Even though lawmakers probably won’t make any changes this year, they have begun hearing testimony and debating the issues already. Among the changes that are being considered is portability of the exemption amount to surviving spouses. Currently, if one spouse dies without fully using up his or her $2 million exemption, that amount is wasted. This can happen when the first spouse to die doesn’t own enough assets in his or her name or when he or she leaves the entire estate to the surviving spouse. Reform in this area would allow unused exemption amounts to pass to surviving spouses, thus making two exemption amounts available for use when the surviving spouse dies.

There has also been discussion of changing the estate tax to an inheritance tax. This would put the focus of the tax not on the decedent, but rather on the recipient. Each person would be given a lifetime inheritance tax exemption and would pay taxes on any amount they inherit in excess of that amount. This is the type of system used in many other countries that have death-related taxes. Such a system has interesting public policy ramifications, but may be just too radical a change for this country at this time.

It seems a certainty that there will be discussion about and very possibly changes to both the estate tax rate, the top rate will be 55% in 2011, and the exemption amount, $1 million in 2011. Even though any change in the estate tax laws must start with Congress, the positions of the two presidential candidates are worthy of note. The Tax Policy Center of the Urban Institute has put together summaries, derived from candidate statements and websites as well as input from the candidates’ campaigns, of the two candidates’ positions on many tax issues.

You can view the full analysis at www.taxpolicycenter.org/taxtopics/presidential_candidates.cfm. In summary, their positions on estate taxes are:

- Senator Obama: Permanently fix the estate tax law as it is currently for 2009: an exemption of $3.5 million and a top rate of 45 percent.

- Senator McCain: Permanently reduce the tax in 2010 by increasing the estate tax exemption from its scheduled 2009 level of $3.5 million to $5 million and reducing the tax rate from 45 to 15 percent.

Kirsten Howe practices estate planning law in Walnut Creek. Send your estate planning questions to Kirsten by e-mail.

AAA has decided to close its three call centers in California and move them out of state—a loss of over 900 jobs. The Livermore AAA call office will be closing by September 1st meaning more than 300 people will lose their jobs. The Elk Grove office will also be closing, leaving 500 more Californians unemployed. Arizona has already opened a new call center and Oklahoma will be opening the second call center to make up for California’s closing centers.

Earlier this summer, Toyota was considering expanding their Bay Area plant in Fremont to increase their ability to manufacture their Prius hybrid cars, but coincidentally, or maybe not, not long after California Democrats proposed to raise billions of dollars in new taxes, Toyota has announced they are moving over 2,000 jobs to a more pro-business state. They will not be expanding their facilities in the Bay Area, but instead they will be building a brand new facility in Blue Springs, Mississippi.

What Mississippi gains and California loses: Toyota’s $1.3 Billion investment in the facility; 2,000 direct jobs once the plant is in operation; another 4,900 jobs within five years of the plants’ opening; an annual payroll of $328 million; and loss of revenue to the state of $693 million.

Large companies are not the only ones hit hard by new taxes—small businesses are having trouble keeping their doors open in California too. There are over 3.2 million small businesses in California and they operate on very narrow profit margins, sometimes as low as three percent. A majority of businesses in the state are small businesses. California can’t afford to have more of them leave the state or go out of businesses because they can’t cover their costs and turn a profit.

Our state’s high taxes and extensive government regulations have led to an over 40% increase in spending over the past ten years. If this number isn’t troubling enough, California home prices have fallen 28% from last year. The cost of gas per gallon has skyrocketed over the last year. Now the Democrats in the Legislature have proposed to raise your taxes billions more.

California has one of the highest tax rates in the nation, second to only New York City. The Democrat budget proposal includes $9.7 Billion in new tax hikes—which would give California the prestige of levying the highest taxes in the nation. The proposal includes $5.6 Billion in new income tax revenue, $1.1 Billion will come from eliminating deductions for research conducted by businesses, $215 Million by reducing the dependent-care credit for families with income of $150,000 or more, and $815 Million from not adjusting current tax brackets for inflation—hitting hardest middle income taxpayers with joint incomes of $97,000 or more.

Enough is enough, now is not the time to increase taxes on hardworking families or businesses. Now is the time for the state to reign in and cut wasteful spending so more California businesses and jobs are not lost to other states.

Owning a home has always been part of the American dream. During the latter part of the 1970s, the inflationary Carter Era, property taxes were soaring in California, to the point that they created hardship. Bill Stall, press secretary for then-governor Jerry Brown, explains that the taxes were “especially hard on senior citizens and others living on fixed incomes.”

Proposition 13 rolled back assessments to 1975 levels, and these could rise no more than 2 percent per year, capped at 1 percent of a home’s cash value. It also mandated a two-thirds majority to raise any state tax, and easily secured a place on the June, 1978, ballot. During the campaign, state officials, particularly Governor Brown, opposed the measure in apocalyptic terms. Jesse Unruh, state treasurer and a Democrat, pointed out that California enjoyed a budget surplus of $5 billion. A full 65 percent of state voters approved Proposition 13, a landslide by any definition.

Proposition 13 cut property taxes but a tax cut of any kind, contrary to what many politicians and pundits imagine, is not a gift or subsidy. Homeowners simply were allowed to retain more of the funds they had already earned. Proposition 13 freed up more money for food, mortgage payments, medical care, transportation, tuition and other family needs. Those who bought homes in ensuing years enjoy the same limitation. Even so, the measure gets a bad rap in Sacramento from those one might call the pillage people.

This group, primarily politicians and pundits, supports ever encroaching government and construes whatever tax increases may be necessary to bankroll it as automatic and beyond discussion. In this view, people must live within limitations, but not government, so naturally Proposition 13 incurs their wrath. Consider this account by Peter Schrag of the Sacramento Bee. Proposition 13, he writes, “triggered the national tax revolt and marked the first major triumph of latter-day me-first individualism and market theology over the communitarian ideals and civic concern that moved the country to its greatest achievements during the Depression and the years of World War II.”

Proposition 13 actually constrained greed on the part of government. That is, the government taking more of what people earn, not to offer them new and better services but to compensate for their own excessive spending and budgetary mistakes.

Meanwhile, Stephanie Greenwood, editor of 10 Excellent Reasons Not to Hate Taxes, (yes, that’s the actual title) published in 2007 by The New Press, blames Proposition 13 for education woes. The measure, she writes, “drastically limited property tax increases . . . the change coincided with a rapid drop in student achievement.”

The drop in achievement had actually been going on many years prior to Proposition 13 and is more related to junkthought, low standards, social promotion and bilingual education. High education spending does not guarantee high test scores. Private and charter schools outperform government schools on much less. If there were truly a dearth of money for K-12 education, as educrats continually claim, we would not see $200-million-plus boondoggles such as the ill-fated Belmont Learning Center in Los Angeles.

There’s no denying that California faces serious financial problems. Those problems are due to excessive spending, bloated bureaucracy, an unfavorable business climate, waste, and corruption. They are not due to Proposition 13, which turns 30 as members of the baby boom generation begin to retire and live on fixed incomes. With food and fuel prices soaring, they will rely on Proposition 13 to remove the unpleasant surprise of their property taxes following “California’s often exuberant housing prices into the stratosphere,” as Mr. Stall puts it. Any attempt at reform should keep that in mind.

If the pillage people believe property and income taxes are too low they are free to pay an extra thousand or two out of pocket. They could also launch a ballot measure titled “Government Initiative to Raise Property Taxes” and see how state voters respond. It would be better simply to support limited government and lower taxes, as California voters did thirty years ago.

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County voters can begin the process of change by defeating Mary Piepho for re-election. Piepho, if re-elected, will not commit to opposing tax increases. Piepho’s opponent, Assemblyman Guy Houston, has stated publicly that he would, if elected, oppose tax and fee increases.

Voters should back Houston over Piepho for District 3 Supervisor.

Prices for food and gasoline are high enough. Taxes must not add to voters’ economic burdens.

Richard Colman
Orinda

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Send your OPEN MIKE post submissions to editor@halfwaytoconcord.com

In February an important first step towards closing our state’s budget shortfall was taken. The Legislature approved nearly $2.3 billion in immediate spending cuts that will help to solve the looming deficit. I supported these reductions, not because I liked it, but because it was the responsible thing to do. The state cannot go on spending more money than we have. California takes in $30 billion more revenue today than when I took office in 2002—we should be able to make ends meet.

But an $8 billion gap remains between the state’s revenue and its expenses in the next budget year. The Assembly and Senate are weighing options on how to close the gap and protect our most important services, like public education. Unfortunately there are a number of proposals aimed at closing the budget gap that would be harmful to our state’s residents.

Several members of the Legislature call for closing tax ‘loopholes’ or reducing your tax deductions. These changes amount to tax increases and will affect you and your family. They’ve proposed taking away the senior citizen tax credit, a $255 million increase, and reducing the dependent child tax credit, a $2.4 billion increase. At a time when the value of your home is under attack by a sinking real estate market there are those that want to eliminate your mortgage interest deduction. This would cost California homeowners billions of lost equity.

The price of gasoline is approaching $4.00 but that didn’t prevent Assembly Speaker Fabian Nunez from proposing an additional $1.2 billion in oil taxes. California families are already paying the highest gasoline prices in the country with no relief in sight. Government should not take more money out of the pockets of working families by raising taxes and gas prices.

I opposed this tax and will continue to oppose taxes that try to balance the budget on the backs of hardworking California families. There are over $20 billion in tax increases being proposed right now.
The truth is that all of these new taxes must be paid for by real Californians. Enough is enough, there are very few of us that think we are under-taxed. It is not fair to force Californians to support a government that is growing at such an irresponsible rate.

This year’s budget must protect education and other vital services but at the same time, keep our economy strong. In the month of February, our nation’s economy shed 63,000 jobs, the fastest drop in five years. Home prices are falling across the state and nation as well. Our actions in Sacramento have real consequences and the consequence of raising taxes is more hardship for Californians.

Assemblyman Guy Houston represents the 15th Assembly District, which includes portions of Alameda, Contra Costa, Sacramento, and San Joaquin counties.

Yet the jump on page A-9 shows charts that document her lurch from the mainstream to the wild-eyed Left on bread and butter economic and taxation issues at a 30-percent clip. This full embrace of the Left comes in alignment with her otherwise perfect, 100% rating by ultra-liberal organizations who have found a firm komrade in fellow-traveler, Ellen Tauscher. If truth were told, this puff piece could just as easily have read, “Safe district enables Tauscher to show true colors!”

By any standard, a thirty-percent increase is not modest.

Not in costs for housing, gasoline, taxes, heating bills, mortgage payments, salaries, or illegal immigration population growth. Why even a quarter-basis point move by the Fed has a huge impact, so why not a Congresswoman’s slide down the slippery slope of forced redistribution of wealth? And why does the Times editor for this piece dissemble, parse, and word smith their way out of an embarrassing and dangerous trend by a key Bay Area representative?

Is it a girl thing, where the columnist shows a penchant for taking it easy on da sistahs? Or is it some ideological axe of the editor?

Or both?