Good morning, California.
WhatMatters today: Taxes.
Stockton Mayor Michael Tubbs wants to give $500 a month to a select group of residents “to spend it as they wish, for 18 months, in a pilot program to test the impact of what’s called guaranteed basic income.” — Steve Lopez, LA Times.
The next governor talks taxes
Antonio Villaraigosa, Delaine Eastin, John Cox, John Chiang, Gavin Newsom, Travis Allen.
In interviews with CALmatters, top candidates for governor offered prescriptions for taxes. Democrats Delaine Eastin and John Chiang urged a Proposition 13 overhaul. Antonio Villaraigosa says sales taxes are too high and urged service taxes. Gavin Newsom said the next governor must “lead a tax reform discussion.” Republican John Cox would slash the state income tax. Travis Allen would eliminate the gasoline tax, among others.
CALmatters’ Byrhonda Lyons compiled their answers in this video.
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Who most deserves a tax break?
California is a high tax state but gives tax breaks of more than $61 billion a year on everything from lottery winnings and chicken feed to manufacturing equipment and mortgage interest.
Low-income renters can claim a credit of $60-$120, depending on whether they’re single or couples. The program has remained the same essentially since 1979, when Jerry Brown was governor the first time.
Sen. Steve Glazer, an Orinda Democrat, proposes to increase the renters tax credit, rising to almost $220 by 2022. He also add a category. Renters with children would get $434 in 2022. After that, increases would be pegged to the cost of living. It’d cost the state — and save renters — $180 million over the next three years.
Chances: Democrats and Republicans support raising the credit. Brown generally opposes ongoing spending, but might see an update as a piece of unfinished business.
How to help working poor
Some California Democrats want to expand a tax credit for low-income workers to include the youngest and oldest workers, and those who have no Social Security number including undocumented immigrants. Annual cost: $90 million.
Remind me: President Ronald Reagan saw the federal earned income tax credit as a way to reward work by giving rebates to low-income wage earners. Gov. Jerry Brown created a state version starting in 2015. The law excludes workers who are between 18 and 25, 65 and older, and undocumented immigrants.
Impact: 1.2 million Californians claimed the credit in 2018, collecting $285 million, the nonprofit CalEITC4Me reports.
Assembly staff analysis details the pro-argument: “Undocumented Californians contribute about $180 billion a year to the state’s economy and represent 10 percent of our workforce. And nearly one in six of all California children have at least one undocumented parent. … California is stronger when our safety net provides health and income mobility opportunities to all California residents in need.”
The Franchise Tax Board, however, “would be unable to accurately match or verify the taxpayer-reported wage and withholding information with employer-reported wages to the Employee Development Department, increasing the likelihood of improper claims.”
What’s next: The Assembly version of the budget proposes to extend the credit to low-income undocumented workers who file income tax returns. The Senate version does not include that expansion. The issue will be negotiated as legislators and Brown put final touches in the budget for 2018-19.
Legislators propose extending the state film tax credit through 2025 at a five-year cost of $1.65 billion.
Hooray for Hollywood: Democrats and Republicans, organized labor, studios and actors give thumbs up to the credit, believing it keeps productions in California.
History: Legislators first approved the film tax credit at Gov. Arnold Schwarzenegger’s urging, and expanded it in 2014 by granting $330 million a year through 2020.
The California Film Commission cites big job increases since California started giving the credit. Lawmakers have directed the Legislative Analyst’s Office to report in 2019 whether it works as promised.
Why now? Long-running television series need some assurance that there would be a tax break for years to come. And Hollywood is an excellent source of campaign support in an election year.
A most divisive campaign
Sen. Josh Newman, Fullerton Democrat.
California’s 12-cent per gallon gasoline tax is at the center of the divisive June 5 recall campaign against Sen. Josh Newman, a Fullerton Democrat who was one of 81 legislators who voted last year to levy the tax to fix roads and bridges.
Combatants: Democrats seek to save their colleague. Republicans seek to take back a seat they held before he won it by 2,500 votes in 2016. Southern California talk radio hosts have fueled the recall.
Newman: In hindsight, he would have cast the same vote, with a caveat: “We’ve got to figure out how to give voters assurances that their hard-earned dollars are well-spent. We didn’t do that very well.”
It’s only business? Newman’s wife saw the California Republican Party’s mailer accusing him of sexual harassment. Senate Republicans tell Newman not to take it personally. That’s tough.
Sen. John Moorlach, a Costa Mesa Republican, called Newman a “good man. … The most difficult part of this job is I have to work with everybody, but then fund their opponents, and I don’t know if I’ll ever get used to that dynamic.”
The campaign: Business interests, unions, construction companies and others have poured $2.1 million-plus to oppose the recall. Newman bought two bull costumes and hired workers to wear them and stand at key intersections holding signs reading: “The recall is bulls***.”
Oil interests, which are affected by the gas tax, are not directly funding the recall. But since 2017, oil companies have given $2.5 million to the California GOP, 20 percent of the money raised by the California Republican Party.
Dan Walters: Gas tax campaign to come
In his latest commentary, CALmatters’ Dan Walters analyzes the initiative to repeal the gas tax headed for the November ballot. Polls show it’s unpopular. But Walters believes that could change, with the right campaign.
For the record: WhatMatters misidentified a legislator standing next to Assemblywoman Cristina Garcias in a photo caption Monday. He was Assemblyman Tony Thurmond.
Please email or call with tips, suggestions and insights, [email protected], 916.201.6281. Thanks for reading. See you tomorrow.