29 July 2014
In 2010 the Berggruen Institute on Governance founded the Think Long Committee for California, a high-powered group of eminent citizens with broad experience in public affairs, labor, and business.
The name of the group itself implied its main objective: to introduce a depoliticized, non-partisan and long-term agenda as a corrective to the partisan rancor and short-term, special interest political culture that has come to dominate California political life.
After deliberating a year in monthly sessions, the group released its "Blueprint to Renew California" in 2011 - a bipartisan plan to renew California's dysfunctional democracy.
As the work has transitioned from developing solutions to advocating for change the work of the Think Long Committee now falls under a newly formed 501(c)(4).
19 August 2013
by Nathan Gardels
Unless the state modernizes its obsolete tax code, as the Think Long Committee has recommended, California could be right back where it started from with billion dollar annual deficits.
In order to balance the budget, Governor Jerry Brown cut spending over the past two years (the General Fund Budget is down to $97 billion this year from $127 billion when Arnold Schwarzenegger was governor). He then also convinced the public to approve a tax increase on the wealthy, with a temporary tax hike on those making over $250,000 per year.
As a result, California is back in fiscal balance -- but totally reliant on income and capital gains taxes on the state's richest citizens. At this point, the top 1 percent pay 50 percent of income taxes in California.
As America as a whole, California included, drifts toward plutocracy and growing inequality, there is certainly a logic in this. But it is unsustainable. Just to start with, the Silicon Valley tech industry -- where so much of the wealth the state depends on is concentrated -- is already starting to slow down. Tax revenues will follow any slump at an accelerated pace.
The only sustainable course for the long term is to broaden the tax base to include a sales tax on services. California has a $2 trillion dollar economy. Half of it is information and services, yet is not taxed. If you buy a donut in a coffee shop, you pay a sales tax. If you buy a legal, financial, accounting or entertainment service, you are not taxed.
A recent report from the California Legislative Analysts Office (LAO) underlines the volatility and fragility of relying on a narrow income tax base to the exclusion of a tax on services. In recent years, state revenue from the sales tax on goods has dropped. That is because consumer purchases of goods have dropped from 53 cents of every dollar to 33 cents. Services today are more expensive and a larger part of a person's budget.
The Think Long Committee recommendation would raise a 1-3 cent sales tax on services (excluding health care) while trimming the income tax on all income categories while maintaining California's progressive tax structure. This would raise $10 billion in new revenues annually for localities, K-12 and higher education for the community colleges, CalState and the University of California.
Governor Brown's tax hike is temporary and will expire during his next term. (Everyone expects him to win the next election). The Think Long Committee will renew its efforts to change the tax code by broadening the base and lowering rates as the Governor's plan winds down.
Below is a report in Bloomberg News that notes the Think Long plan, a column by Dan Walters on the problem with California current tax code, and the LAO report on falling revenues from the sales tax on goods.
5 October 2012
A Ballot Initiative, Tax Reforms, and Raising Infrastructure Investment
Since the release of the Think Long Committee’s final report, A Blueprint to Renew California, last November, we have proceeded to act long, rolling out our proposed reforms on tax and governance over several election cycles stretching to 2018. The Think Long Committee is working with the legislature and governor, but is also engaging in the initiative process, in which the public votes directly on policies.
Here are the three areas of immediate action:
1. We have joined with a bipartisan reform group, California Forward, to place the Government Performance and Accountability Act (GPAA) as an initiative on the November 2012 ballot. Our political action arm contributed $1.5 million to help gather the one million signatures necessary to qualify the proposition for a public vote.
As a new experiment in governance, we developed the elements of this initiative through a “deliberative poll” in which 400 citizens, chosen by sampling to represent the population as a whole, gathered to discuss, with the help of experts, what changes might make state government more responsive and effective.
The key elements that emerged include two-year performance-based budgeting, transparency in legislation to prevent back door deals at the last minute, devolution of power to localities by providing more flexibility in how they implement state programs, and greater discretion for the governor to make budget cuts when bipartisan agreement cannot be reached in the legislature.
These elements are all reflected in the GPAA on November’s ballot.
2. We are positioning our bipartisan tax reform for the 2014 general election along with advocating a Rainy Day Fund that would put away budget reserves for cyclical downturns. How we ultimately proceed will depend on the fate of other tax initiatives on the current 2012 ballot.
The Think Long tax plan would raise $10 billion in new revenues annually for paying down debt, education and local infrastructure by extending a sales tax to services (not now taxed in California, although services constitute half of the state’s $2 trillion economy) while reducing income taxes across the board in a way that retains the state’s progressive rate structure.
The need for tax reform remains clear. California’s deficit has ballooned to $17 billion as expected tax collections from capital gains and high-end earners failed to materialize with the depressed price of Facebook and other tech stocks after IPOs this year. Even though more than $1 billion has been cut from the University of California and CalState college budgets since 2008, the state still spends more on prisons than higher education.
3. Along with Laura Tyson – a Think Long and 21st Century Council member who was Bill Clinton’s top economic advisor -- and McKinsey’s Lenny Mendonca, we have been working together with the governor’s office on an infrastructure investment vehicle that can attract large institutional investors – from California’s own Public Employee Retirement System (PERS) to the China Investment Corporation (CIC) – to projects in California. Presently, the state has a $750 billion infrastructure deficit.
As part of this effort, our institute arranged a meeting between Governor Jerry Brown and Gao Xiqing, president of CIC, to explore investment opportunities for China in California.
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