21, 24, & 26: “The Tax Propositions”

Give to Caesar what is Caesar’s. No, I’m not telling you to return the pencil you borrowed in English class from that kid with the weird name. I’m speaking, of course, about taxes. In contemporary American society, paying taxes is as natural a part of life as watching reality TV shows about the lives of bodacious boneheads. Recognizing the prominent role taxes play in our everyday lives, we are in no way at fault for questioning exactly what belongs to Caesar. This is exactly what Propositions 21, 24 and 26—“the tax propositions”—do.

Prop. 21 opens up our tax proposition rundown simply enough: it would add an $18 annual vehicle license surcharge to vehicles registered in California. Exempting commercial and certain other types of vehicles, this fee would apply to approximately 28 million vehicles statewide, bringing in a total of more than $500 million annually. This additional revenue would be designated to the State Parks and Wildlife Conservation Trust Fund, a new fund established within the State Treasury, for the improvement of state parks. Current funds designated toward state park improvement—$130 million—would be absorbed back into the state’s general fund.

The positive effects of Prop. 21 are both significant and fairly obvious. Persistent underfunding of state parks has led to more than $1 billion worth of necessary park maintenance going overlooked. These parks need funding. With the newly created trust fund, the maintenance of state parks would improve, thus protecting California’s natural beauty for us and for future generations to enjoy. The benefits, however, don’t stop with park improvement. Any car subject to the annual $18 surcharge will be granted free daytime access to and parking in California’s state parks, thus offsetting the surcharge itself. More inviting parks are also expected to bring an increase in tourism.

Those who oppose Prop. 21 call it a piece of corrupted legislation, arguing that the surcharge revenue will be diverted to other, wasteful programs. These people have certainly not taken the time to read the full text of Prop. 21, as it emphasizes multiple times and quite explicitly that the funds received shall not be designated to any purpose outside the scope of the proposition. In fact, Article 4 of Prop. 21 breaks down by percentage specifically where the money is supposed to go. Prop. 21 is an airtight proposition that ensures both environmental and economic gains for the state.

Prop. 24 gets a bit more complicated. In 2008, California lawmakers in conjunction with Governor Schwarzenegger approved a set of intricate tax breaks for businesses, scheduled to go into effect this year. Specifically, businesses were allowed to carry back previous net losses and share tax credits with affiliated businesses. Multi-state corporations were also allowed to decide whether they wanted to be taxed on property, payroll, or sales, rather than all three. But forget the intricacies. What’s important is that these tax breaks would combine to save businesses an estimated $1.7 billion per year. Prop. 24 would repeal this legislation.

Let’s face the facts: California is in a financial panic. The current deficit is approximately $19 billion, and huge spending cuts have been made to the upcoming budget. As of July, the state’s unemployment rate was 12.8 percent, well above the national average of 9.5 percent. We are stuck at an impasse: while the state could definitely use the additional $1.7 billion to lessen the blow of budget cuts to health care and education programs, businesses would find job creation much easier with that money at their disposal.

I hold that job creation takes precedence. According to macroeconomic theory, a rise in employment will lead to an increase in disposable income, which in turn increases aggregate demand and kicks the economy back into gear. As money starts to flow again and the economy begins to improve, there will be more economic activity for the government to tax. Though the state budget may take a hit now, the economy will be much better off in the future.

Of course, it’s unclear how much of that $1.7 billion will actually be used to pay new employees and how much will be used for “corporate expenses.” Corporations are not legally required to use the extra funds from tax breaks to create new jobs. We have to trust that these corporations will find it in their own self-interest to expand through job creation. Perhaps there’s some reassurance in the fact that these tax breaks were already approved by California’s policy makers.

Finally, we have Proposition 26. Whereas Props. 21 and 24 attempt to answer what should be rendered unto Caesar, Prop. 26 addresses the question of how something is determined to be Caesar’s. Prop. 26 asserts that certain fees placed on businesses should require a two-thirds supermajority vote to be passed rather than the current simple majority required. The logic behind Prop. 26 is as follows: taxes require a two-thirds supermajority vote to be passed; “fees” and “charges” on businesses are essentially taxes; therefore, “fees” and “charges” should require a two-thirds supermajority vote to be passed.

Unfortunately, the reasoning behind the second premise, that fees and charges are essentially taxes, is less than convincing. Supporters of Prop. 26 claim that fees and charges incurred by businesses are just like taxes in that they are monies taken from the businesses and redistributed for the welfare of the entire community. Missing from this argument, though, is what specific benefits are gained through redistribution. In the case of taxes, benefits could take the form of—oh, I don’t know—the improvement of state parks. In contrast, fees and charges levied upon businesses are there to clean up the mess made by those businesses in the first place. An oil company, for example, might pay a fee that goes toward cutting down on pollution, or a soda company might pay one to finance recycling programs.

The difference between taxes and fees lies in the negative externalities, the adverse societal effects not priced by the market. When an oil company installing offshore rigs destroys an ecosystem, society may be negatively affected, but the oil company does not compensate society for the harm caused because it takes place outside the market.

The fees and charges that would be eliminated by Prop. 26 are the missing link: they put a price on the harm that certain industries cause society. In this respect, they are different than taxes. I, for example, pay an income tax, even though my income doesn’t harm anyone. Because fees and charges are different than taxes, the logic behind Prop. 26 fails and so should the proposition itself.

With this year’s tax propositions, we must ask ourselves: (a) what should rightfully be Caesar’s and (b) how do we determine this. Simply put, an $18 annual surcharge on vehicles should be Caesar’s, but $1.7 billion of corporate money should not, and a two-thirds supermajority vote is not always necessary to determine what is Caesar’s. If you disagree, remember that these policies are still on the table. Vote according to your beliefs.

Once again, to register to vote just visithttp://www.sos.ca.gov/elections_vr.htmand follow the simple instructions. Registration forms must be postmarked NO later than Oct. 18, so hurry up!

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