property, although the residential taxation methodology would remain the same — for now. It’s projected about $10 billion more in taxes would be raised.

Unless homeowners bought before the gigantic price increases of recent years, it’s a myth Prop. 13 has kept property taxes low. Voters have approved numerous bonds and parcel taxes above and beyond the maximum 1 percent of the assessed value at acquisition allowed by Prop. 13 (compared to a state average of 2.6 percent before Prop. 13 passed).

Because of soaring property values, California also now ranks a high 17th among the states in per capita property tax payments, at $1,559 per capita. That’s up from a rank of 31st in 1996.

And let’s remember the main benefit of Prop. 13: tax stability. You know when you buy your home what property taxes will be five, 15 or 30 years down the road. There’s no surprise jump in the tax that drove many homeowners into foreclosures in the years before 1978. Business owners — employers — should continue enjoying the same stability.

It’s possible other tax increases could be put on the 2020 ballot, such as an estate tax. So let’s review what we already must put up with.

California’s top marginal tax rate of 13.3 percent is by far the highest of any state. Even the middle-class rate, beginning at about $55,000 of income, hits at a staggering 9.3 percent. Yet in the Bay Area now, the San Jose Mercury-News reported, even $400,000 in income leaves families “feeling strapped” because of high taxes, housing and other costs. Should they pay more taxes?

Taxes are not the solution, but the problem. You should vote against a “split roll” or any other tax on the ballot. Like abolitionist Wendell Phillips urged before the Civil War, “Eternal vigilance is the price of liberty.” Never take a tax increase proposal lightly. Your prosperity may depend on it.

John M. W. Moorlach, R-Costa Mesa, represents the 37th District in the California Senate.



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