SB 51: the California politics thread

*Please* do not take these single-model snowmaps literally...there are too many caveats to list here. That said, multiple models continue to hint at potential for some very low snow levels Tue-Wed next week in CA...perhaps even a dusting near sea level in NorCal. Stay tuned!#CAwx pic.twitter.com/zrjqVdOhX6

— Daniel Swain (@Weather_West) December 24, 2021

oof. she was (relatively) great, so this is probably bad news.

On the floor of the Assembly, @LorenaSGonzalez announces she is resigning from Legislature immediately to take over as head of California Labor Federation by July. That takes labor's biggest champion out of the building and leaves open her powerful appropriations chairship.

— Alexei Koseff (@akoseff) January 3, 2022

She was the author of AB5 - the poorly written freelancer bill that single-handedly fucked over a lot of freelancers and tiny community arts organizations in the state. No love from me here.

hm.

Like, for example, a carbon tax,

wow imagine if a government implemented this

?

She was the author of AB5 - the poorly written freelancer bill that single-handedly fucked over a lot of freelancers and tiny community arts organizations in the state. No love from me here.

― Elvis Telecom, Monday, January 3, 2022 7:06 PM (yesterday)

honestly, I have worked for a lot of tiny community arts organizations, and the thing is, they have a tendency to exploit workers (generally out of financial scarcity or lack of administrative knowledge/capacity or both). The criterion about "services provided to others" is where the arts orgs had issues with AB5, though I feel like that could have been argued in their favor in many cases. But the thing is, they were/are regularly paying people as contractors that should have been employees even under the old test. And another thing is, until the Covid PUA came about that gave unemployment benefits to self-employed people, those workers would be fucked if they got laid off, or during the off season(s), or if they just were so burnt out they wanted to quit.

The largest costs that arts orgs incur when paying workers as employees vs contractors in California are workers comp (for theatrical stagehands and actors/dancers/opera singers it's a big percentage -- and in case anyone doesn't know how workers comp insurance premiums are calculated, they are based on a percentage of wages paid per occupation category) and accounting/HR staff.

My irritation here is that "community arts organization" as it's currently defined doesn't differentiate between large theatrical orgs with a board of directors and a professionalized donation pipeline and a broke space in a Riverside strip mall that has art classes for kids in the day and all-ages punk shows at night.

SB805 (https://saveperformingartsact.org) was going to fix what was lost under the broad strokes of AB5 but it looks like Newsom vetoed it today. Sigh.
https://leginfo.legislature.ca.gov/faces/billStatusClient.xhtml?bill_id=202120220SB805

Also maybe the 'legislator to union head pipeline' is as bad as 'legislator to industry'

(fwiw I think workers comp is a good thing and have an old friend who runs a nonprofit theatrical group that hires union and has correct workers comp coverage)

My irritation here is that "community arts organization" as it's currently defined doesn't differentiate between large theatrical orgs with a board of directors and a professionalized donation pipeline and a broke space in a Riverside strip mall that has art classes for kids in the day and all-ages punk shows at night.

Honestly, it comes down to risk tolerance in terms of potential enforcement.

The place having punk shows in the Riverside strip mall (which is like, "my people" tbh) probably is violating a bunch of municipal codes operationally and the mindset there is probably like, "Are they really going to come after us for paying arts ed part-timers as independent contractors? Uh, well, if that happens, I guess we can do another gofundme?" ... Whereas the large theatrical orgs actually have salaried staff who get benefits and PTO and have office furniture that was purchased new ... and part of those people's jobs is to assess risk and worry about worker misclassification. I have kinda had that job as well (though I was a part-timer, no benefits or PTO).

I'm 100% down with the strip mall art punks. I've had jobs at non-profit arts groups that were nothing more than a front for money laundrying and/or tax evasion. Usually property is involved. One place in particular, the Los Angeles Photography Center (not its real name) had a really nice space in several floors of a vintage building downtown and paid really well, but there was no payroll - I got a check from a completely different account and 1099'ed. It turned out the chairman of the LAPC (ntrn) not only owned that building but a dozen others around the city and was using the non-profit as an element of some complicated tax scheme.

whoa!!!!

leeeeeroy jenkins

California #SinglePayer funding proposal:

-2.3% excise tax on businesses, minus first $2mil in receipts
-1.25% payroll tax for businesses with 50+ employees, more for those making $50K+
-Personal income tax, increases starting at 0.5% for $149K, rising to 2.5% for $2.4 million+ https://t.co/WDnt7tL3qA

— Jeremy B. White (@JeremyBWhite) January 6, 2022

What do you think? At first glance, seems like a good idea! Health care costs are such an anchor on businesses.

i think we should also make private health insurance and private schools illegal but looks good to me otherwise.

^^

My idea for getting rid of private schools is to convince the top Ivies and Stanford, Caltech, etc to match the percentage of private school kid admissions to the percentage of kids in the country who go to private schools. For example, since only about 10% of kids go to private schools, the colleges would only select 10% of their incoming classes from private school kids. Right now, the top universities are more like 70% private school kids, which is gross.

?

― DJI, Wednesday, January 5, 2022 2:17 AM (two days ago)

July 2011

in seriousness, i don't know if that ammendment stands a chance (it needs 2/3 of the legislature and 50%+1 of the people IIUC and newsom seems lukewarm at best). also unclear on how much cooperation CA would need from the federal govt for it to work.

gross receipts taxes on businesses don't really take into account the widely different profit margins across industries. Gross receipts taxes are going to be "unfair" to businesses like construction, retail and restaurants vs. say consulting firms. These are also going to be the businesses that have more workers from marginalized backgrounds. Otoh, exempting businesses with less than $2 million in gross receipts is good, in that a lot of "mom and pops" won't have to pay.

Practically speaking, I am sure all the $200/hr lawyers and accountants are already working on how to avoid these taxes if this bill becomes law. Avoidance strategies will probably include: moving out of state and creating subsidiaries. So there would need to be a step up in enforcement. Already the state tax agencies (FTB as well as whatever the sales tax agency is calling itself now) are probably overwhelmed with enforcing rules about nexus. This would create a greater incentive for businesses (and individuals) to "leave" California, and for the state tax agencies to have to prove that actually, no, you still owe California taxes because you are making money here. Also, there would probably need to be rules and forms related to shared control (I forget the legal term) so that larger businesses can't evade the excise tax by subdividing into smaller entities so that they can exclude multiple $2 million in gross receipts.

However, one positive thing about this proposal -- is if single payer exists, and the cost of providing health coverage to employees goes away, then one of the big blocks in proper worker classification goes away, and AB5 compliance costs are reduced.

some of that in this thread

GRTs are just not ideal. The exemption would encourage firms contort themselves to stay below $2 million, while the tax itself would encourage excessive vertical integration, creating a weird bias against medium sized firms for no real reasonhttps://t.co/qHh1FmVMA9

— James Medlock (@jdcmedlock) January 6, 2022

A gross receipts tax is on sales income, as opposed to purchases ... I am struggling with this illustration. This looks like something more in line with a sales tax or VAT type thing? Am I just being dense?

i don't know. i don't undertstand the different at all. but yeah he's advocating for a VAT.

which would still "penalize" businesses that make things as opposed to ... people like him who are consultants. However, I do think there are way too many "things" being made and sold, and it would be better for the environment if there were fewer.

i think the claim is that in the case of a vertically integrated business, GRT and VAT are the same thing (which is good for the business), but that's not true if there are several businesses in the supply chain. i.e. GRT's disadvantage small businesses.

Now consider a non-vertically integrated set of businesses. A soap manufacturer buys $100 worth of ingredients, and pays $5 in GRT. They sell this to a retailer, who pays $5.25 in GRT. And then the retailer sells it to a consumer, who pays $5.51 in GRT. Total tax paid is $15.76 pic.twitter.com/OqUE1VJKiN

— James Medlock (@jdcmedlock) October 20, 2020

Here's my dumb illustration of how Soapy Sales Inc would evade a gross receipts tax

So, let's say Soapy Sales Inc currently makes and sells soap and their business income before expenses (i.e. gross receipts) is $10 million. So, an excise tax of 2.3% on $10 million gross receipts (minus $2 million) would be $8 million x .023 = $184,000

Now, what the lawyers and accountants might suggest would be to split Soapy Sales Inc into multiple companies:
Soapy Sales Soap Makers Inc -- which makes the soap -- let's say it has gross receipts of $2 million
Soapy Sales Soap Packaging Inc -- which designs and packages the soap -- let's say it has gross receipts of $2 million
Soapy Sales Soap Northern California Inc -- which distributes and sells the soap in Northern California -- let's say it has gross receipts of $2 million
Soapy Sales Soap Southern California Inc -- which distributes and sells the soap in Southern California -- let's say it has gross receipts of $2 million
Soapy Sales Soap Innovations Inc -- it basically has some vague soap related business activities and is where the rest of the gross receipts of $2 million go

As none of these 5 companies have gross receipts of more than $2 million, then they would pay no excise tax

so a VAT is less vulnerable/distorting than GRT?

a VAT is a regressive tax as I understand it? And I am against regressive taxation on principle.

on its own a VAT is "regressive", yes, which is bad, but in practice they're good imo

https://mattbruenig.com/2017/04/05/why-consumption-taxes-are-fine/
https://mattbruenig.com/2017/04/04/the-vat-tax/

(and in the opinion of significantly more progressive countries with less regressive overall tax systems)

Income tax -- a tax on net income -- is more fair than a VAT or a GRT. Of course it leads to different avoidance strategies and tactics. Though they could do something like, an income tax but factor in compensation of highly paid employees. Like, where the bill is going with the extra payroll tax on employees making more than $50k, though I would say more like, employees making more than $180k.

So let's say Soapy Sales has gross receipts of $10 million and net income of $1 million, but they don't want to pay income tax on $1 million, so they give their executive staff (let's say there are 10 of them) a bonus of $100k each ... Probably the Soapy Sales executive staff will definitely have compensation over $180k with those bonuses added in, and then that gets factored in to the tax, so Soapy Sales ends up paying more of their fair share. Or, if Soapy Sales really cares about their employees and thinks of them like family, then they can give bonuses to all the workers making barely minimum wage, and there wouldn't be income tax on that.

more here https://noahpinion.substack.com/p/interview-james-medlock (ctrl-f "VAT")

it's not either income tax or consumption taxes. most countries (including the US) do both.

(and in the opinion of significantly more progressive countries with less regressive overall tax systems)

lol but also more public services (e.g. housing, transit) and much more homogenous populations

i don't see how trains and public housing are relevant. what do you mean by homogeneity? if you mean racially then again, i don't see how that's relevant. if you mean econimically then yes they are more homogoneous economically and *that's literally the point and the problem we're trying to solve, no?!*

i mean if the money from a consumption tax is not spent by the collector, and is used simply to remove money from the economy then yes it is a "regressive tax".

if the money from a consumption tax is used to pay for *healthcare that is free at the point of delivery for all* (!) then it is ... extremely not regressive?

California has sales tax! It also does both. However, certain things are exempt from sales tax. Menstrual products are finally excluded from sales tax.

Like, the part of me that is an anti-capitalist comrade believer in mutual aid and commoning of resources ... yes, consumption taxes are great because it will motivate people to do all the righteous anarchist shit. ... The pragmatic part of me that sees hundreds of people's financial records each year, is very much against increasing consumption taxes because they hurt lower income people more than higher income people.

California has sales tax!

i know. sorry my point wasn't clear. i'm saying your post "Income tax -- a tax on net income -- is more fair than a VAT or a GRT" seems to be an argument against consumption taxes *in principle*, which is a pretty extreme position relative to every developed country and most US states. i was trying to highlight that. but i think i understand more where it comes from based on your last post.

i don't see how trains and public housing are relevant.

they are relevant in that transportation and housing are major expenses for a lot of Californians. If the government reduced the cost of these items, or subsidized them more for low income people, then the people would be less burdened by consumption taxes.

if you mean racially then again, i don't see how that's relevant

racially, in terms of languages spoken/understood as well -- things that are often barriers to accessing public services

if the money from a consumption tax is used to pay for *healthcare that is free at the point of delivery for all* (!) then it is ... extremely not regressive?

many very low income Californians already get free healthcare through MediCal ...

free healthcare as a thing to be funded by increased consumption taxes is less of a selling point for me, though if you were to make the same argument with the public benefit being affordable housing, then I am signing right up, because that is seriously in need of major government action and funding in California.

got you on trains and public housing fair point.

i agree that language and accessibility of services is a problem, but a VAT is much simpler to administer and understand than a 1040, so i don't get that.

medical exists, but if your claim is that healthcare in california is good an accessible and single payer would not be an improvement that would redistribute wealth and down the income distribution then i don't think i could disagree with that more.

i agree that language and accessibility of services is a problem, but a VAT is much simpler to administer and understand than a 1040, so i don't get that.

not in terms of taxes, but in terms of accessing public services -- like mediCal, food stamps, free school lunches, etc. Like, in our ideal state, the government would provide all these important things to people and people would receive them. What I'm saying is, there are problems on the providing end and complications on the receiving end.

medical exists, but if your claim is that healthcare in california is good an accessible and single payer would not be an improvement that would redistribute wealth and down the income distribution then i don't think i could disagree with that more.

I am not saying the current state of healthcare in CA is sufficient, just that affordable housing is more insufficient.

public benefit being affordable housing, then I am signing right up, because that is seriously in need of major government action and funding in California.

it's first in need of a consitutional amendment so the state can spend money on public housing iiuc! https://calcog.org/repeal-article-34/

not in terms of taxes, but in terms of accessing public services -- like mediCal, food stamps, free school lunches, etc. Like, in our ideal state, the government would provide all these important things to people and people would receive them. What I'm saying is, there are problems on the providing end and complications on the receiving end.

this seems like an argument that CA should not offer services because they don't do as good a job offering services to non-english speakers?

i still think my idea of turning office towers in central areas of urban centers into affordable apartments and/or transitional housing is a good one.

this seems like an argument that CA should not offer services because they don't do as good a job offering services to non-english speakers?

I'm saying, it's easier to provide services in a country where most everyone looks the same and speaks the same language. Not that it shouldn't be done by the state. You were the one that brought up other countries.

It's more about the cost and challenges of implementation, rather than arguing against it being done.

ok

but I think that covid has made it more possible to have state-run services in that they have had to develop infrastructure that previously they didn't have, and that was used as a reason for not having state run services.

hopefully that's true!

Any thoughts on the proposed PUC rules to stop allowing net usage metering for solar and charge solar customers for the PRIVILEGE of having installed solar panels? As someone who just installed solar, plus a battery, it smacks of utility rent-seeking. Plus, they are doing this pathetic woke-washing where they claim if they don't get this money, it will hurt minority communities, since they won't be able to use all that money to build desert solar installations.

― DJI, Wednesday, December 15, 2021 1:53 PM (one month ago) bookmarkflaglink

https://www.nytimes.com/2022/01/17/opinion/schwarzenegger-solar-power-california.html