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 resources, as well as, the ability to independently audit governmental agencies, projects, or programs without legislative approval. Additionally, I will have fiscal and financial oversight in numerous financing authorities including the Franchise Tax Board and Board of Equalization.
With the ability to examine the books of California, I will work with your county/city to determine which responsibilities they are best suited to manage and which responsibilities the state will retain. After a thorough examination, we will determine what percentage of tax revenue the state will collect from local municipalities.
Once our plan is studied and developed, we will present it to the people, and you will decide what form of government you want, not Sacramento politicians. My goal is to have a plan ready to be voted on by the 2020 election. You will then have a chance to voice your opinion and accept or reject our proposal. I believe this is too important of a decision to be made by politicians and bureaucrats. We the people must decide if we want local representation or overbearing centralized government.
Won’t trickle-up-taxation make rich municipalities richer and the poor poorer?
The first thing to know is the amount of revenue the state will collect will not simply be to cover the state government’s expenses. The state will receive additional resources so it 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, 30% was used for illustrative 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 could allow the state to have a bit more flexibility in assisting underperforming communities that might need some additional help. There might be a flat fee based on per person and even lower percentage percentages that would most likely be a flat rate (i.e 15% of all taxes collected locally) to keep a stable tax base to the state to keep critical services fully funded without extreme revenue swings as we currently have. Overall, our goal is to make sure your community has the resources necessary to best address the needs and wants of your community, as well as have adequate funds to run the state government.
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 communities needs, then it will be much easier to vote them out during the following election or even recalling them if need be. With local representation, you can voice your concern directly to your city council or county board of supervisors during the public comments section or schedule a meeting with your representative. In Sacramento, the concerns of the people are 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 utilized more efficiently. For instance, one of the largest sources of tax revenue generated locally is sales tax. 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 are considering taxing services.
Let me explain, say you take your car to a repair shop. Currently, you will only pay taxes on 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 isn’t necessary 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 trickle-down through multiple government agencies and bureaucracies. 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 minimizing waste, fraud, and abuse.
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 county/city is taxing you too much and providing you with inferior services, but your neighboring county/city is providing better parks, libraries, community centers, police and fire services at lower tax rates, what will happen? Your county/city will have to adjust and begin implementing or improving on the policies of the neighboring community, 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 any progressive wanting to be taxed more when they can receive the exact services they desire at a lower tax rate.
Will my city have a personal income tax with Trickle-up-Taxation?
No, for easier implementation and logistical reasons, there will only be a county income tax and no city income tax. Your city will be treated as the state and receive a portion of the income tax collected from residents of your city. So it might look like this. Your county implements a 5% income tax, and your city may collect 15% of that 5%. But each county could be different. One city could receive 25% from their county. The percentage will be determined locally.
Your city and local municipalities, for instance, will have more control to determine things like the sales tax and at what percentage.
Will Trickle-up-Taxation repeal Prop. 13 and raise my property taxes?
No, Prop. 13 protections will not only stay in place, but we will look at ways to strengthen those protections.
How will you monitor the spending at the State level of the taxes gained from the counties?
That is currently under the current duties of the Controller, to monitor the finances of the state and make sure all payments comply with the law, as well as, audit governmental programs and agencies to ensure compliance and fiscal responsibility. The current Controller has, for the most part, neglected this duty and has focused on auditing a few cities but has refused to audit or even look into the high-speed rail boondoggle. With Trickle-up-Taxation, I want to expand authority to counties to have greater fiscal safeguards and auditing authority over cities. So the County Controller should have the tools to keep cities with weaker budgetary oversight accountable and safeguard against waste, fraud, and abuse. With 58 Counties and 482 Cities in California, having the State Controller, in a sense, doing everything, allows many things to fall through the cracks. So the State Controller will still have the ability to audit cities but for the most part, the Controller will monitor the State, and the 58 counties and the 58 counties will monitor the 482 cities. This way I will be able to spend more time exposing waste, fraud, and abuse on the State level, which has been ignored for far too long.
How will you ensure that the State taxes would be spent in a manner that doesn’t increase the State’s massive debt?
I will put safeguards in Trickle-up-Taxation that will put a limit on what the State government can increase debt on and under what circumstances (e.g., disaster relief). Typically, whenever you hear they are putting safeguards on a new tax increase and must be used to A, B, and C and cannot be diverted, there is usually a loophole and if not the old taxes which don’t have that protection are usually diverted. They do this with the gas tax, where only 20% of the money goes to road repair, yet they still increased our taxes by $52 billion. So we will want to restrain what the Legislature and Governor can spend money on. I will also put a balanced budget amendment in Trickle-up-Taxation. The exact percentage will be determined after a thorough study but let’s say that a maximum of 90% of funds coming to the state can be used to pay for ongoing expenses, a minimum of 8% will be used to pay down debt and unfunded liabilities, and 2% will be used as a rainy day fund. We will have a tight safeguard to prevent massive debt increases and keep the size of state government to a level where it can be the most effective and efficient.