Today in Bad Ideas
[guest post by JVW]
The state that brought you the high-speed rail boondoggle, the failed stem-cell initiative, and the never-ending increases in gas taxes to raise money (which doesn’t in fact go to improving state roads) now has a dynamite — as in “bound to explode and kill everything around it” — plan to keep funneling money into the public trough during the economic havoc caused by the coronavirus. Naturally it’s complicated; naturally the majority Democrats supporting the plan have not spent one moment pondering the unintended consequences of the plan; naturally there is a strong chance that this blows up in our faces if the legislature dares to pass it and the government signs it into law:
Democrats who control California’s Legislature on Monday proposed a $100 billion economic stimulus plan that relies on what they are calling “future tax vouchers” along with speeding up other spending during the coronavirus pandemic.
If the phrase “future tax vouchers” doesn’t fill you with and overwhelming sense of dread then I don’t know what to tell you.
The plan would allow state Treasurer Fiona Ma to issue tax vouchers that proponents said could raise billions of dollars, though they said it was too soon to provide a more detailed estimate.
Why bother with a more detailed estimate when we know it’s going to be pulled straight from the imagination of progressive policy analysts and will have absolutely no tether to economic reality? Remember how the bullet train was going to run from Los Angeles to San Francisco in just over two-and-one-half hours? This is the same sort of wish-casting that has become a hallmark of modern California policy-making.
The state would let taxpayers prepay their taxes for a future budget year at a slight, as yet undetermined, discount. Most of those likely to take advantage of the program would be wealthy enough to make it financially worth their while, said Tim Schaefer, deputy treasurer for public finance.
“It is a work in progress. A lot of it is aspirational and properly so,” Schaefer said.
[. . . ]
Sen. Bob Hertzberg of Van Nuys, one of the lead proponents, said taxpayers could prepay their taxes through 2024 under the proposal, giving the state “a three-year runway to get back on our feet” in anticipation that the economy will improve enough by then to allow the state to absorb the loss in future revenue.
Assembly Budget Committee chairman Phil Ting of San Francisco equated the vouchers to coupons that taxpayers could use later or sell.
OK, Sen. Hertzberg: the state is going to bring in $100 billion over the next four years which will help plug holes, then presumably after that the state will be able to do without $25 billion per year from 2025-28 as taxpayers use their vouchers/coupons in lieu of giving Sacramento money. This coming, naturally, as the left-wing organizations which pull the strings on legislative Democrats gleefully consider ways to extract more tax revenue from businesses and wealthy Californians. Imagine the bank who was holding your mortgage came to you and told you that if you would accelerate the next 24 months of payments by paying that entire sum over 12 months, then they would give you vouchers to cover payments for the next 12 months after that. That might sound appealing (though it would hardly make any economic sense) right up until they told you that, oh, by the way, they were also increasing your adjustable mortgage interest rate by several percentage points so that the additional 12 months of payments really only covers six months. This seems to be the deal the state is trying to cut with businesses and wealthy Californians.
Democrats said their goal is to spur jobs while aiding small businesses, particularly those that are owned by women or racial minorities. Sen. Jim Beall of San Jose pointed to estimates that 13,000 jobs are created for each $1 billion invested in infrastructure.
They offered few specifics, but said that could include expanding small business tax breaks, shielding small businesses from increased unemployment insurance costs, or encouraging more manufacturing of protective equipment needed during the pandemic.
Other efforts could include expanding low-income tax credits, encouraging more affordable housing, or protecting struggling renters and landlords, the lawmakers said.
So naturally any “help” for businesses forthcoming from Sacramento will be doled out according to one’s placement on the intersectionality index, and they will once again retreat behind the tired canard that government spending equals job creation, even though the cupboard is bare and we’re already living on dollars “borrowed” from Uncle Sucker. The reality is that our majority legislative party and governor have no idea at all how to manage this crisis, so they are true to form certain to lurch between policies that range from the unaffordable to the impractical. It isn’t going to be a very fun reckoning here in the Golden State, especially as public employees read the tea leaves and decide to retire early with their pensions rather than deal with all of this uncertainty. Here’s wishing them well as they decamp to Oregon, Nevada, Arizona, and other parts of our country far less dysfunctional.
– JVW
When will they ever learn?
By the way, I participated in a Zoom discussion with my state Assemblyman (a Democrat who tries to tack to the center but is continually pulled leftward by his colleagues) where many of the states problems were addressed. I think he’s generally a good guy who means well, but he is a very minor player in a party that is now dominated by ideologues from the Bay Area and the core of Los Angeles.
JVW (ee64e4) — 7/28/2020 @ 2:44 pmToday in Bad Ideas
Biden 2020. =mike-drop=
DCSCA (797bc0) — 7/28/2020 @ 2:47 pmI assume that this is just an accounting trick to sell bonds in a slightly different way. Maybe they think the’ll be able to get a more favorable discount rate? Or they can play accounting games to avoid showing the liabilities on their books?
Seriously, why don’t they just sell bonds?
Time123 (53ef45) — 7/28/2020 @ 2:48 pmThe plan should be a big boon to money launderers. Y’think the tax collector is ever going to look at the cash in the mouth?
felipe (023cc9) — 7/28/2020 @ 3:13 pmSeriously, why don’t they just sell bonds?
I think because there are limits on the amount of bond indebtedness that we are allowed to take on, and with the financial picture being so dismal we have probably already reached that limit, as least for the time being. So yeah, they probably want to structure this like it’s a bond, but they are prohibited by law from promoting it as such. Another reason why I think this is destined to blow up in their faces.
JVW (ee64e4) — 7/28/2020 @ 3:19 pmThe plan should be a big boon to money launderers.
Good point. Or, as typical in this state, we will spend tens of millions of dollars on a new bureaucracy of public employees charged with monitoring this sort of thing.
JVW (ee64e4) — 7/28/2020 @ 3:19 pmJVW, seems like there’d be room to sue if it violates the bond limit…I wonder where these vouchers fall in BK priority? Would this really be easier than changing the law to raise the bond limit?
Time123 (53ef45) — 7/28/2020 @ 3:22 pmReason number 321 for property owners to leave this state.
Colonel Haiku (6c33c4) — 7/28/2020 @ 3:24 pmYeah, maybe the libertarians will stop the D’s from bankrupting the state. And to continue the fantasy, then give us legal hookers and cocaine.
rcocean (2e1c02) — 7/28/2020 @ 3:47 pmYep, leave the state. That’ll show ’em. Hahaha. Yeah, the liberal/left would never want that.
rcocean (2e1c02) — 7/28/2020 @ 3:49 pmHere’s something that would bring in the same marginal gain: restore the SALT deduction, which transferred tax money from the state to the feds by the simple expedient of residence planning prior to a sizable capital transaction. Why not buy a nice Florida house with the $7 million you’d otherwise have to pay the state when cashing in those Amazon shares you bought at 200.
Kevin M (ab1c11) — 7/28/2020 @ 4:19 pmAnother reason why I think this is destined to blow up in their faces.
Do, THEN ask permission.
Judge: Well, yes this is unconstitutional but I’m not going to order the state to redeem $100 million of this paper — it would bankrupt us.
Attorney: But, your honor, we are already bankrupt. You’re just pretending we aren’t!
(Attorney spends night in jail, but is not wrong)
Kevin M (ab1c11) — 7/28/2020 @ 4:23 pmOne good thing about this: Selling bonds afterwards won’t be possible.
Kevin M (ab1c11) — 7/28/2020 @ 4:23 pmThis is a dumb idea. Politicians never reduce the budget and if there’s a surplus they almost always find a way to get rid of it. All that 100 billion would do is tack directly onto the state debt in the medium/short term.
Nic (896fdf) — 7/28/2020 @ 4:26 pmIf it’s limited to not doing much more than making up the shortfall in taxes paid this year and next it it could make sense/ (npaid axes could be collected when the house is sold)
Sammy Finkelman (fe6a9b) — 7/28/2020 @ 4:29 pmCalifornia uses about 1.5 billion gallons of gasoline a year (4.2 million gallons a day); about half what they used in 1999. The price of regular gas in Los Angeles is (at the lowest 10 stations) about $2.65 a gallon. In Chicago, a city under EPA mandates like L.A., the price is $1.95. 70 cents a gallon difference * 1.5 billion gallons = about $1 billion dollars annually that is given by California’s people to the oil companies FOR NO GOOD REASON.
Start there.
Kevin M (ab1c11) — 7/28/2020 @ 4:36 pmThis is a dumb idea. Politicians never reduce the budget and if there’s a surplus they almost always find a way to get rid of it
With a surplus, they initiate new programs that they then fund forever.
Kevin M (ab1c11) — 7/28/2020 @ 4:37 pmReason number 321 for property owners to leave this state.
Recurring reasons #1-5: Lessee, I have WHAT! in equity? How much of a house can I get in Texas for that? You gotta be sh1tting me! And I can own a gun, drive anywhere at 65MPH and have good public schools for my kids?
Kevin M (ab1c11) — 7/28/2020 @ 4:45 pmWhy not just sell indulgences?
Kevin M (ab1c11) — 7/28/2020 @ 4:47 pmSchrute Bucks > future tax dollars
Hoi Polloi (dc4124) — 7/28/2020 @ 5:26 pmSchrute Bucks > future tax vouchers
Hoi Polloi (dc4124) — 7/28/2020 @ 5:27 pmSounds familiar…
Dave (1bb933) — 7/28/2020 @ 5:51 pmDave, from your link:
Phil Ting just drooled all over his necktie while reading this. And an aide is reading this slowly to Gavin Newsom in a Kindergarten teacher voice.
JVW (ee64e4) — 7/28/2020 @ 7:51 pm@3, 5, & 22-
Rip Murdock (361788) — 7/28/2020 @ 8:31 pmThe California Constitution requires a vote by the people to issue bonds. So the high speed rail project and and stem cell initiatives were approved by the voters.
This is equivalent to a kid wanting a parent to “front” him his inheritance.
norcal (a5428a) — 7/28/2020 @ 9:01 pmThe California Constitution requires a vote by the people to issue bonds. So the high speed rail project and and stem cell initiatives were approved by the voters.
That’s a great distinction. Thanks. Though it makes one wonder if the legislature couldn’t squeak through this as a bond measure if they declared it was “for education, for the kids, and for veterans.” But I guess even though realize how gauche it would be to try to talk the state taxpayers into more borrowing at the same time that they are hoping we vote to raise our town taxes. And fortunately the deadline for putting initiatives on the November ballot has passed, though I wouldn’t put it past the Democrat establishment to figure out a way to cheat that requirement with some sleight-of-hand.
In the short term though it certainly makes more sense to wait and see if we elect Joe Biden and usher in a Senate Democrat majority, in which case Washington will probably shower us with cash to make all of our debts disappear for a moment, until the piper’s bill is finally and inevitably due.
JVW (ee64e4) — 7/28/2020 @ 9:32 pmThis is equivalent to a kid wanting a parent to “front” him his inheritance.
And then still expect to be provided for in the will once they actually die.
JVW (ee64e4) — 7/28/2020 @ 9:33 pmJoe Rogan, who runs a popular podcast and just signed a $100 million deal with Sotify, says he’s leaving Los Angeles and moving to Texas.
https://www.msn.com/en-us/news/opinion/chuck-devore-joe-rogan-leaving-los-angeles-for-freedom-in-texas-signals-coming-exodus-from-liberal-cities/ar-BB17fr6t
He says it’s because he wants to be free, but the real reason is probably that he’ll save $13 million in state income taxes, as Texas doesn’t have any.
I’ve never heard of this guy before. But I do know that there are many wealthy indiduals in hig tax states that come to Texas, buy a house or condo, declare it their primary residence, to avoid paying income taxes in their home states.
Residency requirements in Texas are only two months out of a year. So they come down to Texas, once or twice a year, stay for a short while, then go back to their homes.
That’s not tax evasion. It’s tax avoidance. I’ve personally know several mlti-millionaires who have done exactly that.
Gawain's Ghost (b25cd1) — 7/29/2020 @ 6:10 am*Spotify*
Gawain's Ghost (b25cd1) — 7/29/2020 @ 6:11 amOh, and speaking of bad ideas, the Republican Senates $1 trillion stimulus package includes billions in defense spending that has nothing to with combatting the coronavirus.
https://reason.com/2020/07/28/senate-republicans-1-trillion-covid-19-relief-bill-includes-billions-for-new-fighter-jets-attack-helicopters-and-missiles/
Gawain's Ghost (b25cd1) — 7/29/2020 @ 6:18 am@30
If you thought using bleach to fight the virus was insane, how about Apache gunships?
There’s not much secret what’s really going on:
GOP coronavirus bill replaces money for Pentagon projects Trump raided for border wall
Dave (1bb933) — 7/29/2020 @ 7:11 amA border wall that has yet to be built, Dave.
Where did those misappropriated funds go?
Gawain's Ghost (b25cd1) — 7/29/2020 @ 7:29 amWhy the White House insisted on $1.8B for a new FBI building in the coronavirus bill
Dave (1bb933) — 7/29/2020 @ 9:55 am33/ The stupid explanation for Trump’s preferring a rebuilt FBI building in Washington where it is, rather than moving the FBI HQ outside D.C. is that he’s thinking that if the FBI moves and the site is bought by a private interest, somebody may build a hotel there, which would compete with his hotel. Really thinking ahead there, Trump. As some opponents of Trump like to say about things he says, this is without evidence.
Sammy Finkelman (fe6a9b) — 7/29/2020 @ 4:10 pm