Stop the Cuts, Close the Loopholes!

California was once the envy of the country for our top-notch schools and universities, infrastructure and quality of life. Now California may become the only state in the nation to completely eliminate welfare-to-work assistance and job training for low-income families and their children.

The Governor’s May revision to the state budget proposes $17.9 billion in cuts to state programs, including eliminating welfare-to-work. Over the last two years, state programs have been slashed by $32.5 billion—and there is no relief in sight from this Governor.

It doesn’t have to be this way. The non-partisan Legislative Analysts’ Office clearly presented the Governor and Legislature with other options:

Some of the most severe cuts proposed by the Governor could be avoided by adopting selected revenue increases—from fee increases and other nontax revenues, changes to tax expenditure programs, delays in previously scheduled tax reductions or expirations, and targeted tax increases. We urge the Legislature to put these types of solutions in the mix.

Several legislators have taken matters into their own hands and are moving bills to raise revenue and to stop the dismantling of state programs. These bills do not increase taxes for working people, but instead require the wealthiest corporations and individuals to pay their fair share.

AB 2492 (Ammiano) would close the loophole in Proposition 13 that allows commercial property owners to get out of paying their fair share in property taxes. Currently, when property changes owners, its land value is reassessed and the new owner pays taxes based on the new value, which is often higher. But corporations often use a loophole in the law to avoid triggering the change of ownership provisions, and get out of paying what they owe in taxes.

The result is that the share of property tax paid by homeowners has increased while the share paid by multi-national corporations has decreased. A recent report by the California Tax Reform Association illustrates how many major properties have gone without reassessment in the last 30 years, such as when a group of investors including Goldman Sachs and Bain Capital acquired Burger King in 2002 and avoided having any of its San Diego County franchises reassessed. Major banks such as Wells Fargo and JP Morgan Chase have also avoided most reassessment of their takeovers of Wachovia and Washington Mutual.

Other ideas for revenue include the Oil Industry Fair Share Act—AB 1604 (Nava)—that would impose an oil severance tax on multi-national oil companies who extract oil in California. Assemblymember Furutani introduced AB 1836, which takes a page out of Governor Wilson’s playbook by reinstating two temporary higher tax brackets for wealthy Californians.

The California Teachers Association and other groups are fighting back against deep cuts to education by moving an initiative for the November ballot to repeal the major corporate tax loopholes that were part of the 2008 and 2009 budget deals. Repealing those three tax loopholes alone would save the state an estimated $2 billion a year—money that could go to schools and other critical state programs.

The Federation is also moving a package of bills that would ensure that any future tax breaks are accountable, transparent and effective at creating jobs. SB 1272 (Wolk) and SB 1391 (Yee) would require that tax expenditures are reviewed, have a sunset date and include a provision allowing the state to clawback the subsidy is a company decreases jobs in the state. AB 2564 (Swanson) and AB 2666 (Skinner) bring needed transparency to tax expenditures by bringing them into the budget debate and creating a public, searchable database that show what corporations get tax breaks, how much they get and what wages and benefits they provide workers.