Sacramento, CA…California actually has a government spending limit, hard as that may be to believe, and Gavin Newsom is making a mockery of it, just as his predecessor did. In 1979, a year after signing off on the revolutionary Proposition 13, voters passed Proposition 4, implementing the “Gann Limit,” which would peg California’s state spending to the 1978-79 level and only let it grow adjusted for inflation and population. State revenues above the voter-approved limit can be reckoned with several different ways, including refunding half of the excess revenues to taxpayers, with the other half going to schools.
Newsom is choosing the refund path for this year’s massive Gann Limit excess, which is currently estimated at $16 billion dollars. But instead of sending their money back to the taxpayers in relation to how much they paid, giving everyone a slice of the rebate in proportion to their tax contributions, Newsom is turning the program into a giant transfer payment scheme.
Paul Gann, the father of Prop. 13 and the namesake of this taxpayer protection plan, would be dumbfounded by Newsom’s willful misunderstanding and shameless appropriation of his taxpayer-protection initiative.
The wealthiest taxpayers in this state, the top five percent, paid nearly 70-percent of California income taxes last year. Those citizens were also supposed to get relief from the Gann Limit. Instead, they get nothing.
Newsom is sending rebates to the bottom two-thirds of tax filers only. What about the top-third, who paid a whopping 97-percent of the total income taxes in 2018, for example? In Newsom’s redistribution plan these top payers are simply out of luck, even though it’s their payments providing the bulk of the excess. And before you shout, “tax the rich!” understand that in that same tax year, we are talking about people making $60,000 a year.
It’s great that the Governor wants to help taxpayers during the pandemic, even though it was state policy that caused so much of the damage to small businesses and killed so many jobs. If the governor and legislature want to make more direct payments to citizens out of the general fund, after Gann Limit refunds have been fairly distributed, be my guest.
In fact, I challenge Governor Newsom and the legislature to find ways to make the state more affordable and livable for all citizens, starting with lower taxes on personal income, on business income, on gasoline, and by eliminating green energy mandates that have forced our electricity prices up 9-times faster than the national average over the past decade. These steps would help every day of the year, not just on the day he announces his budget.
Getting money back into the hands of job-creators – by lowering costs and equitably rebating the Gann Limit dollars – would actually fuel a California rebound.
But to repurpose a taxpayer protection act, approved by voters, into a new tax and welfare plan, is bad-faith politics and speaks to why Newsom is facing a recall.
Governor Brown’s 2017 budget dodged the Gann Limit by magically reclassifying $22 billion in spending as neither state nor local, as required by the original Proposition, making it disappear, along with the hopes of fiscal conservatives.
Brown would not adhere to the mandates of the 1979 Gann Limit reform; he tricked his way past the law and shafted taxpayers along the way. Apparently, Governor Newsom was watching and learning, waiting for his own opportunity to betray the intent of California’s voters.
Newsom’s plan is ugly political alchemy, where he mutates a rebate program into a new tax on the homeowners, small business owners, teachers, police and other middle-class people who will be paying the taxes they will never get back. He should refund ALL taxpayers according to their tax payments and quit manipulating the Gann Limit for his political needs.
Senator Ted Gaines (Ret.) was elected to represent the Board of Equalization’s First District. He is a leading taxpayer advocate, defender of Prop. 13, and is committed to providing trustworthy and transparent representation for nearly ten million constituents in 30 counties of northern, eastern, and southern California. For more information, visit boe.ca.gov/Gaines.