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Reich visits Capitol on CEO pay, oil extraction tax

It’s Robert Reich day at California’s State Capitol.

No, there hasn’t been an official proclamation. But the former U.S. Secretary of Labor, now a UC-Berkeley public policy professor, will be under the dome Thursday to speak on behalf of two bills introduced by Bay Area lawmakers.

Reich is doing a news conference with state Sen. Mark DeSaulnier, D-Concord; state Sen. Loni Hancock, D-Berkeley; and California Labor Federation Executive Secretary-Treasurer Art Pulaski in support of DeSaulnier’s SB 1372, which would create a new corporate tax table that increases taxes on businesses with big disparities between the salaries of their workers and their CEOs. The bill is being heard Thursday morning by the State Governance and Finance Committee.

“For example, if the CEO makes 100 times the median worker in the company, the company’s tax rate drops from the current 8.8 percent down to 8 percent. If the CEO makes 25 times the pay of the typical worker, the tax rate goes down to 7 percent,” Reich wrote on his blog Monday. “On the other hand, corporations with big disparities face higher taxes. If the CEO makes 200 times the typical employee, the tax rate goes to 9.5 percent; 400 times, to 13 percent.”

“Pushing companies to put less money into the hands of their CEOs and more into the hands of average employees creates more buying power among people who will buy, and therefore more jobs,” he wrote. “For the last thirty years, almost all the incentives operating on companies have been to lower the pay of their workers while increasing the pay of their CEOs and other top executives. It’s about time some incentives were applied in the other direction.”

And, Reich will testify to the Senate Public Education Committee in favor of SB 1017 by state Sen. Noreen Evans, D-Santa Rosa, which would create an oil extraction tax to fund higher education, health and human services, state parks and more.

Reich endorsed a similar student-organized ballot measure effort last year, saying that using oil severance tax revenue for education “should be a no-brainer. It will only improve our schools. The real question is why California hasn’t done this long before now.”

The California Chamber of Commerce this month put both bills on its list of “job killers,” arguing they create barriers to economic development.

“The economic recovery is still the number one issue for Californians,” Chamber President and CEO Allan Zaremberg said when announcing the list. “These bills pose a serious threat to our economy and, if enacted, would dampen job growth in the state.”

Of Evans’ bill, Zaremberg said “an oil extraction tax will drive up consumer prices, push jobs away and upset a fragile economy that is showing strong signs of life.”

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What they’re saying about the governor’s budget

From Assembly Speaker John Perez, D-Los Angeles:

“This is a proposal that clearly shows California has turned the corner. The Governor’s budget is sober, restrained and forward thinking, and I believe it’s a solid foundation for the budget process. I am looking forward to thorough and insightful public hearings as we work with the Governor to adopt the final budget by our Constitutional deadline.”

From California Republican Party Chairman Tom Del Beccaro:

“It’s easy for Gov. Brown to tout austerity and fiscal restraint when he has more of the taxpayers’ money in his pocket. His challenge will be to follow through on those promises when the economy continues to stagnate and the Democrats’ pie-in-the-sky projections don’t come to pass. That’s why Republican legislative leadership correctly proposed this week for the Governor to mandate that his new Prop 30 taxes fund our classrooms and protect our communities.

“What’s disappointing about Gov. Brown’s announcement is that job creation was never mentioned. Cutting the regulatory burden was ignored. Working with Republicans to unify the state is sadly not part of his agenda. In order for California to finally emerge from its economic doldrums and enter a new Golden Age, the answer lies with policies that encourage job growth and unleash the innovation of small business owners, not with budget wrangling and deferred payments that mask billions in debt to the federal government for unemployment insurance and more.

“We need bold reforms to go hand in hand with accountability and responsible fiscal governance if we want to return California and its citizens to prosperity. If Jerry Brown thinks we’re out of the woods just because, on paper, we’ll finally be ‘living within our means,’ he’s sadly mistaken.”

From state Senate Budget Committee Chairman Mark Leno, D-San Francisco:

“The budget proposal released today by Governor Brown is the most positive one we have seen in half a decade. The budget is narrowly balanced and contains elements that ensure a modest reserve. However, it reflects the difficult cuts and decisions the Legislature and Governor have made in the past few years to address the state’s structural budget deficit. It also demonstrates the confidence entrusted in us by voters in November who recognized that our fiscal situation was untenable without new temporary revenues. Although we are still under fiscal constraints, I am hopeful we are now past the period of devastating cuts we saw in previous years to education and programs that provide critical aid to elderly Californians, disabled people and working families.

“With the improvement of our fiscal outlook comes the opportunity to continue our work to restore California. While our recent efforts have focused largely on making cuts in the least harmful manner possible, we will now have more capacity to refine our work to improve essential programs and analyze the role of government and its effectiveness. I look forward to working with Governor Brown and my colleagues in the Legislature to evaluate this year’s budget to help ensure it is the best possible plan for a state on the mend.”

From state Senate Republican Leader Bob Huff, R-Diamond Bar:

“New funding for our classrooms is a positive step forward for California. However, the Governor’s budget only seems to include $2.7 billion in new funding for K-12 schools and community colleges even though Proposition 30 taxes will generate $6 billion this year alone – Californians should be disappointed.

“I remain concerned that while state spending is being increased by $5 billion over last year, much of this money is used to expand state programs and provides major pay and benefit increases for state employees.

“Basically, this budget is balanced by a $50 billion tax increase, and Californians have yet to see any real, long-term plan to bring back jobs and help our struggling families.”

More, after the jump…
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Everyone’s talking about budget talks gone bust

Budget talks in Sacramento have been declared dead, and the wires are abuzz with posturing for whatever comes next.

From Gov. Jerry Brown:

Jerry Brown“Yesterday, I stopped the discussions that I had been conducting with various members of the Republican party regarding our state’s massive deficit.

“The budget plan that I put forth is balanced between deep cuts and extensions of currently existing taxes and I believe it is in the best interest of California. Under our constitution, however, two Republicans from the Assembly and two from the Senate must agree before this matter can be put to the people.

“Each and every Republican legislator I’ve spoken to believes that voters should not have this right to vote unless I agree to an ever changing list of collateral demands.

“Let me be clear: I support pension reform, regulatory reform and a spending cap and offered specific and detailed proposals for each of these during our discussions. While we made significant progress on these reform issues, the Republicans continued to insist on including demands that would materially undermine any semblance of a balanced budget. In fact, they sought to worsen the state’s problem by creating a $4 billion hole in the budget.

“One glaring example is the taxation of multinational corporations. My budget plan requires that gigantic corporations be treated the same as individual taxpayers and not be allowed to choose their preferred tax rate.

“This is the so-called single sales factor. The Republicans demand that out-of-state corporations that keep jobs out of California be given a billion dollar tax break that will come from our schoolchildren, public safety and our universities. This I am not willing to do.

“Much is at stake, and in the coming weeks I will focus my efforts on speaking directly to Californians and coming up with honest and real solutions to our budget crisis.

Attached is my letter to Republican Leader Dutton last Friday that outlines in greater detail my position.”

From state Sen. Anthony Cannella, R-Ceres, who was among the five GOP Senators bargaining with Brown:

“I fully recognize that doing what’s right for my constituents and getting California back on track will entail tough decisions to fundamentally change the way our government works for the people it serves. That’s the reason I joined my colleagues in pushing for pension reform, a hard cap on state spending and measures to spur job creation – all of which we believed would help address the ongoing structural problems that contribute to our state’s persistent multibillion-dollar deficit.

“I appreciate Governor Brown’s willingness to engage on these issues and the progress that was made as a result. However, finding agreement required an equal willingness from the public-employee unions, trial attorneys and other stakeholders to join our effort to get California moving again – a willingness that was stunningly absent from our conversations. As a result of these groups’ refusal to challenge the status quo, it has become clear the governor and legislative Democrats are not in a position to work with us to pass the measures necessary to move California forward.

“Thus, I do not foresee a path to compromise.”

From California Labor Federation Executive Secretary-Treasurer Art Pulaski:

“Gov. Brown’s balanced approach to solving our state’s budget crisis offered California a much-needed pathway to stability and an end to our long budget nightmare. It’s truly sad that Republican legislators have put their own narrow interests above the needs of our state by blocking a vote of the people on solving our budget crisis. It appears the Republicans were never negotiating in good faith. Their ever-growing list of inflexible demands – most of which had nothing to do with our current budget crisis — frustrated any hope of compromise.

“By refusing to allow a vote of the people on issues that profoundly impact us all, Republicans have completely abdicated their responsibility to their constituents and our state. Instead of governing responsibly, they continue to take their marching orders from out-of-state ideologues and radio talk show hosts. Republicans have shown they are more willing to protect tax handouts for billion-dollar corporations than protect our kids’ schools. Their failure to make any compromises shows how out of touch they’ve become.

“If the Republicans aren’t willing to govern, Gov. Brown and the Democrats must do so without them. There’s simply too much at stake. We urge Gov. Brown to move forward with a fair budget that saves our schools, public safety and other vital services from even deeper, more devastating cuts.”

From state Sen. Tom Harman, R-Huntington Beach, another of those five GOP senators:

“Recent polling clearly shows Republican reforms have the backing of the majority of Californians. It is a sad commentary that the best interests of California play second fiddle to the self-serving interests of public employee unions. Unfortunately the go-to answer for Democrats always seems to be more taxes. Nothing has changed.”

UPDATE @ 6:02 P.M.: From Assembly Speaker John Perez, D-Los Angeles:

“Democrats have made the tough decisions necessary to close an historic budget deficit. While Republican rhetoric suggests they are open to working with us, their actions have not reflected their public statements. In fact, over the past several days, they have shown their true priority is demanding tax cuts for huge, out-of-state corporations, and other costly proposals that would have put a four billion dollar hole in the budget. I am deeply disappointed they have refused to let the people of California have a say in how we close the deficit and put our fiscal house in order.

“Regardless, we must move forward on finding solutions that reflect the spirit of the Governor’s budget proposal. We have approved more than 14 billion dollars in solutions to close a 26 billion dollar deficit, and we will meet our constitutional obligation to approve the budget by June 15. One thing is clear: the people of California would be well served if Republican actions matched their rhetoric, because we need to move forward together, as a state, to close this deficit.”

UPDATE @ 6:07 P.M.: From state Senate President Pro Tem Darrell Steinberg, D-Sacramento:

“I want to commend the governor for putting out an honest budget and trying to reach across party lines. Unfortunately, the Republican Party as a whole appears to want to be irrelevant when it comes to governing in California and it seems intent on achieving that objective.

“The only responsible way to resolve the state’s structural deficit once and for all is to make deep cuts and extend existing revenue. We stepped up with cuts, passing legislation that erased $14 billion of the deficit. On the revenue question, all we asked was that the minority party give Californians the right to vote on whether to double those cuts or instead extend existing taxes for five years. The Republicans denied the people that opportunity. In doing so, they put corporate tax breaks ahead of our children and students, and put private-sector developer subsidies ahead of public safety. I don’t believe their decision reflects the will and the values of the majority of Californians.

“The deadline to pass a balanced budget is June 15 and we will meet that deadline. We have a job to do and we’ll do it.”

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What they’re saying about Brown’s budget plan

I’ll be adding to this as the day goes on.

From Service Employees International Union California Executive Director David Kieffer:

“It’s time to stop playing games in California and get serious about a balanced approach to solving our budget crisis.

“Our state will not survive and recover if we do not come together to solve our problems. We cannot afford another year of gridlock and partisanship like we’ve seen in recent years. Instead, we need a cooperative effort on both sides of the aisle to restore the greatness of our state.

“Our top priority should be to restart job growth, but that will require that we get our state budget mess fixed. Doing so will be painful, and the sacrifices should be shared by all.

“Governor Brown’s budget proposal is a good start. It is balanced, and he even proposes to cut his own office. Every branch of government should follow his example.

“While we support the Governor’s balanced approach, it’s far from perfect. We will advocate for improvements to this budget so that it better reflects California’s values. We must pass a budget that ensures that frail seniors and people with disabilities aren’t put in harm’s way; that struggling families get the help they need to eat and pay the rent; and that our schools, colleges and universities stay strong.

“Moving control of services from Sacramento to the communities where they are used makes tremendous sense, but only if the services are funded and maintained. Realigning services will also give us the opportunity to find ways to improve public services to deliver more value to California.

“We look forward to working with the governor and the legislature to move California forward through this difficult time, help position California for recovery and job creation, and rebuild the things that have made California’s economy and communities thrive: our schools, colleges, healthcare, and infrastructure.”

From Republican activist Stephen Frank, publisher of California Political News & Views:

“His ‘budget’ is $84 billion–that is ONLY if we agree to keep high taxes. In an Arnold special election the people said NO to higher taxes. In November, 2010 the voters said NO to higher taxes. Now he is trying to use blackmail to get us to keep high taxes. When that fails, he creates a $10 billion addition to the deficit. Also, note his budget does not include money to pay for the approximate $10 billion in lawsuits the State has lost and the lawsuits it will lose this year, in this budget. In fact, he has built in at least $20 billion in ADDITIONAL deficits.

“Maybe the most immoral part of his ‘budget’ is his desire to cut employees pay by up to 10%; but, only those who do not pay bribes to unions to work. Non union people get cut; workers who pay bribes are allowed to keep their pay in tact. Punishing people for being honest and rewarding those forced to pay bribes. Then, again, we all knew he is owned by the unions.

“Jerry Brown can not be seen today due to all the smoke and mirrors around him. Dishonest budgeting is the proper term for his effort to punish Californians for the out of control government left behind by Arnold and the Sacramento Democrats. As Nancy Reagan would say, this time about the taxes, ‘Just Say NO.’”

From California Partnership Executive Director Nancy Berlin:

“These are indeed tough times, but if we’re going to get serious about California’s recovery, then we need to get serious about raising revenues, and that means putting all revenue options on the table.”

“We applaud Governor Brown’s first step to propose extending last year’s temporary revenue sources – including the Vehicle License Fee, income tax and sales tax increases, as well as the proposed elimination of the highly discredited and ineffective ‘enterprise zone tax credit. But now we need the Legislature to push harder, and bring in the revenues California so desperately needs.”

From Californians Against Higher Taxes:

“Californians Against Higher Taxes will analyze all proposals for revenue enhancements to determine if they have an adverse impact on California’s economic recovery and the creation of jobs. The Coalition looks forward to working with the legislature and the administration to ensure that any budget solutions that increase state revenues are not detrimental to private sector job creation.

“Additionally, we appreciate the Administration’s proposals to seek either a two-thirds vote of the legislature–in keeping with the language of prop 25–or a vote of the people to increase revenue.”

Read more, after the jump…
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Whitman would save millions from her tax cut

Continuing a meme that Democratic gubernatorial nominee Jerry Brown started during the debate last week, his supporters released a memo today estimating that Republican nominee Meg Whitman would see personal savings of between $8.2 million and $41.2 million over a four-year gubernatorial term if she keeps her promise to eliminate the state’s capital gains tax.

Brown had asked Whitman – the billionaire former eBay CEO – during their Oct. 12 debate at Dominican University of California in San Rafael how much her tax plan would benefit her own finances; she didn’t answer, and hasn’t released an estimate since. Today’s memo was prepared and released by California Tax Reform Association Executive Director Lenny Goldberg.

Whitman says eliminating the tax will stimulate investment, leading to job creation. Democrats say it would blow an even bigger hole in the already-shredded state budget while mostly benefiting the very rich, with no guarantee of an economic benefit.

“Meg Whitman has millions to gain, but we have everything else to lose,” California Labor Federation Executive Secretary-Treasurer Art Pulaski told reporters on a conference call.

He said eliminating the capital gains tax would reduce state revenues by $4.5 billion per year, with each dollar lost bringing “a decrease in the quality of life for Californians:” failing schools, reduced college admissions, shortages of police and firefighters, crumbling infrastructure, struggling seniors and disabled, and reduced or no child care, all without creating jobs.

Pulaski and Goldberg repeated their calls for Whitman to release her tax records so estimates such as theirs wouldn’t be necessary.

State Sen. Leland Yee, D-San Francisco, agreed the memo underscores Democrats’ contention that Whitman offers “a one-sided solution to our budget problem – it is to enrich the rich and cut from children and the poor.”

California saw faster economic growth than the rest of the nation from 2000 through 2007 even with the capital gains tax in place, said University of California, Berkeley Economics Professor Michael Reich, while other states such as Texas have outperformed California in recovering from this recession because they weren’t as hard hit by foreclosures.

Whitman’s campaign issued a statement saying leading economists are on her side.

“Having closely studied the issue, Meg Whitman’s proposal to eliminate the capital gains tax in California will spur investment and create jobs. As a whole, Meg’s economic policies of streamlining regulation and implementing targeted tax cuts are crucial in getting our economy moving again and getting Californians back to work,” Hoover Institute Senior Fellow John Taylor – an economic advisor to governors Arnold Schwarzenegger and Pete Wilson, as well as to presidents Gerald Ford and George H.W. Bush – said in the campaign’s statement.

But Reich said California investors have diversified national and international portfolios, and so their reinvestment wouldn’t benefit the Golden State’s economy all that much. He also said millionaires haven’t been leaving California in any measurable way due to taxes, and so it’s unlikely any would return if the tax was eliminated.

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Views on California’s May unemployment numbers

From Gov. Arnold Schwarzenegger:

“When the world loses one-third of its wealth in 18 months, it is to be expected that historic levels of job losses will follow. Not surprisingly, we and our fellow states have seen unemployment numbers rise sharply during this difficult time. A full recovery will not happen overnight — it will take time, which only further underscores the need to continue the economic stimulus measures I fought for in the February budget. There is no greater priority right now than to stimulate the economy, create jobs and get California back on the road to prosperity.”

From California Labor Federation Executive Secretary-Treasurer Art Pulaski:

“While the rest the country is beginning to emerge from this deep recession, California remains stuck in the mud under Gov. Schwarzenegger’s failed leadership.

“If ever there was time to sound the alarm, it’s now. The staggering loss of 68,000 jobs in May means more families are teetering on the edge of financial calamity. Instead of throwing families in need a lifeline, the governor threatens to push them over the cliff with his ill-conceived budget proposal.

“The catastrophic cuts the governor has proposed to vital services will shred the safety net that so many families depend upon for survival in these difficult times. Budget cuts will also lead to additional job cuts, exacerbating unemployment.

“Behind every unemployment number is a heartbreaking story of a family in distress. Unless legislators and the governor reach a quick and fair solution to the state budget, we can expect job loss to accelerate and the pain families are feeling to intensify in the months to come.

“We can’t afford more Republican grandstanding. It’s time for a real budget that’s not balanced on the backs of working families.”

UPDATE @ 1:58 P.M.: More views, after the jump…
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