This entire interview and zero mentions of Prop. 13 and its historical relationship to subsequent changes in the federal and California state tax code. Okay.https://twitter.com/Recode/status/1108312272340992001 …
Partner at @initialized. Previously @techcrunch. When life hands me lemons, I make tarte au citron.
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Kim-Mai Cutler Retweeted Recode
This entire interview and zero mentions of Prop. 13 and its historical relationship to subsequent changes in the federal and California state tax code. Okay.https://twitter.com/Recode/status/1108312272340992001 …
Kim-Mai Cutler added,
There’s a symbiotic relationship between the state government, CA cities and the existing level of inequality *because* the state’s primary revenue source is income taxes at 70% of the general fund. https://lao.ca.gov/reports/2018/3805/ca-tax-system-041218.pdf …pic.twitter.com/lDZt8eKjPX
Which has a particular structure centered enough on capital gains that it’s actually hard for the state to predictably or reliably budget for public services because the revenue source is so pro-cyclical. We can have a $20B surplus one year and then a $40B deficit the next year.pic.twitter.com/i1Nkhd7cji
At a city level, there’s a symbiotic relationship as well. When Ed Lee took over as mayor, SF was supposed to be running $800M+ deficits every year. Inviting tech allowed the city to run in place against pension obligations, but at a cost of displacement.https://m.sfgate.com/bayarea/article/1st-S-F-5-year-budget-plan-draws-daunting-picture-2373448.php …
It’s the same choice San Jose is making in selling downtown land to Google in order to generate more business/employment tax revenue to offset pension liabilities while compensating for the lack of tax revenue from residential lands. https://sanjose.legistar.com/View.ashx?M=F&ID=6814235&GUID=9249DE06-385F-4FF6-804F-CDBA1D5D4B1B …
So you can change the tax structure in that way (and further progressive taxation is good!) but it will further increase the financial dependency of the cities and state on the ultra-wealthy in the long-run and also make the tax base even more volatile & unpredictable.
.@BettyYeeforCA oversaw a study looking at a lot of different options to make the state budget less wildly unpredictable, but the different pathways seem challenging from a political viability perspective. https://www.sco.ca.gov/Files-EO/Comprehensive_Tax_Reform_in_California_A_Contextual_Framework_06_16.pdf …
should read the Yee doc, in the car now, quick q, has CA considered a Norway-like SWF, a Calpers for general revenue, to put a buffer between taxable income volatility and noncyclical or even countercyclical spending needs?
Not that I can recall. But Calpers isn’t making its 7% and as a result needs to take more risk to cover employee retirements and is weighing putting $20B more into private equity to make higher returns. https://www.wsj.com/amp/articles/calpers-wants-to-double-down-on-private-equity-11552834800 …
yeah... the trouble with a pension fund is it aims to “fully fund” a liability which creates incentives to overstate prospective returns to minimize the current funding burden. a supplementary SWF would simply have a payout formula, not a nut to meet.
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