Saturday, January 28, 2012

One reason why Californian's have budget problems - everybody else

The following chart has been floating around the internet since 2008. In this blog, the focus is California, so were going to reconsider the data:

Red State Socialism
Before commenting on the meaning of this chart, it is important to know that Politifact rates the chart as "Mostly True" explaining:
The graphic’s data uses data from the 2004 election rather than 2008, and the figures on taxes and spending date back to 2005. There are fewer states that would be labeled Republican based on the 2008 election, and there’s a strong likelihood that tax and spending data would have changed as well. Because of this likelihood, we downgrade the accuracy of this generally accurate chart to Mostly True.
Also, Politifact notes:
[Jesse Erlbaum, the chart's creator,] added, "I've listened to feedback about this chart for a few years now, and folks who don't like the insinuation it makes will always come up with some explanation. Popular ones are that there are more military jobs, more retirees, more farmers, and fewer cities in red states. I don't buy it. Whatever the excuse, the data is clear: These states receive more than they pay in. Everything else is just a rationalization based on someone deciding that one reason for spending money is good, and another is bad. This chart makes no such distinction. I say, ‘Deal with it!’ The facts are the facts."
Additionally, Politifact offers a troublesome comment:
"Because of the high deficit spending we’re seeing at the federal level, it’s likely that every state is currently receiving more in federal spending than its population paid in federal income taxes," the Tax Foundation's Morrison said.
What we know is that the tax numbers in the chart come from the conservative, business oriented Tax Foundation that regularly tells us California taxes are too high. After downloading the study data, what is made clear in a footnote is the following (emphasis added) and we learn that "Morrison" was just blowing smoke to cover up what the business funded Foundation doesn't want us to know:
* During fiscal years in which the federal government runs deficits some spending is financed through borrowing. This creates implicit tax liabilities for states that must be repaid eventually. To incorporate these implicit tax liabilities into the analysis, the following adjustment was made to state tax burdens: First, the total federal tax burden is increased by the size of the federal deficit. Next, this total burden is allocated among states based on each state's proportion of the actual federal tax burden. Finally, adjusted spending-per-dollar-of-tax ratios are calculated by dividing actual expenditures by the adjusted tax figure, effectively making figures deficit neutral.
What else we do know is that the data available runs from 1981 to 2005 and they ceased providing the data. I may be paranoid, but....

Erlbaum's chart presents the data on a per capita basis. What it doesn't show is the underlying numbers. By downloading the underlying data (in spreadsheet form) from the Tax Foundation, we can discover a number that should be meaningful to Californian's currently fighting over State Government Expenditures and Taxes:

According to the Tax Foundation numbers, in 2005, Californian's incurred a net tax burden to the federal government $47.6 billion - that is, $289.6 billion was extracted out of our economy and $242.0 billion came back into our economy.

According to the business subsidized Tax Foundation data if the federal government would remit all that money to the State General Fund we could easily improve our schools and roads, restore our social and health programs to a desirable level, and cut taxes including eliminating state corporation taxes.

In fact, if the federal government would just send us the net gain of Iowa and South Carolina,  we could avoid considering a tax increase measure in November and still contribute more to other states' economies than any state.

Of course, as we know we and residents of the other states that suffered a net theft in 2005, we victims only have 32 Senators while the thieving states have 68.

Friday, January 27, 2012

The "tech equals jobs" myth rolls along in the halls of government but briefly not in the tech biz press

In the posts here a great deal of sarcasm has been offered regarding politicians embracing the executives of Silicon Valley and high tech generally. Finally, others with ostensibly more high tech credentials than I are beginning to observe that our "emperors" have no clothes.

Let me preface the following discussion by pointing out that Apple Inc. has been singled out in the current discussion because
  1.  the numbers involved are big, really big, and 
  2.  this week the President in his State of Union Address indicated that no one in the White House reads The New York Times by invoking the ghost of Steve Jobs and the other side of the Congressional Aisle stupidly jumped right in to share in the we-like-Jobs (that's a capital "J") because they definitely won't read The New York Times.
As one article in a tech journal put it:
Apple may be the poster child for manufacturing abroad, but HP also uses Foxconn heavily. Analysts estimate that Apple will be roughly 40 percent of Foxconn’s revenue in 2012. HP is about 25 percent, according to Fubon Research. No one is writing about HP though even though its supply chain report reads just like Apple’s. Every electronic you have on you right now goes through China. The data center that powers the cloud behind those devices were also made by folks stacked in tech dorms in China. The minerals in the battery were mined somewhere. Deep down do you really give a rat’s ass about the working conditions that created those relatively inexpensive devices? Of course not, you’re from a Western economy. And from what I can tell you’re still buying as much tech gear as you can.

It’s not just tech. Tech is being thrown under the bus with this debate because it’s sexier. Ever notice how everything you wear comes from somewhere else too. We go to Wal-Mart, Target or wherever and demand cheap chic. You don’t get cheap without inexpensive labor. In the fashion industry the race is on to find more sourcing outside of China. Why? Labor costs are going up. Africa is looking good at the moment. Rest assured that shirt on your back has some exploited labor behind it. In fact, everything you own comes from a supply chain that probably has multiple things you just don’t want to know about. You could swap out Apple in that New York Times story and replace it with almost any American corporate giant.
We all know "almost any American corporate giant" is...well, if you aren't in the mood to read anything but my conclusion click here.

This week David Gerwitz1 joined the slowly growing group of those aware of the truth trying to get the message across.

Gerwitz notes:
It’s been a banner week for Apple. With Apple’s announcement of Q1 2012 results, the company is now apparently worth more than Greece.

In the same week, the President of the United States invoked the late Steve Jobs and Apple in his Congressionally-mandated State of the Union address.

Just a few hours later, in the GOP response to the President’s speech, Governor Mitch Daniels also played the Steve Jobs card, saying “The late Steve Jobs — what a fitting name he had — created more of them than all those stimulus dollars the President borrowed and blew.”

Partisanship aside, certainly Apple has created a lot of jobs over the years. But today, most of the jobs created by Apple are not American jobs, they’re sweatshop-style jobs for miserable, overworked workers in China.
Last week, before the State of the Union, The New York Times noted:
When Barack Obama joined Silicon Valley’s top luminaries for dinner in California last February, each guest was asked to come with a question for the president.

But as Steven P. Jobs of Apple spoke, President Obama interrupted with an inquiry of his own: what would it take to make iPhones in the United States?

...Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.

...Apple has become one of the best-known, most admired and most imitated companies on earth, in part through an unrelenting mastery of global operations. Last year, it earned over $400,000 in profit per employee, more than Goldman Sachs, Exxon Mobil or Google.

However, what has vexed Mr. Obama as well as economists and policy makers is that Apple — and many of its high-technology peers — are not nearly as avid in creating American jobs as other famous companies were in their heydays.

Apple employs 43,000 people in the United States and 20,000 overseas, a small fraction of the over 400,000 American workers at General Motors in the 1950s, or the hundreds of thousands at General Electric in the 1980s. Many more people work for Apple’s contractors: an additional 700,000 people engineer, build and assemble iPads, iPhones and Apple’s other products. But almost none of them work in the United States. Instead, they work for foreign companies in Asia, Europe and elsewhere, at factories that almost all electronics designers rely upon to build their wares.

“Apple’s an example of why it’s so hard to create middle-class jobs in the U.S. now,” said Jared Bernstein, who until last year was an economic adviser to the White House.

“If it’s the pinnacle of capitalism, we should be worried.”
Before going any further, here is exactly what President Obama said in his State of the Union Address this week:
You see, an economy built to last is one where we encourage the talent and ingenuity of every person in this country. That means women should earn equal pay for equal work. (Applause.) It means we should support everyone who’s willing to work, and every risk-taker and entrepreneur who aspires to become the next Steve Jobs.

After all, innovation is what America has always been about. Most new jobs are created in start-ups and small businesses. So let’s pass an agenda that helps them succeed. Tear down regulations that prevent aspiring entrepreneurs from getting the financing to grow. (Applause.) Expand tax relief to small businesses that are raising wages and creating good jobs. Both parties agree on these ideas. So put them in a bill, and get it on my desk this year. (Applause.)
The President, who knows that the Apple Inc's don't represent any real hope for economy, nonetheless reinforced the conventional wisdom that American's tend to believe instead of facts.

We need to get some of the facts on the table. If Apple employs 43,000 people in the United States, we have to understand that at least one-third are Apple Store employees. According to a recent report:
It turns out that in 2010, Apple Store revenue was $481,000 per employee. It's at about $320,000 per employee through three quarters of 2011, according to Dediu. That projects to a dip from 2010's record numbers to $427,000 in revenue per employee for this year, though one would expect fourth quarter Apple Store sales to spike due to the holidays.

...But what about compensation for said employees? Is Apple particularly generous when it comes to its retail employees, considering the gold mine of a cash cow they're a big part of making so profitable?

The answer to that is, well, not so much. Dediu reckons that the average Apple store employee creates sales at the rate of about $278 per hour. Wages for those employees, however, range from $9 to $15 per hour for salespeople and can reach $30 per hour for Genius Bar staff.

Oh, and Apple Stores don't do commissions.
In fact, attempts are underway to unionize Apple Store employees. In an article last Summer, this was reported:
Part-time Apple store worker named Cory Moll is attempting to secure better pay and benefits for he and his coworkers by launching a campaign to form the Apple Retail Workers Union. The union would give the tens of thousands of Apple store employees around the world one singular voice for negotiating better pay, benefits, and treatment.

Moll, who makes $14 an hour in his part-time position with the company, says that his current wage just doesn't cut it in his hometown of San Francisco. For reference, the minimum wage in the city is $9.92 an hour. The intrepid union leader says that his movement is slowly gaining support from the company's notoriously loyal employees.
The time has come to acknowledge the truth stated here in October 2009 when the Gubernator was both literally and figuratively blowing smoke at a reporter for TIME:
Yes, Arnold is the embodiment of California - an aging actor whose image is everything and substance is not very deep. In the case of California's economy, we do have a problem and the promise of California I knew in 1960 is over.

The article focuses on the promise of the future seen in the past of the technology entrepreneurs and venture capitalists - the technopreneurs - without any real analysis of either the past or the future that they represent to the vast number of Californian's who work for a living.

Californian's already know that most of those nifty high-paying technology jobs created between 1985 and 2005 have gone to people making half or less located in other countries and other states. But they keep hearing that the green revolution partly funded by the Obama stimulus bill will be the source of California's magical economy engine.

No one is explaining the truth about that, of course.
The other truth that seems to have been missed by many is what was reported here in February 2011:
Don't be confused by the "economic recovery big-lie corollary." The San Francisco Bay Area and the San Jose Area include major technological centers including Silicon Valley, many established genetic research and development businesses, and many "green" technology centers. Employment, the number of jobs, in this area according to the federal government is the same today as it was in 1990....

In January 1994 the NASDAQ composite index was at 800. In July -September 2002 it several times closed at over 4,200. In September 2002 it frequently closed at under 1,200. That's the technology boom-bust pattern we have seen.

About half of the dot-com companies survived after 2004. A very few, like Amazon, eBay, and Google are significant firms. The layoffs in the private sector were in the hundreds of thousands in the corridor from San Francisco through San Jose....

Essentially, in terms of private sector job growth the decade between 1995 and 2005 was lost....
On October 7, 2009, the question raised here was What's the purpose of an "economy"?

That brings us back to the facts troubling David Gerwitz. They are relatively simple. In it's most recent quarterly statement Apple Inc. indicated it had $97.6 billion in cash. About two-thirds or $64 billion was reported being held by Apple "offshore" at the end of December. Gerwitz clearly stated his problem:
But Apple is a U.S. company. We know it is because both the President and the loyal opposition just pointed to it (or to the Dearly Departed, in any case) as a model for American business. ...I’m not an international finance expert, but the idea — the mere idea — that a company like Apple would store its big wad of loot offshore to avoid paying its fair share to America makes me ill.
His article points out that Microsoft has $42 billion overseas, as do Cisco and many others. So he and others struggle with the problem which they identify as not being an Apple Inc. problem. Well, maybe, but the story in The New York times offers an example that revolves around Apple. Some might call it anecdotal, but it carries with it the unfortunate truth of having a "world economy" involving international corporations but local labor markets:
The first time Eric Saragoza stepped into Apple’s manufacturing plant in Elk Grove, Calif., he felt as if he were entering an engineering wonderland.

It was 1995, and the facility near Sacramento employed more than 1,500 workers. It was a kaleidoscope of robotic arms, conveyor belts ferrying circuit boards and, eventually, candy-colored iMacs in various stages of assembly. Mr. Saragoza, an engineer, quickly moved up the plant’s ranks and joined an elite diagnostic team. His salary climbed to $50,000. He and his wife had three children. They bought a home with a pool.

“It felt like, finally, school was paying off,” he said. “I knew the world needed people who can build things.”

At the same time, however, the electronics industry was changing, and Apple — with products that were declining in popularity — was struggling to remake itself. One focus was improving manufacturing. A few years after Mr. Saragoza started his job, his bosses explained how the California plant stacked up against overseas factories: the cost, excluding the materials, of building a $1,500 computer in Elk Grove was $22 a machine. In Singapore, it was $6. In Taiwan, $4.85. Wages weren’t the major reason for the disparities. Rather it was costs like inventory and how long it took workers to finish a task.

“We were told we would have to do 12-hour days, and come in on Saturdays,” Mr. Saragoza said. “I had a family. I wanted to see my kids play soccer.”

Modernization has always caused some kinds of jobs to change or disappear. As the American economy transitioned from agriculture to manufacturing and then to other industries, farmers became steelworkers, and then salesmen and middle managers. These shifts have carried many economic benefits, and in general, with each progression, even unskilled workers received better wages and greater chances at upward mobility.

But in the last two decades, something more fundamental has changed, economists say. Midwage jobs started disappearing. Particularly among Americans without college degrees, today’s new jobs are disproportionately in service occupations — at restaurants or call centers, or as hospital attendants or temporary workers — that offer fewer opportunities for reaching the middle class.

Even Mr. Saragoza, with his college degree, was vulnerable to these trends. First, some of Elk Grove’s routine tasks were sent overseas. Mr. Saragoza didn’t mind. Then the robotics that made Apple a futuristic playground allowed executives to replace workers with machines. Some diagnostic engineering went to Singapore. Middle managers who oversaw the plant’s inventory were laid off because, suddenly, a few people with Internet connections were all that were needed.

Mr. Saragoza was too expensive for an unskilled position. He was also insufficiently credentialed for upper management. He was called into a small office in 2002 after a night shift, laid off and then escorted from the plant. He taught high school for a while, and then tried a return to technology. But Apple, which had helped anoint the region as “Silicon Valley North,” had by then converted much of the Elk Grove plant into an AppleCare call center, where new employees often earn $12 an hour.

There were employment prospects in Silicon Valley, but none of them panned out. “What they really want are 30-year-olds without children,” said Mr. Saragoza, who today is 48, and whose family now includes five of his own.

After a few months of looking for work, he started feeling desperate. Even teaching jobs had dried up. So he took a position with an electronics temp agency that had been hired by Apple to check returned iPhones and iPads before they were sent back to customers. Every day, Mr. Saragoza would drive to the building where he had once worked as an engineer, and for $10 an hour with no benefits, wipe thousands of glass screens and test audio ports by plugging in headphones.
As I said in October 2009, if the purpose of an economy is to make international corporations more productive and their owners and management more wealthy, then we have had a very successful tech-based economy over the past three decades.

On the other hand, if the purpose of an economy refers to the ways in which people use their environment to meet their material needs and you measure it in terms of the size and wealth of the middle class, the American economy is in a long-term decline which may or may not be reversible.

In fact, there is an irony in Apple's image history.

Everyone remembers the Apple commercial frm the 1984 SuperBowl XVIII which was an allusion to George Orwell's novel, Nineteen Eighty-Four, which described a dystopian future ruled by a televised "Big Brother". The rows of marching minions have direct cinematic parallels with those in the opening scenes of the classic dystopian film Metropolis.

Right now if you search on Google News the words "Apple Foxconn workers" you will be led to stories about Foxconn International Holdings Ltd., the Chinese manufacturer used by Apple to produce most of its top selling products. After publishing two frontpage stories How U.S. Lost Out on iPhone Work and In China, the Human Costs That Are Built Into an iPad one writer of a letter to the editor commented:
It’s ironic and disheartening that the company that set out to change the world could accomplish the task only by employing vendors who subject workers to slave-labor wages and an Orwellian work environment.

With all due respect to the late, great Steve Jobs, if the famous 1984 Super Bowl commercial for Apple were reshot, the image of Big Brother on the giant screen might fittingly be his own.

In stark contrast to its counterculture origins, Apple seems to have evolved into the embodiment of everything it once despised — a greedy, callous, ruthless behemoth beholden only to fund managers who demand incremental profits every quarter at any cost.
Yes, it isn't only Apple Inc. But Apple Inc. is the right image for a simple message.

That message is there is no future for workers in the "Silicon Valley tech industry international economic model implemented after 1984". It is worker antagonistic which makes it an anathema, destructive to our way of life and the well-being of working people everywhere.

Yes, it is the logical outcome of a chain of events. So was World War II. No one in their right mind would embrace either as good for humanity. But it appears that our  business leaders have and our governmental leaders had better look out.

As Peter Heather put it2:
Any new flow of wealth – such as that generated by the Industrial Revolution, in more modern times, or globalization – will always spark off intense competition for its control; and, if the amount of new wealth is large enough, those who control it will erect entirely new authority structures. In Western Europe, for instance, the Industrial Revolution eventually destroyed the social and political dominance of the landowning class....
Oh wait, President Obama and California Governor Jerry Brown make regular trips to pay homage to the gurus of the tech industry. So maybe the tech industry leaders have already destroyed the social and political dominance of the alliance between the old industrial manufacturers and labor, advancing all of us to a new era of capital versus labor. And the power has all shifted to capital.

1Gerwitz is a member of FBI InfraGard, the Cyberwarfare Advisor for the International Association for Counterterrorism & Security Professionals, a columnist for The Journal of Counterterrorism and Homeland Security, and has been a regular CNN contributor, and a guest commentator for the Nieman Watchdog of the Nieman Foundation for Journalism at Harvard University. He is the author of Where Have All the Emails Gone?, the definitive study of email in the White House, as well as How To Save Jobs and The Flexible Enterprise, the classic book that served as a foundation for today's agile business movement. Gerwitz is host of the ZDNet Government and ZDNet DIY-IT blogs, CBS Interactive's Distinguished Lecturer, an author, U.S. policy advisor, and computer scientist. He is featured in The History Channel special The President's Book of Secrets, is one of America's foremost cyber-security experts, and is a top expert on saving and creating jobs. He is also director of the U.S. Strategic Perspective Institute as well as the founder of ZATZ Publishing.

2 From The Fall of the Roman Empire : A New History of Rome and the Barbarians by Peter Heather

Sunday, January 22, 2012

Obama's Administration & the wave energy technocrats: What whales?

The first two posts here were Limited Time Only - Act now to own your piece of the ocean off the Mendocino Coast and FERC Ponders Allowing Public Input, Environmental Review of Proposal for Electrical Generators in Whale Route as I was rather aghast at the apparent governmental effort to facilitate wave power facilities construction along the U.S. Pacific Coast.

As I pointed out, unlike the areas off Europe and Britain, the entire U.S. Pacific Coast is the migration route for the Gray Whale:

It appeared that the wave energy efforts by PG&E and others came to a halt, though it took a couple of years. But apparently that did not discourage the Obama Administration.

Lo and behold, the Obama Administration is back advocating it again according to a Silicon Valley Mercury News article (classified as an article on green energy):
A new report by the Department of Energy says that waves off California's 1,100-mile coastline could generate more than 140 terawatt hours of electricity a year -- enough to power 14 million homes -- if tidal and wave energy was developed to its maximum potential.

The United States uses about 4,000 terawatt hours of electricity a year; 1 terawatt hour powers about 100,000 American homes.

"California's wave and tidal current resources offer real opportunities to generate renewable energy using water-power technologies in the future," Energy Secretary Steven Chu said in a statement.
When you look at the article - and the report it refers to - you discover that government engineers sound like the nuclear power engineers of the 1950's, in this case all focused on how to get electricity to support the systems and customers of Apple and Intel by building electromagnetic energy generation facilities in the survival path of a species the U.S. spends a great deal of time pretending it cares about.

They even provide an interactive map which indicates where wave power energy generators should be built:

This doesn't surprise me. As I've pointed out before, there is a core disconnect between what the Obama Administration says (and probably believes) versus the permanent-job producing potential of the tech economy. As I noted in 2009:
Californian's already know that most of those nifty high-paying technology jobs created between 1985 and 2005 have gone to people making half or less located in other countries and other states. But they keep hearing that the green revolution partly funded by the Obama stimulus bill will be the source of California's magical economy engine.
But we still keep seeing the heavy influence of the international technology corporations in the supposedly-progressive Obama Administration as I explained on February 22, 2011 offering extensive supporting detail:
This week it was announced that President Obama will appoint Intel CEO Paul Otellini to join GE's CEO Jeffry Immelt on the Council on Jobs and Competitiveness.

President Obama has spent a lot of time with Silicon Valley corporate chiefs. This week he spent more time with them. In fact, the LA Times reported:

Obama's visit was, however, also a reminder that the political stereotypes that California conveys are not just divided between movie star-rich Southern California and the hippie-liberal north. Silicon Valley has its own connotation, of magical inventions spawned in garages or college dorms, of American enterprise.

It was that spirit that Obama sought as his own last week, even if largely out of view. He landed Thursday night, but only his arrival and his departure Friday morning from San Francisco were public events.
 Despite all the factual evidence to the contrary, based on what he says and based on the policies he has allowed to be implemented or continued during his administration, Obama appears to believe that technology oriented international corporations are going to replace the 7 million jobs lost nationwide since 2008, if only we'd just educate another 7 million engineers, biologists, and lab technicians using money from the working poor, or at least any source other than the technology corporations like Intel.

Intel, headquartered in Santa Clara was founded in 1968. By the end of the 1990s, Intel was one of the largest and most successful businesses in the world. But Intel's employment in the Silicon Valley area has been cut drastically. It shut it's last Silicon Valley manufacturing plant in 2009.
I simply don't understand why the Obama Administration is so tied to these multinational corporations.

And I don't understand why anyone thinks wave energy projects are green energy! Just ask the Gray Whales what they think.

Tuesday, January 17, 2012

Polling stops the billionaire's beauty and barber shop tax proposal; Moonbeam has typo

Calbuzz reported today:*
Calbuzz has come across a brand new FM3 poll for the Think Long Committee that tests the major competing tax measures (fairly described) for their fundamental acceptability among 800 likely voters. The results: California Federation of Teachers' millionaire's tax, 70-30%; Jerry Brown's temporary income and sales tax increases, 62-37%; Think Long's income tax cut and extend sales tax to services, 57-30%; Molly Munger's income tax increase, 51-45%.
That was followed by reports of a statement from the Think Long Committee like this one in the Sacramento Bee:
"It is clear from public reaction, stakeholder meetings and our own public opinion research that Californians are hungry for real reform and are more willing than ever to support a sweeping plan that is fair and will put an end to California's perpetual financial volatility and suffocating wall of debt," the committee said in a statement. "At the same time, we recognize the practical constraints of the 2012 election calendar - and have come to the conclusion that it will take more time to perfect these proposals, eliminate unintended consequences and provide every stakeholder and everyday Californians a meaningful voice in that process."
The Committee's proposal was described here in the post The billionaire's beauty and barber shop tax proposal.

In the meantime, Governor Jerry "Moonbeam" Brown's measure to increase taxes on the working poor and the very rich had to be resubmitted Friday. The Sacramento Bee reported:
Gov. Jerry Brown is taking a mulligan, tripped up by a typographical error and forced to re-file his ballot initiative to raise taxes.

The Democratic governor on Friday filed paperwork with the state for "The Schools and Local Public Safety Protection Act of 2012- ver. 2." The measure is identical to one Brown filed in December, the governor said in a filing with the attorney general's office, "except that we have corrected a typographical error that resulted in two numbers being transposed."

Re-filing an initiative can delay the attorney general's preparation of its title and summary, potentially condensing the period for a proponent to gather signatures and making that effort more expensive.
I don't understand how this could happen in an organization headed by such a smart man. (That's sarcasm.)

What's not surprising about this news is that what I call The California Federation of Teachers & Friends Tax Millionaires for Education, Social Services, Safety Services, and Road and Bridge Maintenance Initiative got the strongest support in the polls. It would get even stronger support if the press were honest about how the Governor's measure would impact on lower income workers.

In fact, perhaps one day the press in California will be honest about all the various tax measures in terms of who pays, what the added tax will look like in 2020 (i.e. it will have expired causing a replay of the current crisis), the likely impact on those who decide where to locate businesses, how the money can be used, etc., instead of who is sponsoring it.

I know, the public can't understand the details, but they can relate to faces, hence the popularity of Facebook and the need to write about people, not bland tax facts.

*The text quoted has disappeared from the linked web site as of January 19, 2012. Perhaps there was some rights problem, but being paranoid I think it may have been removed to not embarrass Brown. A Google search still turns up references to it from which I've done a screen dump and created a jpeg file to show it existed.

Thursday, January 12, 2012

The Working Class, The Chamber of Commerce, & Governor Moonbeam's 2012-13 Proposed State Budget

On "The Daily Show with Jon Stewart" this week Fox News libertarian political gadfly Andrew Napolitano rattled off a comment something like:
"I don't believe there are two parties in this country... We have one big-government party. It has a Democratic wing that likes war and taxes and individual welfare, and a Republican wing that likes war and deficits and corporate welfare."
Today at its luncheon forum, Governor Jerry "Moonbeam" Brown's Finance Director Ana Matosantos will be chatting with members of the California Chamber of Commerce.

According to The Sacramento Bee:
Gov. Jerry Brown's political adviser, Steve Glazer, has been tapped to advise the California Chamber of Commerce's heavy-hitting political action committee in legislative races next year.

The chamber's JobsPAC, whose donors include insurance, oil, tobacco and pharmaceutical companies, spent more than $9 million statewide last year, including opposing the elections of Lt. Gov. Gavin Newsom, Attorney General Kamala Harris and Insurance Commissioner Dave Jones, all Democrats. The chamber itself attacked Brown during the campaign, though it became largely supportive of the Democratic governor this year.

...Glazer will remain Brown's unpaid political adviser in the new year.
The California Chamber of Commerce is apparently becoming a regular member of the Moonbeam fan club. The Chamber has endorsed the Governor's tax increase initiative, the only proposal submitted to the Attorney General's Office that substantially raises the taxes paid by the poorest workers among us as well as the richest among us, while favoring most those with taxable incomes in the $100,000 - $200,000 range.

Apparently Brown has successfully won the hearts of the Republican wing of the California branch of Napolitano's One Big-Government Party. And since Governor Brown, 73, is part of the the Democratic wing's ruling gerontocracy along Senator Diane Feinstein, 78, Senator Barbara Boxer, 71, and Party Chairman John Burton, 79, he apparently is capable of either "working with" or "effectively misleading" both wings.

Due to a "oops" mismanagement problem, Brown's proposed 2012-13 State Budget was presented a few days early this year. It didn't take long before the State Legislative Analyst Mac Taylor, in his polite and respectful style, to express concern about revenue estimates being too high, about severe cuts in programs that support families with working parents, and about the problem of having school systems setting budgets in July based on a possible voter approval of a tax increase initiative in November.

To use The Sacramento Bee's explanation of the cuts to family support:
The governor's proposal drops aid to parents who fail to find jobs after 24 months, rather than the current 48 months. It also would restrict child care access to those making the equivalent of about $11,400 for a family of three, down from $12,970.
The Great California Slump appears to have permanently reduced employment by a million jobs. Literally tens-of-thousands of unemployed workers are seeing their unemployment benefits end. The Democratic Governor's solution for the budget deficit is a sales tax increase, along with an income tax increase on the richer folks, which combined still leave a major deficit requiring these cuts.

When you find a key elected leader of the California Democratic Party receiving support from the Chamber of Commerce, you begin to understand why Andrew Napolitano's comment "feels" like it could be accurate.

The problem we have in California is a failure to deal with reality. The press tends to describe Brown as someone who tells it like it is. I call him Moonbeam who is someone who spins the truth to get himself elected.

The fact is he says he has proposed a General Fund expenditure budget for 2012-13 of $92.6 billion but that includes assumptions about expenditures that should not be made. And that's after shuffling off significant work to local governments, along with $2.5± billion in sales tax revenue. Without that sales tax revenue, he has $88.0 billion to work with. In my opinion, he's short at least $6 billion without any tax increases. The problem is that in the current fiscal year he's short at least $6 billion. So he proposes an initiative to raise taxes, which tax increase expires in 2017.

The State owes a bunch of money not covered by that initiative. For instance, its Unemployment Insurance Fund owes $10 billion an counting to the federal government for loans covering basic unemployment benefits since 2009 (the federal government covers all benefit after 26 weeks) These basic benefits Chamber of Commerce members should have covered in payments made prior to 2009. But they consistently opposed increasing the payments.

Brown has included in the budget a surcharge on employers of a little over $3 a month per employee to make interest payments on the loans. That may not pass because of Chamber opposition.

In 2011 we borrowed from the state’s Unemployment Compensation Disability Fund to cover the interest in order to avoid taking it from the General Fund. But we have to deal with this problem or by 2016 the Disability Fund, funded by employee withholding, will be bankrupt.

Brown made no headlines worrying about this. And it isn't the only problem lurking in the background.

A year ago I wrote about Brown's first budget proposal since he was elected:
Foolishly I thought Brown was going to offer a severely reduced balanced budget to the Legislature with a possible solution.... I thought he was going to create a serious discussion about the future of California government rather than attempt to put it off for five years.

In five years, the opportunities to keep California "golden" will be even more severely constrained. This is some legacy the son of Pat Brown is going to leave us.

Of course, with these proposals he simply just restarted the same old political arguments....
Nothing is really changed since last January. Jerry "Moonbeam" Brown is offering no leadership. He's no different than he was in his first two terms as Governor 30 years ago.

Saturday, January 7, 2012

2012 Tax Initiatives Chapter 5:     Income Tax Only Initiatives

As I've noted previously, four "tax-the-rich" income tax increase initiative measures have been submitted to the Attorney General to date.

One, which has the advantage of being accurately titled as "Our Children, Our Future: Local Schools and Early Education Investment and Bond Debt Reduction Act", I call the The Activist Heiress's California PTA Supported Proposal to Tax Millionaire Dad & Friends for Schools Initiative.

This proposal might please Warren Buffett who is constantly pointing out that the income of his clerical help is taxed at a rate higher than he pays. Fittingly this measure is being proposed by Molly Munger, daughter of billionaire Charles Munger, vice chairman of Buffett's Berkshire Hathaway.

Munger, a Harvard Law School Graduate who after being a federal prosecutor and a partner in a Los Angeles law firm, became a staff attorney with the Los Angeles office of the NAACP's Legal Defense and Education Fund in 1994. She co-founded and is President of the Board of the non-profit Advancement Project which is sponsoring the initiative.

Her proposal, though legally complex, would:
  • Raise income tax rates using a sliding scale that creates 11 different brackets up to $5 million-plus for joint filers (at the lower income levels the rates remain the same).
  • Provide an estimated $8.5 billion directly to school districts and $1.5 billion to public preschools and early-childhood development programs, though during the first four years $3 billion would be used for state bond repayment prioritized to school bonds.
Monger has won the support of the California State PTA. While it provides for an independent oversight board, the money bypasses the processes controlled by Legislature and the Governor, going directly to the school districts. Naturally, Governor Moonbeam would not support this approach.

In terms of comparing increases in taxes on taxable income to Governor Moonbeam's proposal, here's a comparable chart showing increases including the increased income and current sales/excise taxes (Monger does not propose any sales tax increase):

Compare this to the chart I provided in the last post:

Monger's proposal results in no increased taxes on the lowest taxable income level families while Brown's sales tax increase represents a significant increase at that income level. Also Monger isn't trying to buy votes from the upper middle class, so a couple making $135,000 a years would see a 6% increase in the taxes paid to the State under Monger's plan, while Brown's plan would represent a 2% increase.

In a very real sense, this measure's income tax revenue would have replaced property tax revenue lost to the schools because of Proposition 13. It embraces California's liberal progressive tax trends, but ironically would continue to place education in front of every economic bubble collapse. And, then there is the problem that it would expire on December 31, 2024, making it a temporary, albeit 12 year, fix.

Originally, the proposal would have had the full $10 billion going to education, but in late December Munger submitted a revision that for four years provides relief to the General Fund by using $3 billion to make payments on state bonds, the priority being school bonds. Munger did this to address concerns by Governor Brown, Democratic legislative leaders, and budget "stakeholders." Munger foolishly thinks she can negotiate with these folks to get support for her measure.

A truly simple measure, what I call The Unity High School Senior Class Free Resident Tuition for State Colleges Paid from Tax Increases on Incomes over $250,000 Initiative would increase the income tax rate by 0.7% on annual taxable incomes between $250,000 and $500,000 and 1.7% on annual taxable incomes over $500,000 to provide ree tuition for four years to all California residents at UC and CSU campuses provided that, each academic year he or she maintains a cumulative GPA of 2.7 or performs 70 hours of community service.

While some of the wording might be a problem, it is simple. Whether these kids could get enough signatures to get it on the ballot is questionable.

On the other hand, what I call The California Federation of Teachers & Friends Tax Millionaires for Education, Social Services, Safety Services, and Road and Bridge Maintenance Initiative would simply add 3% on annual taxable incomes between #1,000,000 and $2,000,000 and 5% on incomes over $2,000,000. The measure is complicated in how the money would be spent as it creates The California Funding Restoration Trust Fund, and within that Fund, the Public Education Funding Restoration Trust Fund, the Children and Senior Services Funding Restoration Trust Fund, the Public Safety Funding Restoration Trust Fund, the Road and Bridge Maintenance Funding Restoration Trust Fund, and the California Funding Restoration Administrative Account and specifies in great detail how the funds will spent. The State Controller is to administer and essentially audit the expenditures.

The measure funds would experience huge variations in taxable income at those high income levels and rates. As I explained in an earlier post an already existing voter approved special 1% tax rate on income over $1 million fell 25% between fiscal years 2007-08 and 2008-09. Since in this tax measure we're talking about around $40 billion, a 25% drop from year-to-year is a rather big number to add to an already extreme economy-vulnerable budget.

Also, it undoubtedly would have a significant effect on choices about residence and business locations made by billionaires. At some point, no one can ignore the fact that deriving income and living within California would be a major sacrifice for anyone potentially making many millions in taxable income. If you were to make $7 million taxable, on the last $5 million you would pay about $800,000 in taxes in California and $0 in taxes in Texas. That would be pretty hard to ignore.

Lastly, there is a targeted income tax initiative which I call The California Center for Public Policy 15% to 25% Extra Personal Income Tax on Annual Pension Income Exceeding $100,000 Derived from The California Public Employees and Teachers Retirement Systems Initiative. It basically reduces pension income for those receiving from the two State pension funds what is considered high pensions.

One has to recognize that there has been some abuse by a few executives in public employment. But the bulk of retired public employees receiving such pensions are physicians, folks with PhD's in fields like physics and chemistry who worked for our universities, etc. There seems to be a bit too much begrudging envy associated with this measure.

But the biggest flaw in the measure is that it doesn't put the money back into the retirement funds to help make them whole. It dumps the money into the General Fund which, at least in many cases, was not the source of the employer's contribution. There, of course, Legislators can use the money to give themselves raises. Not much forethought here.

The press has given the most continuing ongoing coverage to Governor Brown's proposal which has the greatest impact on low income working families, which the press hasn't clearly noted, while at the same time publicizing how his proposed budget cuts will negatively impact these same people. And, of course, we still don't have what I call The billionaire's beauty and barber shop tax proposal.

What will happen next is anybody's guess. More on that in a later post.

Monday, January 2, 2012

2012 Tax Initiatives Chapter 4:     Spinmaster Moonbeam's Enticing, "Cagily Worded" Tax Proposal

Since Governor Jerry "Moonbeam" Brown (Moonbeam is a nickname he says he likes) is raising large amounts of money for the campaign on his initiative proposal (along with money for his reelection in 2014), I'll start my review of "tax-the-rich" proposals with his initiative measure.

Conveniently it has almost all the flaws, accompanied by spin untruths, that one could possibly expect from a seasoned California politician - none of which the mainstream press acknowledges while they give him favorable fluffy story after story.

In passing I will note that the term "cagily worded" in the title of this post comes from an analysis on the Silicon Valley Education Foundation's web site, one of several such independent reviews that began worrying last month over the details in Brown's proposal.

My analysis below has the advantage of having enough time to consider the details in what I call The Moonbeam Complex Free Up General Fund Money and Fix Nothing Tax Increase Initiative now at the Attorney General's Office for review.

The Temporary Measure Problem. The first troubling fact is that the measure will expire on December 1, 2017. I don't really understand how this is going to work.

California's economy is going to continue be in The Great California Slump between now and then. Here are examples of where The Great California Slump stands at the beginning of 2012:
  • Housing values continue to drop, which affects personal wealth and consumer confidence.
  • We need to find 1 million jobs for Californians, not including the jobs needed for those new to our expanding workforce, an accomplishment that would be impossible unprecedented for a five year period.
  • At some point Congress is going to quit funding extended unemployment benefits leaving many households with severely reduced income.
  • At some point employers in California are going to be required to repay the federal government for the $10+ billion we've borrowed to pay basic unemployment benefits - a potential job creation killer.
  • In terms of high income earners, one of primary sources of taxable personal income has been IPO's issued by California companies in the tech sector which appear to be iffy right at the moment with the obvious exception of Facebook in 2012 (Google's IPO in 2004 did result in a relatively few tax returns providing a nine-figure revenue shot into the General Fund which the Legislature instantly spent).
Is Brown going to calculate what 2017-18 revenues will be and then in some fashion limit spending to that number for the five years in between so that we won't need to vote on a new version of this measure?

Or is he going to allow the Legislature to spend at the increased revenue level forcing another fight over cuts or new taxes in 2017?

This is partly why I call this in part a Fix Nothing Tax Increase Initiative. It does not fix our revenue structure, its passage would just make Moonbeam's life less stressful for the next few years assuming he doesn't decide to base spending on a stable economy.

Taxing the Poor and the Rich Problem. Unlike the other measures I will discuss in my next posts, Moonbeam's measure is a combination of a sales tax increase and an income tax increase.

In his letter explaining his proposal, of the sales tax element he says:
There will be a temporary ½ cent increase in the sales tax. Even with this temporary increase, sales taxes will still be lower than what they were less than six months ago.
Brown is either very stupid, invested in right wing economics, or cynical. I have accepted that he's cynical and simply wants to get reelected.

Using a combination of a sales tax increase plus an income tax increase on those with the highest income, he can generate additional tax revenue while creating the least impact on those whose earnings place them in the "middle middle-class" and "upper middle-class." This is where you find the "likely voters" he will need in 2012 to get the measure passed and in 2014 to get reelected.

The following reflects the percentage increase in income and sales/excise taxes paid at various taxable income levels:

Determining the incidence of a General Sales Tax increase is problematic using statistical averages. But what I do know is that the sales tax is very regressive and will impact more heavily on the lowest paid portion of the working class as reflected in this chart.

With regard to the income tax, I know that "taxable" income is only marginally reflective of real income which is protected from taxes by many exemptions and tax breaks, but usually people with annual taxable incomes over $500,000 can be called "the rich."

With all of those reservations offered, almost any honest system of calculation of the impacts of Moonbeam's proposal will result in this reality:
  • Tax returns showing taxable earnings under $65,000 (likely to be 69%± of the returns filed for the 2011 year) will see an increase in sales and income taxes paid of around 5%±1%.
  • Tax returns showing taxable earnings in the range of $65,000 - $250,000 (likely to be 29%± of the returns filed for the 2011 year)will see an increase in sales and income taxes paid of around 3%±1%.
  • Couples filing tax returns showing taxable earnings over $250,000  (likely to be 2%± of the returns filed for the 2011 year) will see an increase in sales and income taxes paid of around 9%±4%.
The cynicism Brown shows is found in just how sure he is that people will ignore the facts and accept his spin, which the press will repeat over-and-over without comment. It's already begun with these two sentences in his  letter:
  • "No family making less than $500,000 a year will see their income taxes rise."
  • "Even with this temporary increase, sales taxes will still be lower than what they were less than six months ago."
These two sentences are literally correct. His income tax increase affects only high income Californian's. Of course, his sales tax increase represents a 10% increase in the State's General Sales Tax, which impacts most heavily on people with annual taxable incomes of  less than $50,000 a year.

But yes, his sales tax increase proposal does represent half of the expired temporary sales tax increase that supplemented revenues that past three years. That was the temporary increase that we only needed temporarily - the one approved by the Republican Governor and a few Republicans in the Legislature.

The Not Enough Money Problem. Over the life of this temporary measure, the income tax increase could generate anywhere from $3± billion to $6 billion a year depending on the general well-being of our richest citizens. The sales tax increase will generate $3± billion a year. That's $6± billion to $9 billion a year. The State General Fund is facing a deficit of about $14 billion ± $3 billion on July 1, 2012 (yeah, the range of what we don't know is that significant). So this proposal which in his letter Moonbeam says "would generate nearly $7 billion" doesn't fix the problem in the best of circumstances.

The Money for What Use Problem. Then there's the the major spin in Brown's letter what explains his measure "would generate nearly $7 billion in dedicated funding to protect education and public safety."

Most of the revenue is not targeted in the sense that the gain in cash in to the state's coffers will supplement existing spending in education and public safety. Instead it is "cagily worded" in a way voters would not understand, but which I'm sure will be called out by the mainstream press before the election if the key staff in the key newspapers complete a reading for comprehension course.

For instance, Moonbeam's initiative states:
(8) Revenues, less refunds, derived pursuant to subdivision (f) for deposit in the Education Protection Account pursuant to this section shall be deemed "General Fund revenues," "General Fund proceeds of taxes" and "moneys to be applied by the State for the support of school districts and community college districts" for purposes of Section 8 of Article XVI.
Now I know that many people, particularly those key newspaper staff, regularly pick up Section 8 of Article XVI of the State Constitution for some light reading. But in case you don't do that, basically that Section sets a minimum amount of money to be paid to K-12 schools from the General Fund.

Moonbeam's wording simply says that if this tax increase covers part or all of the required spending on schools, General Fund monies previously used for schools could be spent on raises for the Legislature.

But that's not the only wording that we need to be concerned about. The measure also says:
(1) Except as provided in (d), commencing in fiscal year 2011-2012 and continuing thereafter, the following amounts sh.all be deposited into the Local Revenue Fund 2011, as established by Section 30025 of the Government Code, as follows:

(A) All revenues, less refunds, derived from the taxes described in Sections 6051.15 and 6201.15 of the Revenue and Taxation Code, as those sections read on July 1, 2011.

(B) All revenues, less refunds, derived from the vehicle license fees described in Section 11005 of the Revenue and Taxation Code, as that section read on July 1, 2011.

(2) On and after July 1, 2011, the revenues deposited pursuant to paragraph (1) shall not be considered General Fund revenues or proceeds of taxes for purposes of Section 8 of Article XVI of the California Constitution.
Again, if Section 8 of Article XVI of the State Constitution isn't in your material for light reading, basically that Section sets a minimum amount of money to be paid to schools from the General Fund.

What this provision does is lower the amount guaranteed to schools.

Taken together, these two provisions which normally nobody but education funding experts would understand allow Brown in his measure to say that it will be:
...helping balance the budget and preventing further devastating cuts to services for seniors, middle-class, working families, children and small businesses
Fortunately, Moonbeam's measure which he has titled "The Schools and Local Public Safety Protection Act of 2012" will prevent "devastating cuts to services for seniors, middle-class, working families, children and small businesses." This is simply illogical if the title is accurate. The title just could be ... misleading.

By increasing the taxes paid by
  • high income families about 9%,
  • lower income working families about 5%, and
  • middle-class families somewhere around 2%,
...Moonbeam's measure will
  • protect our schools and local public safety, plus
  • prevent devastating cuts to services for seniors, middle-class, working families, children and small businesses,
...all by generating enough funds to cover about half the expected General Fund deficit. 

I'm surprised he didn't assert that his measure will daily provide a piece of fat-free apple pie to every Californian.

Voters may have other options to "tax the rich."  I'll explore them in my next post.

Sunday, January 1, 2012

2012 Tax Initiatives Chapter 3: The Guillotine Option - "Tax The Rich"

As of January 1, 2012, four "tax-the-rich" initiatives have been filed with the Attorney General:
  1. The Unity High School Senior Class Free Resident Tuition for State Colleges Paid from Tax Increases on Incomes over $250,000 Initiative,
  2. The Activist Heiress's California PTA Supported Proposal to Tax Millionaire Dad & Friends for Schools Initiative,
  3. The Moonbeam Complex Free Up General Fund Money and Fix Nothing Tax Increase Initiative, and
  4. The California Federation of Teachers & Friends Tax Millionaires for Education, Social Services, Safety Services, and Road and Bridge Maintenance Initiative.
The one currently getting the most press is the one filed by Governor Jerry "Moonbeam' Brown who issued a long letter to the "People of California" upon filing the initiative. In it he said, in part:
My proposal is straightforward and fair. It proposes a temporary tax increase on the wealthy...
  • Millionaires and high-income earners will pay up to 2% higher income taxes for five years. No family making less than $500,000 a year will see their income taxes rise. In fact, fewer than 2% of California taxpayers will be affected by this increase.
Key issues related to context with regard to the State General Fund tend to be "old news" and therefore aren't explored by the press. And, in most cases, the key staff of the key newspapers in California - The Los Angeles Times, The San Francisco Chronicle, and The Sacramento Bee - are frequently "confused" by Moonbeam's spin, apparently cannot access the State's finacial history readily available on line, and frequently "misrepresent" the context.

In his letter, Governor Moonbeam referred to the unwillingness of the Republican minority to support a reasonable approach. For the most part, the three newspapers have repeatedly published attacks on the Republicans. This is understandable as the Republicans talk like ideologues (which may be all that they are). What the newspapers have not published repeatedly is the following information:

This chart shows that State General Fund spending rose 71% in a period when the combination of population and consumer price index growth justified a 42% increase. The Democrats were responsible for pushing the spending up, but now blame the Republicans for not helping with the deficit problem they, the Democrats, created.

The fact is, because of the obvious collapse in revenues due to The Great California Slump, enough Republicans along with the Republican Governor Arnold Schwarzenegger did approve temporary increases in the personal income and sales taxes for 2008-09 (also for 2009-10 and part of 2001-11) plus provided for accelerated collections of corporate taxes, all to prop up wildly excessive spending commitments some of which were directly approved by the voters.

The Republic legislators involved thought they were giving the Democratic majority a chance to put the State's financial house in order by reducing expenditures. Yeah, they're dreamers.

That's the honest context of the fight over tax increases. And it is boiling down to a public relations effort to make a part of 2012 conventional wisdom that the "tax-the-rich" mantra is "truth, justice, and the American way." Of course, real problems did develop during the first few years of The Great California Slump:
  • Yes, during The Great California Slump education has taken an unprecedented hit in funding that must be corrected.
  • Yes during The Great California Slump social and health services have taken a heavy hit in funding which combined with an increase in need is a problem for us all.
  • Yes during The Great California Slump the State wasn't in a position to reduce the horrendous costs created by the good citizens who voted for the Three Strikes Law (the voters may support a proposed 2012 ballot measure in an attempt to correct this problem).
  • Yes, during The Great California Slump revenues for schools, law enforcement, fire protection, etc., were horrendously impacted because of the good citizens who decided in 1978 through their votes for Proposition 13 that government shouldn't be supported by the stable property tax instead of the volatile income and sales taxes.
The funding problem is real because we made it that way voting our biases, prejudices, and selfish financial interests. And from a certain bias, the Republicans have called us on it by saying "don't spend so much," an idea that apparently makes many Californians grimace in pain.

In my introductory post on the initiatives, I reviewed the possible confusion over what constitutes  "the wealthy" or "the rich" from a general viewpoint. Let's review that term in terms of current tax policy to get some context. The Franchise Tax Board recently released income tax data for 2009 which offers this for context:

This tells us is that 64% of the folks filing tax returns paid 5% of the personal income tax California collected, and that 4% of the folks filing tax returns paid 55% of the income tax California collected.

For a cynical politician, it would appear getting approval from the voters to increase taxes on that 4% should be easy and the amount generated should be significant. The problem is that getting approval from the voters may be easy because it is a dumb idea on two accounts.

First, the swings in annual changes in adjusted growth income (the number that determines income tax revenue) in California in the 50 years between 1959 and 2009 look like this:

If California governments (including schools) had limited their spending budgets to a modest increase each year regardless of public's demand for new or expanded services, there would be no deficit problem today.

But the voters and the people who represent them lack the discipline needed to not spend all the money in their collective pocket.

When adjusted gross income, and therefore income and sales tax revenues, skyrocket we expand programs to spend it all.

That's our way in our private lives. Sales tax revenues wouldn't track as close to the AGI change as it does if the residents of California had any sense of economic discipline - because when their income goes up they spend it all (and more) creating higher sales tax revenue.

Our habits aren't going to change. So when we rely more heavily on personal income tax, we are setting our future selves up for failure.

And when we depend upon the income of billionaires, we make it worse. You don't have to do much research on this. The revenue from an already existing voter approved special 1% tax rate on income over $1 million fell 25% between fiscal years 2007-08 and 2008-09. Billionaires gamble with their future - that's how a some get richer and some don't.

The problem is you can't operate government like a business. Even if revenue falls by 20% we can't shut down one of five assembly lines like some manufacturer. The same number of school kids and college students still need classrooms and teachers. Criminal continue to commit crimes. Wildfires continue to burn. And clients for social and public health services climb.

Only fools fund their public services from volatile revenue sources. Welcome to California, the ship of fools, where financial irresponsibility is enshrined in our Constitution and in far too many of our lives.

The other problem with the "millionaires tax" is that increasing the tax burden on the personal income of the people who decide where to locate their businesses is betting against human nature. As I've explained in previous posts, Texas does not tax their businesses less. Simply, Texas does not have a personal income tax.

If you are a CEO, CFO, COO, or whatever, who is looking at paying $100,000 a year in state income tax in California versus none in Texas, why would you not relocate your business office and primary residence in Texas? Heck you can always keep your home in Carmel as a second home to visit. After all, the property tax on it is relatively low compared to Texas.

Sadly, it is more likely that the marketing spin on one of the "tax-the-rich" measures I will discuss in my next posts may appeal to voters.