[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.