SB 51: the California politics thread

SF feels like a ghost town, it's surreal

We’ve been in a quieter part of town anyway but when the nearby bar closed, it definitely got quiet.

I have never seen as many people on my block in Oakland as I have today

I remember everyone in my neighborhood coming out of their houses after the 89 Loma Prieta earthquake

Truly sobering story about the state of California's budget — even with a record $20 billion-plus in reserves https://t.co/C0V72BtLme

— Liam Dillon (@dillonliam) March 25, 2020

Just a reminder that California's state budget is super reliant on rich people and when rich people lose money the state as a whole suffers — via @melmason https://t.co/x7koQOiJja

— Liam Dillon (@dillonliam) March 25, 2020

honestly I feel like California isn't going to be as fucked by this as some other states.

And idk how "sobering" the fact that this huge crisis would wipe out our reserves is, really ... I remember the CA economy after the dot-com crash / 9-11 ...I feel like then we were super fucked as a state.

he's right tho that state revenue in any given year is more tied to individual income than it would be elsewhere (bc prop 13 yay!)

definitely more tied to individual income than in states with no income tax! ... what about the states that rely on sales tax for more of their budget?

lol hi

sure you're fucked if you rely on sales tax and there's a once in a century quarantine (hi WA). but CA fucked every time there's a stock market correction if you rely on income tax that is dominated by residents who receive stock compensation.

I don't know if it's actually "dominated" by that? I would be curious to see the statistical data.

"we're unusually sensitive to the stock market (especially tech IPOs etc.)" is the premise of the article in the second tweet i posted https://www.latimes.com/projects/la-pol-ca-next-california-economy/. there's plenty of numbers in there. but fair enough, if "dominated" means > 50% of the revenue, then probably not.

income tax is 70% of the revenue, that's fine -- but that doesn't really show that the income tax revenue is dominated by the tax on stock compensation? ... even if it's saying that a lot comes from capital gains, not all capital gains are coming from stock compensation. You also get capital gains from buying and selling real estate.

i know you work in this area so maybe you already know this? but i'm not sure if people outside tech realize that a typical tech worker's W2 is usually at least 20% stock comp, and closer to 80% or more at the better paid end, see https://www.levels.fyi. or at least it is, until the market crashes and then the highest paid people in the state get a huge pay cut.

granted, the *seriously* rich are getting their income from capital gains, not on a W2. and granted tech people aren't the only people in CA. but it's not a coincidence that the top 4 zip codes for CA income tax are in PA, Burlingame and Menlo Park. and in the context of a budget without a lot of wiggle room, an unanticipated pay cut on the W2 income of the highest paid "regular" W2 employees in the state is a big deal! and it happens every time there's a stock market correction.

note i'm not saying CA should take care of its tech workers better. fuck those guys myself included. i'm saying we (and washington) should move more revenue to property tax (and wealth tax more generally). it would be fairer and it would make CA revenue more predictable.

I was actually thinking about this last night -- because I'm hearing from various people that with the stock market correction, housing prices will go down, because some of the pricing is based on the people with tech money, so a fair amount of capital gains from real estate is connected to the capital gains from stock.

But are you saying that income tax _isn't_ a wealth tax? Or just that the different forms of wealth should be taxed equally? The fact that capital gains tax rates are lower than those on income people actually work for is one of those things that I find fundamentally wrong with our system. And some of it comes down to old money vs. new money, too. For example, I am interested to see what the aggregate income and tax data are for "older money" zip codes in places like Monterey and Carmel and Marin County. I feel like they have had time to shelter their income and perhaps pay less tax than the tech people who are "new money" ... idk.

I had a tax client for a while that had a modest income -- that consisted of like $5k from music gigs, another couple thousand from dividends, and about $60k in tax-exempt bond interest. He paid 0 tax.

If I have 100 and earn 10, and the 10 is taxed, that’s an income tax. If the 100 is taxed that’s a wealth tax. Property tax is an example of a wealth tax.

Wealth taxes tend to affect older people more than income taxes because older people often have little or no income but have accrued more wealth because they’ve lived longer. But they also affect the super rich, who find it easier to disguise income as wealth and avoid income taxes. Aside from property tax, wealth taxes are pretty rare. Elizabeth Warren famously wants a wealth tax on all wealth (not just real property) above a certain amount.

Wealth tax is a tax on savings, which is, like caek said, pretty hard to propose in the USA without people freaking out. Good idea though. Keeps people from hoarding money.

It’s desirable for all sorts of reasons but it’s particularly desirable in CA because real property is incredibly valuable so taxing it good for state revenue, and normal income is unusually volatile in this state because of the tech stocks while wealth is pretty stable or at least varies differently than income so the volatility is reduced.

Here's the other side of the argument:

the thing is, it isn't that real property isn't being taxed based on its value -- it's that people have locked in rates based on how long they have held the property. It's basically rent control for property owners. Should the state abolish rent control for tenants?

And, another thing is, real property values are also volatile in CA (some areas less so than others). So, the technical issue would be, to be equitable, property values would need to be regularly reassessed, and how would this be done? Taxing income and investments held in cash (or cash equivalents) is fairly simple to quantify -- you already have a dollar value. But buildings and land?

Then, you have the issue of double taxation (this also comes up if you are proposing to tax accrued income) -- if someone has made improvements to their real property, in many areas, they are paying permit fees to local agencies based on the estimated value of those improvements -- so now, they are gonna be taxed by the state on the improvements they were already taxed by their city/county on, and they paid to make them! "No wonder everything here is so fucking expensive! Why would anyone in their right mind want to build anything here?!"

idk could always try abolishing private property entirely

though what you could do -- seriously, I no longer have a social life, so discussing and formulating a progressive and practical taxation / economic policy is a great use of my time rn -- what you could do is greatly increase the homeowner's exemption for property tax. (as in, if it's your house and you live in it vs. you own the property and it's only a rental) Right now it's $7000 (maybe that's just Alameda County?) -- as in only $7000 of your property value is not taxable.

Another option would be increasing cash assistance benefits to the poor such that fixed income grandma could afford the increased property taxes on her house. Fixed income grandma was the imperiled heroine in the Prop 13 issue back in the 70s. Today's fixed income grandma (at least in gentrifying cities like Oakland) is a non-white grandma who owns her house in a rapidly gentrifying neighborhood, such that, if property taxes were assessed at current value, she would possibly have to sell her house, and the neighborhood would become whiter. In other words, there is a racial component to this issue (on the side of not repealing Prop 13) that wasn't there back in the 70s

I think any removal of Prop 13 would need to be phased in over >20 years.

there would definitely need to be a phase in for residential (and probably a lot of commercial property too)

Here's the other side of the argument:

the thing is, it isn't that real property isn't being taxed based on its value -- it's that people have locked in rates based on how long they have held the property. It's basically rent control for property owners. Should the state abolish rent control for tenants?

And, another thing is, real property values are also volatile in CA (some areas less so than others). So, the technical issue would be, to be equitable, property values would need to be regularly reassessed, and how would this be done? Taxing income and investments held in cash (or cash equivalents) is fairly simple to quantify -- you already have a dollar value. But buildings and land?

Then, you have the issue of double taxation (this also comes up if you are proposing to tax accrued income) -- if someone has made improvements to their real property, in many areas, they are paying permit fees to local agencies based on the estimated value of those improvements -- so now, they are gonna be taxed by the state on the improvements they were already taxed by their city/county on, and they paid to make them! "No wonder everything here is so fucking expensive! Why would anyone in their right mind want to build anything here?!"

No, but thanks to Costa-Hawkins we currently have very little rent control at the state level anyway. And the topic of rent control is a total non-sequitur.

not really a non-sequitur -- if a tenant in a rental property has rent control, and the property is reassessed at a much higher tax rate, could the owner pass that on to the tenants?

There's a lot more rent control in northern CA cities btw

if a tenant in a rental property has rent control, and the property is reassessed at a much higher tax rate, could the owner pass that on to the tenants?

so... apply rent control so that doesn't happen? i don't get what you're saying here. are you saying that eliminating prop 13 would be hard or that it would be unfair? or something else?

I am basically reiterating arguments that I hear from other people.

Here's one example:
A rental property that is subject to rent control provisions and is the primary income stream for "fixed income grandma." Grandma has owned this property for 40 years. The property taxes are low because of Prop 13. Grandma's tenants have been there a long time, too, and are also low income. If Prop 13 is eliminated and her rental property is reassessed at a much higher rate, what should she do?

1. eat dog food because she now has to pay a lot more in property taxes
2. pass the property tax onto the tenants (which is legal in many jurisdictions) so the tenants end up homeless and/or eating dog food

eliminating proposition 13 does not equate to increasing property taxes. it means you introduce reassessment on some reasonable frequency (year, decade, whatever) and you remove the hard upper limit of 1% or whatever it is. you could (and we should!) repeal prop 13 and at the same time reduce the rate such that the state revenue is unchanged (something like a state 0.1% rate would do this, given how much values have gone up since prop 13 passed). if you do this then, by definition, the average property owner's bill would not change (and about half of bills would go down!)

the goal of repealing prop 13 is not to increase total revenue. it's to allow us to get a bigger fraction of revenue from incredibly wealthy people who are literal millionaires, and less of it from incredibly poor people via the current flat state income tax. you can quibble about the proportions here, but even the principle of *attempting* to do this is *illegal* right now because of prop 13.

the people whose bills would go up to unnafordable levels if you eliminate prop 13 while reducing the state property tax to keep income constant are *incredibly wealthy*! if "grandma" owns a $2m bay area home that she is renting (i.e. she is a millionaire running a dang business!), and the property tax is high, she can sell up and get out of the business! the state does not owe millionaires a tax code that makes running a profitable business easy. now she has $2m in her savings account. she can live of the interest for the rest of her life. a 25 year old can live of the interest from that for the rest of their life, for that matter!

obviously if grandma *lives* in the house, that's a different issue (solved very easily by, for example, grandfathering (ha!) all property tax to be limited by prop 13 for current residents in their current home, or any one of dozens of other ways, e.g. incremental increase, age limits, etc., etc.)

it's to allow us to get a bigger fraction of revenue from incredibly wealthy people who are literal millionaires, and less of it from incredibly poor people via the current flat state income tax.

flat in what sense? CA state income tax is not a flat tax, it is a progressive tax.

obviously if grandma *lives* in the house, that's a different issue (solved very easily by, for example, grandfathering (ha!) all property tax to be limited by prop 13 for current residents in their current home, or any one of dozens of other ways, e.g. incremental increase, age limits, etc., etc.)

Yeah, that is along the lines of what I would argue against the Pro-Prop 13-ers I encounter. Even something as simple as a larger homeowner exemption for the property. Instead of $7000, you can say $100,000 and potentially increase that based on years owned/lived in -- like an extra $100k for each 10 years.

So that -- let's say grandma has had her house for 40 years. Let's say she bought it for $50k and it is now worth $750k. And let's say that the taxable assessed value is $67k.

So: currently -- her tax is based on $67,000 - $7,000 = $60,000

With my proposal of $100k base exemption with an extra $10k exemption for each year owned, she would have: $750,000 - $400,000 = $350,000 -- which would be an increase, but her taxes would be way lower than Jerry Gentrifier who paid $750,000 for a similar house across the street last year.

Jerry Gentrifier, if he and his family lived in their house, would be taxed on $750,000 - $100,000 = $650,000, whereas Greedy Speculators Investment Trust who also bought a house in the neighborhood last year for $750,000 and operates it as a rental (or is holding it vacant) would pay tax on the entire $750k

/it's to allow us to get a bigger fraction of revenue from incredibly wealthy people who are literal millionaires, and less of it from incredibly poor people via the current flat state income tax./

flat in what sense? CA state income tax is not a flat tax, it is a progressive tax.

A wealth tax is de facto progressive in that the tax bill of people who earn more tends to be a larger proportion of their income (possibly more than 100% for the idle rich).

why does being younger than your grandmother make jerry a gentrifier?

"I've not sourced [Nunes] for advice on pretty much any issue — I say that as respectfully as I can — but particularly on public health issues," Newsom said. "He's made some statements in the past that were not consistent with the advice from the experts. We’ll continue to listen to the experts, try to avoid some elected officials that frankly may not have the benefit of the insight many of us do here."

Newsom added that at the Emergency Operations Center, he and the state's health officials are constantly getting new information from around the world and anticipating trend lines.

"Not everyone has that benefit," Newsome continued, "so I’ll forgive him."

https://www.sfgate.com/coronavirus/article/newsom-the-view-nunes-coronavirus-schools-15177436.php

Still not a wholehearted fan of Newsom but this is a pretty great takedown of an ignorant clod.

did they really misspell his name like that in the article?

https://www.bloomberg.com/opinion/articles/2020-04-09/california-declares-independence-from-trump-s-coronavirus-plans

this is one of the simpler financial jobs in CA local government, and this guy is tapping out before it gets real. this is going to be a bad year ...

This is a very tough news. One of the very best people in California local government says it's too tough under these circumstances. https://t.co/yvliw2qkaZ

— Joe Mathews (@joemmathews) April 19, 2020

This is fine

Oh my god. This is horrifying. The US HUD affordable housing income limits for San Francisco County shot up $10,000 in ONE YEAR. According to the federal government, a low-income family of four in San Francisco is now any such family making $140,000 per year. pic.twitter.com/7Pt9OQVwdb

— Louis Mirante (@louismirante) April 23, 2020

wait, so it was $130K before? equally as horrifying.

yup. fucked up.

it means that they can charge higher rents on "affordable housing" and price out even lower income people

-- Athletics
-- Badminton (singles)
-- Throwing a baseball or softball
-- BMX biking
-- Canoeing (singles)
-- Crabbing
-- Cycling
-- Exploring rock pools
-- Gardening (not in groups)
-- Golf (singles, walking – no cart)
-- Hiking (on trails and paths allowing distancing)
-- Horseback riding (singles)
-- Jogging and running
-- Kite boarding and kitesurfing
-- Meditation
-- Outdoor photography
-- Picnics (with your stay-home household members only)
-- Quad Biking
-- Rock Climbing
-- Roller Skating and Roller Blading
-- Rowing (singles)
-- Scootering (not in groups)
-- Skateboarding (not in groups)
-- Soft martial arts – Tai Chi, Chi Kung (not in groups)
-- Table tennis (singles)
-- Throw and catch an American mini football, Frisbee or Frisbee golf (not in groups)
-- Trail running
-- Trampolining
-- Tree climbing
-- Volleyball (singles)
-- Walk the dog
-- Wash the car
-- Watch the sunrise or sunset
-- Yoga

lol

That CA 25th special election has gotten me down. wtf is wrong with democratic voters? I thought everyone was sent an absentee ballot. How hard is it to connect the two sides of ONE arrow with a pen and walk it to a mailbox?

Is that the district that will be re-run in 6 months?

I wouldn't put too much stock into it, esp. considering that's prime Rodney-King-juror country. There's always a bigger turnout in tandem with the Presidential election.

democrats outnumber republicans in that district. I guess I can’t get over how much democratic voters really don’t give a shit. it doesn’t bode well for november imo

"Democrat" seems to be the default now (slowly being overtaken by "Independent"). When you register Republican in California you are a true believer.