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by JUDY HODGSON
This week you will read in our
cover story how funding for public services in this county --in
the state -- was turned upside down 25 years ago by the passage
of Proposition 13. It was a revolution that eventually spread
across the country. I voted for it. My reasons were personal.
We bought our house in 1974. Property values in the mid-1970s
were in a real growth spurt, and each year it was not a pleasant
surprise to open the tax bill.
Having your house dramatically
reassessed in any given year played havoc with many a family's
budget. We struggled, but we were not as bad off as the older
retired couple down the street. They had lived in their home
for more than 40 years -- raised their kids there -- and yet
they had to put their house on the market because they just could
no longer afford the taxes. The Legislature refused to fix the
system, Californians took the matter into their own hands with
the initiative and public services -- with schools sadly leading
the way -- began a 25-year slide.
A friend of mine in real estate
did not vote for Proposition 13. He had an inkling of what would
some day come to pass: the gross inequity that now exists between
the pre- and the post-Proposition 13 homeowners. (He owns a home
up Fickle Hill in Arcata and pays one-third the taxes of his
newer neighbor for very similar property.)
A second, and in my opinion
fatal, flaw with the current system is that it taxes enterprise.
Fix your house up, pay more. Let your house deteriorate -- well,
you get the idea.
If you read last
week's cover story, you will know that I spent a day in Sacramento
shadowing Assemblymember Patty Berg. The topic on everyone's
mind, of course, was the $38 billion deficit or, more specifically,
the spending cuts and/or tax increases it is going to take to
close the gap. So I read with interest a column
by Joel Fox in Sunday's San Francisco Chronicle. According
to a recent poll from the Public Policy Institute of California,
voters don't want cuts in services or new taxes.
So how do we fund public services?
In his column, Fox reminds us
of a plan put forth many years ago by economist Arthur Laffer:
to wipe out all taxes except two -- the "sin" taxes
on cigarettes and alcohol, and a flat tax. (I would add a tax
on casino revenues, but that's a subject for another column.)
Laffer's flat tax would be placed
on income in addition to a flat value-added tax levied on business.
It works like this: Each product on the way to consumers has
some value added from raw material to finished product. Each
business along the way would be taxed on the product's increased
value. Creating a simple tax with few deductions streamlines
bookkeeping and allows business to be more productive. Greater
production means more money for the government treasury. And
a flat tax on income would mean lower rates for most people.
(Laffer estimates 6 percent on income and business would bring
in the same revenue now produced by all California taxes.)
It should have been obvious
from my article last week, but the Republicans are in the driver's
seat right now, even though they are in the minority in Sacramento.
The Democrats need some cooperation (two Republicans in Senate
and six in the Assembly) to get a budget passed. The Republicans
will likely get what they want: no new taxes, which means all
our services are going to be dramatically reduced and some will
disappear entirely. (See last
week's story on the California Arts Council.)
There has to be a better way.
Maybe it's Laffer's way.
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