Question & Answers
How do you plan on implementing trickle-up-taxation as Controller?
As the State Controller and the chief financial officer of California, my responsibilities include accountability and disbursement of the state’s financial resource, as well as, the ability to audit government agencies that spend state funds independently and without Legislative approval. Additionally, I have fiscal and financial oversight in numerous financing authorities including being an ex-officio member of the Franchise Tax Board and Board of Equalization.
With the ability to examine the books of California, I will work with your city and county to determine which responsibilities each municipality will take over from the state. The duties the state will retain will then determine what percentage of tax revenue the state will collect from your local municipality.
Once, our plan is studied and developed we will then present it to you the voter to vote on it. My goal is to have a plan ready to be voted on by the 2020 election. You will then have a chance to accept or reject our proposal. I believe that we the people must decide as a state if this is something we want.
Won’t trickle-up-taxation make rich municipalities richer and the poor poorer?
The first thing to know is that the percentage of tax revenue the state will collect from local municipalities will not simply be to cover the cost of the state to function. The state will collect additional tax dollars from municipalities so that the state can redirect monies to projects that affect the state as a whole, as well as, assisting distressed municipalities which might need additional assistance.
Is 30% the exact amount the state will collect from my city and county?
No, the 30% is used for illustration purposes to explain the concept of trickle-up-taxation. Just like the 10% city and county tax rate with zero deductions were used for illustrative purposes. The percentage may differ for different taxes. The state might take only 25% of the gas tax collected, and it may take 50% of personal income taxes. The rate may not also be a flat rate but might have a progressive tax scale that might tax underperforming municipalities a bit less and better-performing municipalities a bit more. This would allow the state to have a bit more flexibility to help poorer communities that might need additional help. Overall, our goal is to keep as large a portion of tax dollars collected in your community so that you and your local officials can best address the needs of your community.
You state that there will be more local representation and accountability with trickle-up-taxation, can you explain?
Trickle-up-taxation is about giving your local leaders greater flexibility to meet the needs of your community. If your local elected officials are not serving your community well and addressing these needs, then it will be much easier to vote them out during the next election or even recalling them if need be. With local representation, you can voice your concern directly to your city council or county supervisors during the public comments section or schedule a meeting with your councilmember. In Sacramento, the concern of the people is given little more than lip service. Corporations, lobbyist, and unions have more influence over legislation than you and your neighbors.
Will trickle-up-taxation raise my taxes?
Maybe, but in most likelihood, your taxes will decrease, and your tax dollars will be used more efficiently. For instance, one of the largest sources of tax revenues generated locally is sale taxes. Most cities collect 1% per dollar spent in the form of a sales tax. With the increase of online retailers like Amazon, sales tax revenue to cities has dramatically decreased. Therefore, Republican and Democrat politicians in Sacramento are considering taxing services.
What this means, is that when you go to a mechanic shop to have your brakes done, you currently only pay sales tax on the parts, not on labor. So if you paid $100 for parts and $200 for labor you would currently pay approximately $8 to $10 in sales tax. With the taxing of services, you could be taxed $24 to $30. Under our current form of taxation, the taxing of services will be inevitable. So get ready to see more tax increases on a host of services.
With trickle-up-taxation, the need to tax services wouldn’t exist because cities and counties will have the necessary tax dollars to provide you with the services your community needs. If Sacramento decides to allow the taxing of services, then your city and county can elect to have a 0% tax rate on services and thus preventing unnecessary and unwanted tax increases. No more forced tax increase from Sacramento.
Also, your tax rate will most likely decrease and be used more efficiently because tax dollars will stay locally and don’t have to go through multiple levels of government. Every time a tax dollar flows from one agency to another, money is wasted in excess bureaucracy. With tax dollars staying locally you will have more money to spend locally while decreasing the tax burden on you.
Will my city and county be able to tax me as much as they want?
No, there will be a state-imposed caps on how much a municipality can tax you. You will not see a county trying to tax you at 50 or 60% of your income. That will not happen, but with trickle-up-taxation, your local municipalities will be incentives to provide you with the best services at the lowest rate. With trickle-up-taxation, you will get competition between municipalities. If your city is taxing you too much and providing you with inferior services, but your neighboring city is providing better parks, libraries, community centers, police and fire services at lower tax rates, what will happen? Your city will have to adjust and begin implementing or improving on the policies of the neighboring city, or they will soon find out that people will begin voting them out or vote with their feet and move next door.
Voting with your feet is happening right now, but instead of Californians moving to a neighboring city they are leaving the state for places like Texas. This causes great financial instability for the state as more middle-class, and upper-middle-class taxpayers are leaving the state. If these Californians stay in California and move to a city and county that emulate the policies of Texas, then the state won’t suffer by losing these taxpayers. The state will continue to receive tax dollars to use on projects to improve the state for all Californians.
Therefore, with trickle-up-taxation, the logical conclusion is you will see lower taxes and better services because each municipality will be competing against each other to provide the services you want at the lowest possible tax rate. Now, the services you want maybe more expansive social welfare programs. That’s fine, there is demand for that, but I don’t know why any progressive that would want to tax themselves more when they can provide the exact services they desire at a lower cost to the taxpayer.