Free Minds & Free Markets

Gov. Jerry Brown: Courts Must Let California Slash its Public-Sector Pensions

Upcoming state supreme court case may be a game-changer if it reverses "California Rule" holding pension promises inviolate.

Don Bachardy, Public DomainDon Bachardy, Public DomainLet us now praise California's Gov. Jerry Brown, who is calling for reductions in gold-plated, unsustainable public-sector pensions in the nation's most-populous state.

Decades ago, Brown was mocked as "Governor Moonbeam" (by Mike Royko) and as a "Zen fascist" who would slaughter "un-cool" residents with "organic poison gas" (the Dead Kennedys). He was a hippie, get it, who slept on a futon, fooled around with rock-star sexpot Linda Ronstadt, and even signed off on a heterodox official portrait (see right). Horrors!

When he took office for the first time, Reason even had the temerity to praise Brown, who assumed office immediately after Ronald Reagan (who increased spending by a whopping 12.2 percent per year!), by writing in 1975:

Jerry Brown is moving in the right direction. He supports many statist measures, but he is still more libertarian than the average politician, and much more than any recent Governor of California. He is more fiscally conservative than many so-called conservative leaders, and yet is a good liberal on civil liberties questions. One thing that Brown has learned from politics that can be a lesson for everyone is his analysis of government: "Government isn't a religion. It shouldn't be treated as such. It's not God, it's humans, fallible people, feathering their nests most of the time." Let us hope that the people of California can learn something from the maverick Governor.

Man, 1975 was a loooong time ago, and suffice it to say that Brown didn't really deliver on libertarianism during his first stint as governor. Or in his second, either, where he has increased spending and became obsessed with a truly useless, criminally expensive high-speed rail project whose only contribution to humanity so far has been to inspire the second season of HBO's True Detective. His second term ends in a year and because of term limits, he can't run again. As he exits, Steve Greenhut noted last month in these pages, "Brown is taking on the public-sector unions he has spent his career empowering." Finally.

Since 1955, something called the "California Rule" has stood in the way of meaningful pension reform. The rule basically holds that public-sector employees at all levels of government had an inviolable right to the pension benefits that existed on the day they were hired. For decades, California's politicians bought votes by promising ever-better and ever-greater pension benefits that would kick in down the road after they were safely out of office, eventually creating a system that only has "68 percent of assets needed to cover its liabilities. For the fiscal year beginning in July, the state's contribution to Calpers [the nation's largest public-sector pension] is double what it was in fiscal 2009."

Absent the ability to alter pensions, states and localities have to devote more and more of their taxes to simply covering the costs of retired workers. Worse still, they often raise taxes to cover rising costs, typically at the expense of providing basic services such as police and road maintenance. In California and over a dozen other states, courts have ruled that pensions and future benefits such as health care can't be touched, forcing taxpayers alone to shoulder the burden. (The city of Bell, California is a microcosm of where this madness leads.)

But that may well change, as much out of fiscal necessity as anything else. In the Golden State, three court cases are unfolding that strike at the heart of the "California Rule." Depending on how they are resolved, the cases may give the state and local governments the right to change payouts during economic downturns as long as the lowered benefits are still considered "reasonable."

From BloombergPolitics:

Brown said he has a "hunch" the courts would "modify" the so-called California rule, which holds that benefits promised to public employees can't be rolled back. The state's Supreme Court is set to hear a case in which lower courts ruled that reductions to pensions are permissible if the payments remain "reasonable" for workers.

"There is more flexibility than there is currently assumed by those who discuss the California rule," Brown said during a briefing on the budget in Sacramento. He said that in the next recession, the governor "will have the option of considering pension cutbacks for the first time."...

"In the next downturn, when things look pretty dire, that would be one of the items on the chopping block," Brown said.

It's more than a little crazy to be hoping for a downturn so that a state can reset public-sector pensions that threaten its fiscal future. It shouldn't have to come to that and it doesn't have to. Changing from defined-benefit plans to defined-contribution plans will solve much of the problem in a way that won't put pensioners out on the street or punish taxpayers with higher taxes and lower services (go here for a sensible public-sector pension reform plan, put together by analysts at Reason Foundation's research policy).

But until more governors follow Moonbeam's example, more legislatures change their practices, and more courts rule against all the various forms of the "California Rule," things will remain dire.

Related: 3 Reasons To Cut Public-Sector Pensions Now!

Photo Credit: Don Bachardy, Public Domain

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  • Fist of Etiquette||

    Jerry Brown is moving in the right direction. He supports many statist measures-

    THIS IS WHAT 70'S REASON THOUGHT WAS THE RIGHT DIRECTION? I'm not reading any further.

    Also, I guess 2018 Reason doesn't believe in honoring contracts. Brown and California agreed to this bed. They can now lie in it as it slides into either bankruptcy or the Pacific Ocean.

  • ||

    If Jerry Brown has taken California to a bad place, why don't they just move (again)?

  • Ken Shultz||

    The "moonbeam" was mostly about culture war stuff.

    For goodness' sake, he became governor the first time in 1975. The Vietnam War ended in 1975.

    He was a fiscal conservative. If Reason said that Brown was headed in the right direction in the '70s, that was when he was a fiscal conservative and social liberal.

    California Uber Alles was about the intolerance of progressive dogma on culture war issues--projecting what would happen when that lunatic Trump Reagan would inevitably lose come 1984 and President Brown took over.

    '80s Reason was disappointed in Brown's behavior, I'm sure. It is the fate of everyone to be disappointed by politicians. Churchill was voted out after winning World War II. Bush Sr. got the axe after we won the Cold War.

    The difference between young and old may be the ability to still believe in politicians. If you don't look back at a politicians' career and are disappointed, then there's something wrong with you.

  • Brandybuck||

    ""He was a fiscal conservative.""

    To be fair, nearly everyone in 1975 California was. The idea that money could be wished out of thin air had yet to be voiced outside the confines of the Berkeley Communist Club. While Brown may be a raving hippie who dropped too much acid, he's not a communist.

  • jmod46||

    Heh. These youngsters are always fun to watch. I can do it now since I'm well past 70. If the Reason Magazine of 1975 had been a naive young lass, Jerry certainly would have had his way with them. Today Reason wants to believe politicians still love them, but they are a bit more jaded.

  • AD-RtR/OS!||

    'Beam was never a fiscal conservative, just a KooK!

  • Marty Feldman's Eyes||

    Also, I guess 2018 Reason doesn't believe in honoring contracts.

    That's what I was thinking- I mean, I'm a California taxpayer who will get shafted six ways from sunday and it would be great to stick it right back to them, but at the same time, my parents are retired and have a (different, very conservative state's) state pension. Whatever its terms are were negotiated in good faith in lieu of raises at the time.

  • loveconstitution1789||

    Multiple family members of mine retired on a Taxifornia pension and then moved to a no state tax state. Commifornia is literally paying them to live in a cheaper state.

    Prop 8 kept property taxes down for them and they sold their homes for sometimes 10 times what they paid.

    They laugh and laugh and laugh.

  • loveconstitution1789||

    Sorry Prop 13 deals with property tax.

  • Elias Fakaname||

    My aunt and uncle retired from CA. My aunt was an English professor, and librarian, and my uncle was a senior administrator. They are re huge progressives. They moved up here to WA (no income tax) when they retired. Unfortunately, they infected WA with their voting habits and the whole state is going down the drain because of people like them.

    They too sold a home (Irvine) for big profit. Although they are family, I must admit at least part of me will feel satisfaction seeing the finally screwed over by their own bullshit beliefs.

  • RPGuy16||

    When one side gets to elect the people who will sit on the other side and negotiate against them, it's not a negotiation in good faith.

  • Trollificus||

    THIS!! ^

    That's exactly what I was thinking listening to the smug "Oh, these deals were bargained in good faith so suck it up and pay." arguments.

    Sorry, this is being represented as a "business/union negotiation" that should be honored, but one side WAS NOT A BUSINESS!! That whole model is bullshit when one side is government, whose representatives at that bargaining table know they will not suffer consequences for bad decisions: It's not going to be put out of business by competitors.

    The ACTUAL party that should have been represented on the other side of the table from the public employee unions was TAXPAYERS. And it's pretty clear they were not represented in any real way. The "bargain in good faith" that was reached was mutually beneficial for the parties that were there: unelected representatives of the state permagovernment and the "This sure won't HURT the election of politicians who favor growth in YOUR wages" nod-and-a-wink Union folks.

    To present this kind of one-hand-washes-the-other scam as a "negotiation in good faith" is awfully disingenuous.

  • RPGuy16||

    At any rate this isn't about changing the pensions of people who are already retired. it's about the crazy court interpretation that says you can't even change the pensions going forward for existing workers - as if when a government employee is hired it is a lifetime contract and the terms can't be changed (even if there is no money) and they can't be fired.

  • UnrepentantCurmudgeon||

    Ordinarily with pension benefits the rule is that they can be altered up to the time that they have "vested", i.e., the employee has put in the necessary minimum time to receive the pension. At that time pension amounts are (sort of) frozen: the employee may benefit from increases but his pension cannot be cut.

    The problem in California though is not contract law nor ERISA. The problem in California is the tremendous power wielded by public employee unions, significantly (though not exclusively) the prison guards' union. The Democrats have secured the unflinching loyalty of these unions by securing their members tremendous benefits, including compensation and benefits including pension benefits. Moonbeam may be happy to get rid of the pensions now that he is leaving, but the Dems who want to rely on public employee union loyalty will be nowhere near as sanguine.

  • PubliusVA||

    "He supports many statist measures, BUT..."

  • AD-RtR/OS!||

    Those two analyses were written while in a Choom Cloud.

  • Ken Shultz||

    Big picture:

    Brown's first public statement in this latest push to cut California's pension costs were made in the context of the tax reform bill that was recently signed by Trump. Among other wonderful things, that bill got rid of the state income tax deduction. Where other states might be able to raise property taxes up to the $10,000 deduction limit (Is the rent NYC not already high enough?), California can't do that because St. Jarvis saw that baby coming from 40 years ago and strangled it in the cradle with Prop 13.

    . . . even during the worst of the recession, the progressives who control Sacramento couldn't muster the support to kill Prop 13.

    Thus, with the highest income tax rate in the country at 13.3%, California is having to fmake tough choices about spending and taxes. When elections are no longer about gay rights, immigration, or environmentalism, California stops being a one party state. Now there are no bigger issues in California politics than spending and taxes. Either the Democrats cut income taxes and spending, or they suffer the voters' wrath over income taxes.

    Hollywood, Silicon Valley, and the biotech industry in San Diego are likely to be hardest hit.

    Big picture: We probably woudn't be having this discussion at all if it weren't for Trump signing the end of the state income tax exclusion.

  • Stormy Dragon||

    California pays far more in federal taxes than it gets in federal spending. The states being susbsidized by the federal tax system are ones like Alabama, Mississippi, Kentucky, South Carolina, etc.

  • Ken Shultz||

    It's absurd to look at taxes from a state's perspective.

    Federal income taxes are paid by individuals--not states.

    Because states like California (with tourism, Hollywood, Silicon Valley, the biotech industry in San Diego, and the Port of Los Angeles carrying on most of the trade with China) engage in more taxable activity than Mississippi is of no significance whatsoever.

    What difference does it make if the people of Mississippi--all pooled together--pay less in taxes in absolute terms than the people of California--all pooled together? What policy conclusion are we supposed to draw from that fact?

    That Mississippi's state taxes should be higher?

    What policy position are you trying to support with your observation?

  • Stormy Dragon||

    So how come there's no biotech industry in Mississippi? You'd think the massive economic advantages brought on by decades of Republican rule would put far ahead of backwards socialist Commiefornia.

    It's almost like a society run by anti-intellectual hillbillies who rant about big government while holding their hand out for their next welfare check isn't a recipe for success.

  • Sevo||

    In the last 50 years, Mississippi has had (3) R governors, and (7) D governors, you nitwit.

  • ||

    And the people who elected R governors aren't/weren't oxymoronically and secretly seeking to debase the tax code *while* drawing welfare checks the way CA (or just Stormy) oxymoronically wants everybody to redistribute their money equally as long as it all winds up back in CA.

    Those anti-intellectual hilbillies, why can't they support our progressive tax policies *and* let us keep our money?

  • Ken Shultz||

    Industries sprout up in various regions for various reasons.

    The climate of Los Angeles contributed to the ability of movie makers to shoot outside during more of the year.

    Shockley was in Silicon Valley after he invented the transistor. Gates and Wozniak were tinkering in their garage and from the area. The Google guys were students at Stanford, I believe?

    There are network effects. Different studios can use the same talent and resources on different movies when they all locate within proximity to each other. The people who did some of the original biotech startups in San Diego all went to the same schools, and they found graduates from all over the world ready for hiring locally.

    The Port of Los Angeles is closer to China than New Orleans, so that's where the manufacturing and distribution work goes.

    Why does California have more tourism? Well, they've got better weather in the South, they've got a thousands of miles of coastline, etc. Mississippi doesn't have that.

    Taxes and regulation are one consideration. There are others.

  • Diane Reynolds (Paul.)||

    Silicon valley had its DNA in the huge government works projects of WWII, where the engineers and their children started tinkering in their garages.

  • loveconstitution1789||

    The other big thing is that before the internet use to communicate easily over great distances it was easier to be close to like minded individuals.

    Silicon valley was a tech area where most people were within 30 miles of each other.

  • Mark22||

    You'd think the massive economic advantages brought on by decades of Republican rule would put far ahead of backwards socialist Commiefornia.

    California used to be purple and far more free market oriented and libertarian. Silicon Valley used to be an actually nice place to live. Income taxes weren't progressive until the 1980's. California became blue and overrun by illegals only during the last 30 years. Over the same period, Silicon Valley has gone from a nice place to live with a moderate cost of living to an overpriced shithole. California has followed the model of nations like Sweden, which also became rich under free market oriented small government but created a bloated welfare state once they had become rich.

  • Mark22||

    It's almost like a society run by anti-intellectual hillbillies who rant about big government while holding their hand out for their next welfare check isn't a recipe for success.

    When it comes to welfare, California has the third highest per capita spending in the nation (after DC and Alaska); Mississippi has the 8th lowest in the nation. And while Californians may worship "intellectuals", Californians are doing pretty poorly in being educated and smart overall.

  • Earth Skeptic||

    Fuck you, Stormy.

    Either you believe in federal redistribution, from rich to poor, or you don't. If you do, then STFU about how more poor people in Mississippi get more handouts than rich people in California.

  • MiloMinderbinder||

    Is this really true. I see some analysis that calculates this kind of thing for income taxes, but leaves out all the other taxes.

    For example: I live in state A, work in state B, for a corporation headquartered in state C and incorporated in state D. Which state gets credit for the employer share of SS taxes?

    Plus: since we are running $500+ billion deficits as far as the eye can see, it's it likely that ALL states get back more in gov't spending than they pay in taxes?

  • Trollificus||

    Also, he's obscuring the fact that PEOPLE pay the taxes he's counting as "coming from California" and he's comparing that figure to the money the STATE gets back from the federal government. It's not even apples v. oranges. It's more comparing apples to bike tires.

  • Ron||

    Thats only because all the reports ignore what the state gets from the fed in medical aid which is massive I've seen numbers in $69 billion range. add that to all the other monies the state gets form the fed and it would be a one of the top takers. and to use proggie terms if California taxes are a right off isn't that the same as welfare since thats what they claim corporate right offs are, corporate welfare. when you take the state right off into account the state pays little to the feds

  • Calidissident||

    Do you have a source for that? The analyses I've generally seen seem to take into account all federal spending, or at least I haven't seen anything indicating otherwise.

    $69 billion is a big number, but it's less than 2% of federal spending. California has over 12% of the population, and if you what you say is true, I'm assuming the medical aid would be left out of all state numbers, so you'd have to add that in for the others as well. I'm not sure that would drastically shift the numbers even if what you say is true about those numbers being left out.

  • ||

    Do you have a source for that? The analyses I've generally seen seem to take into account all federal spending, or at least I haven't seen anything indicating otherwise.

    Not to speak for Ron but, considering Stormy doesn't cite a source, it's hard to definitively refute. More importantly, IMO, is the relative differences. Generally, if you take California as the prototypical 'blue' state, it's generally only one or two places below Texas and Arizona which are decidedly not prototypically blue. Meaning that CA has a give:take ratio of like 2 and Texas and Ohio have 1.8 and 1.75 respectively while places like S. Carolina or Maryland have rates like 0.1 and 0.3.

    One thing to note, the 'largest takers' can easily have nothing to do with political affiliation and a state like S. Carolina that's on the top edge of tropical hurricanes (or Louisiana and Alabama that are frequently in the direct path) and the bottom edge of sever winter storms can wind up taking more than CA in 2016 but after CA suffers floods, earthquakes, and wildfires, will end up drawing off of other states (to the tune of billions whether accounted for in by the source or not) in the next year.

  • ||

    Sorry, Texas and Ohio not Texas and Arizona.

  • Calidissident||

    I wasn't basing my post off of Stormy, I've seen several reports or studies of the same thing over the years.

    I do think that talking point is overused and oversimplified by a lot of left-leaning people, but that said it's an obvious retort to conservatives and libertarians who think the blue states all get subsidized by the red states via federal spending.

    I'm not sure how much disaster relief affects the numbers, that's a pretty small portion of the budget.

    That said, regardless of how the spending vs. taxation per state breaks out, either way the SALT deduction makes it easier for state and local politicians to raise taxes. So the point about the feds subsidizing it isn't true in the sense of "because of this, California gets to pay less federal taxes while raking in more federal spending than what they pay" but it is in the sense I describe of the feds making it easier for Californian politicians to have high state taxes.

  • loveconstitution1789||

    California (2005) paid: $289,627M / received: $242,023M
    Alabama (2005) paid: $24,675M/ received: $42,061M
    Hawaii (2005) paid: $8,519M / received: $12,699M
    Texas (2005) paid: $146,932M/ received: $148,683M

    Tax foundation states pay taxes and receive fed money
    Less populous states tend to get more than they pay to the feds.

  • Mark22||

    Meaning that CA has a give:take ratio of like 2 and Texas and Ohio have 1.8 and 1.75 respectively while places like S. Carolina or Maryland have rates like 0.1 and 0.3.

    Those "give:take" ratios are pretty meaningless. If Nevada gets a nuclear waste dump or Utah gets massive spending on Indian land or military boondoggles, that usually counts as "federal spending in the state". And the fact that California residents pay massive federal income taxes doesn't mean that those taxes are reflective of anything useful California contributes as a state to the national economy.

  • ||

    California pays far more in federal taxes than it gets in federal spending.

    And? Erroneous bean counting aside, Californians are the ones who want their cake, and to eat it too for everyone, equally, but only in California. Indiana or Iowa didn't enact a redistributionist or progressive tax scheme on California. There hasn't been a native-born or adoptive Hoosier in the President's chair since the Industrial Revolution and the one native-born Iowan who sat in the President's chair claimed California as his home. If California doesn't like the federal tax code they should blame ardent redistributionist Presidents like Nixon and Reagan or bumpkin tax-cutting deficit hawks from nowheresville like FDR and JFK.

    And, ultimately, if the redistributionist tax scheme worked and didn't effectively hand people money in order to leave Iowa (or tax them for not leaving), Iowa would be full of people and millionaires the same way California is and there would be no redistribution to be had.

  • loveconstitution1789||

    Stormy Dragon|1.11.18 @ 11:02AM|#
    California pays far more in federal taxes than it gets in federal spending. The states being susbsidized by the federal tax system are ones like Alabama, Mississippi, Kentucky, South Carolina, etc.

    You are missing federal medical spending that more Californians suck up as a state.

    Medicare, Medicaid, VA, and ObamaCare.

  • Ken Shultz||

    Why does it matter?

    Are they saying that Mississippi would be better off if their state income taxes were as high as California's?

    Are they saying that California should secede from the Union because they shoulder a disproportionate share of the tax burden paying for national defense, social security, and Medicaid--and they don't want to pay for those programs?

    What they're usually trying to suggest is that rednecks in other states are stupid to vote for Republicans for tax reasons because they think that rednecks are voting against their own best interests by voting against higher taxes for the wealthy . . .

    . . . as if principles don't matter or as if there were no negative consequences associated with soaking the rich.

    And it isn't even a legitimate comparison for any useful purpose. States don't pay taxes. Individuals do. If individuals in California are being taxed disproportionately to pay for federal programs, it isn't because of California's state taxes. And those federal programs--social security, Medicare, and national defense--are something people are entitled to on an individual basis anyway.

  • Arizona_Guy||

    " voting against their own best interests"

    Anyone who makes a statement like that is presuming to know other people's interests.

  • MatthewSlyfield||

    "Anyone who makes a statement like that is presuming to know other people's interests."

    Very true. There are still plenty of commentators on both team Coke and team Pepsi who used that line.

  • Trollificus||

    " voting against their own best interests"

    I remember Thomas Franks' complete bafflement in "What's the Matter With Kansas?" that anyone, anywhere would vote for anything except free money. He seemed incapable of conceiving that any principle could ever trump that consideration.

    It was like, "Is this guy Team Blue or a member of the top-hat-and-monocle brigade?"

  • BigChiefWahoo||

    I've heard that argument made for years, that some states contribute more in federal taxes than get back in federal spending, and how unfair that is. Well, federal spending is supposed to support 'national' purposes, not re-distribute funds: the lighthouses and Coast Guard stations get built on the sea coasts, mostly, not where the funds were raised necessarily Quit treating all federal expenditures like subsidies! And quit pretending every federal expenditure you disagree with is a "subsidy".

  • Mark22||

    California pays far more in federal taxes than it gets in federal spending.

    California pays nothing in federal taxes. Californians and California corporations pay federal taxes, and many of them because they simply have no realistic choice: they are stuck with California for historical reasons.

    It takes decades for businesses and employees to respond to a hostile tax and regulatory environment like California has created, since people have kids in schools, homes they own, and social networks. Businesses have customers, property, and connections.

    But people are responding: California's net domestic out-migration is second only to New York state, and it's rising rapidly.

  • Trollificus||

    And it's probably fair to assume that the out-migration is of taxpayers, and is somewhat offset by an in-migration of, how shall we say it..."consumers of public subsidies".

    Of course it's impossible to guess how that's gonna work out, since uncontrolled immigration is an absolute good, per REASON.

  • Elias Fakaname||

    Stormy, that little Media Matters soundbte was ong ago disproven. And that's without considering the drag on the economy CA has created by growing the number of welfare recipients to fpgsrgsntuan proportions, or the cost of all the illegals they shield.

    So, are you ly8ng or just an ignoramus?

  • Trollificus||

    Damn. " fpgsrgsntuan proportions"? I'm guessing that's pretty gigantic, right?

    You make a good point there, though " are you ly8ng or just an ignoramus?" is a false choice. Ignoramuses lie too, just very poorly.

  • AD-RtR/OS!||

    Perhaps they shouldn't have been so eager to chase many of the military bases away.

  • Ken Shultz||

    Yes, it's a feature!

    When the central issue of California politics is spending and taxes, we might get to something that approaches rational politics.

    Gay marriage, marijuana, immigration, . . .

    These are issues that distract from spending and taxes, and there may be no more important issue in California than divided government. A one party state gets us exactly where we are.

    Things cannot get better in California until there are negative consequences at the ballot box for Sacramento's misbehavior. The state tax deduction was a moral hazard. They wouldn't make the necessary changes unless there was no other choice, and now they have to choose between taxes and spending, on the one hand, or less of those things, on the other.

  • Rhywun||

    The pols in California will likely spin this into an issue of look what Trump did to us!

    Same in New York, where "#resist" now means "coming up with some scheme that allows us to continue taxing the everloving s--t out of you". Deblasio is fantasizing about sticking it even harder to millionaires and claiming it will work this time "because they love it here". The desperation is starting to smell sweet.

  • UnrepentantCurmudgeon||

    Agreed that we are reaping the whirlwind because of the obscene relationship between the state and the public employee unions, as I discussed above. As destructive as the financial burdens are, public employees constitute a large (and growing) segment of the California labor force; this is the real roadblock to reform, not the "California Rule". Politicians who expect to rely on the unflinching loyalty of the public employee unions will not be friendly to what Moonbeam seems to be so content with as he parts office.

  • Calidissident||

    The final bill did not get rid of the state income tax deduction, the $10,000 limit applies to all state taxes (property, income, and sales).

  • Ken Shultz||

    When I wrote:

    "Among other wonderful things, that bill got rid of the state income tax deduction. Where other states might be able to raise property taxes up to the $10,000 deduction limit (Is the rent [in] NYC not already high enough?), California can't do that because St. Jarvis saw that baby coming from 40 years ago and strangled it in the cradle with Prop 13."

    . . . that's what I was referring to.

  • Calidissident||

    That is not how it reads at all. It literally says it "got rid of the state income tax deduction." And then you proceed to talk about how California can't raise property taxes to the $10,000 deduction unlike some other states. That makes no sense if you understood that the $10k limit applies to all state taxes combined. Why would they have to raise property taxes specifically to the $10k limit when income and sales tax can be used towards that limit as well?

    A previous version of the bill actually did limit the $10k deduction to property tax with no provision for income or sales tax, and given what you wrote I assumed you were under the impression that version is what became law.

  • Ken Shultz||

    I can never tell whether you're being willfully obstinate or if you really just don't get it.

    Governments will need to cut income taxes in order to make sure that everyone is paying the same rate they were before. Regardless of whether anyone can claim a $10,000 deduction, people whose taxes are higher than that are going up--and that will have repercussions for lawmakers. Scrambling to avoid those people's wrath is what this is all about.

    Do you not understand that? Are you trying to make some semantic point that shows that the higher taxes as a result of not being able to deduct (more than $10,000) is somehow politically different because of the $10,000?

    And we haven't even started talking about all the people who don't itemize.

    States that can raise property taxes to make up for the burden of higher income taxes will probably try to do so--that's thought to be the path of least resistance. It remains to be seen whether that will work out as well as expected in places like NYC, where higher property taxes are likely to translate into even higher rent.

  • Calidissident||

    Ken, it isn't my fault you specifically wrote "Where other states might be able to raise property taxes up to the $10,000 deduction limit." You were the one who brought up the issue of raising taxes to the $10k limit, not me. And this came immediately after a sentence where you stated the state income tax deduction was eliminated, with no qualifier to make it clear that you knew income taxes could be applied to the $10k limit.

    "Raising property taxes up to the $10,000 deduction limit" makes absolutely no sense if you were knew the law and were just talking about how the states need to lower income taxes on the people over the $10k limit and then raise property taxes to offset the lost revenue. The raising property taxes to the $10k limit makes zero sense in that context because the people we are talking about are already over the $10k limit so any property tax increases wouldn't be deductible.

    You either did not know the law, and are now refusing to admit that, or you wrote a post that makes very little sense and implied you did not understand the law. Either way, that isn't my fault. I was not the one who brought up raising (property) taxes to the $10k deduction, you did.

  • Calidissident||

    *And to clarify, the sentence is paragraph two is not meant to state that you're arguing state governments need to raise property taxes, just acknowledging that many of them will want to do so to make up for lost revenue if they're forced to cut income taxes.

  • Ken Shultz||

    "Ken, it isn't my fault you specifically wrote "Where other states might be able to raise property taxes up to the $10,000 deduction limit."

    That's a fact.

    "Other states might be able to raise property taxes up to the $10,000 deduction limit" to make up for the loss of income tax revenue, when they're forced to cut income taxes because of the political repercussions.

    . . . but California can't because of Prop 13.

    There's absolutely nothing wrong with that statement.

    It isn't even an opinion.

    It's a fact.

  • PubliusVA||

    If the tax reform treats state income taxes the same as property taxes, why would political repercussions force states to cut income taxes but not prevent them from raising property taxes?

  • Ken Shultz||

    California can't escape higher income taxes that way--because they can't raise property taxes without repealing Prop 13. So they're even closer to having no other choice but to cut spending. . . . and that is regardless of the $10,000 deduction. I repeat, the fundamental force behind this is the inability to write off income taxes--regardless of the $10,000 exclusion.

    It may take more than one election cycle for the Democrats who control Sacramento to see the light, but so long as the central issue in California politics is spending and taxes, future spending increases are likely to be met with questions from swing voters that Sacramento isn't used to hearing like, "Who's gonna pay for this bullet train"? In fact, Jerry Brown already sees the writing on the wall, which is why he's picking a fight over pensions now.

    He's not doing it out of the goodness of his heart. He's doing it because they don't have much choice. They need to cut taxes--and associated future spending like on pension obligations. They're not embracing the shit-storm of pension reform because they like shit-storms. It's because they don't really have a choice anymore, and the reason is because 1) the state income taxes in question can't be deducted and 2) they can't raise property taxes.

  • BYODB||

    Brown is doing that because now he can't suffer any future political losses because of it. I concede it's also possible he has a soul, even while I've never seen much evidence of it before.

  • UnrepentantCurmudgeon||

    I think it probable that the Legislature could approve a measure repealing Prop 13 insofar as it applies to commercial not residential property. Not being entirely current on California election procedure, I believe it then would have to go to popular vote. All things considered, I think there's a fair chance that Californians would approve that change this time around. The problem of course is that the California business climate is already poor, and that change would weaken it further.

  • Ken Shultz||

    It is my understanding that the California legislature cannot repeal Prop 13.

    They can submit it for a referendum to the voters, but to get rid of Prop 13, they'd need the voters to agree to increase their own property taxes . . . and that's far fetched.

    As Democrat and progressive as California is, they would have already repealed Prop 13 if they could--especially back during the last recession.

    They can't. That's why they didn't. That's why they don't.

  • tlapp||

    If the courts won't let the benefits be cut financial insolvency will.

  • Get To Da Chippah||

    Eventually it will get to the point where sending cops to outright kill retirees and pay out wrongful death suits in lump sums will be cheaper than paying six-figure annual pensions plus benefits for decades on end.

  • Earth Skeptic||

    Nah, let the retirees take each other out, with a bounty offered (say, 10% of the deceased pension).

  • jbsnc||

    This situation is amusing. For years getting elected and reelected has often occurred because of huge commitments in salary and benefits to government employees which could lock up nearly 100% of their votes. After some years it very, very sadly becomes a huge problem! Where's the money? Where's the money? In ain't here, there or anywhere. Will the politicians do this again today, tomorrow and next year? You bet they would. This is not about honesty and integrity, its about capturing and keeping power and wealth. Social security is also a mess. Get Al Gore to open his famous SS Lock Box and what do you learn? Its IOUs because all of the excess funds went into the general fund and spent. Its gone, bye, bye, Al. Spent helping someone get elected.

  • UnrepentantCurmudgeon||

    Not quite sure where or how Al Gore comes into it. Approval of melding Social Security with the general fund was won in 1965 together with the Tonkin Gulf Resolution. Johnson justified it as the best way to secure funding for the Vietnam war (yes, liberals, there was a time when your Gods were real big on "boots on the ground" -- do you love LBJ for his War on Poverty or hate him for Vietnam? Never mind, we'll boggle your minds some other time). Social Security was always something of a Ponzi scheme (current payments out being funded at least in part by new payments in), but after that it became a complete scam because the only way Social Security is funded now is by Congressional resolution.

  • Trollificus||

    If progtard minds were susceptible to 'bogglement' or 'cognitive dissonance', hallways in Albany and Sacramento would be decorated with brain matter. Somehow, keeping "eyes on The Narrative" prevents reality from creating those tensions. Amazing but true.

  • Deplorable Victor||

    What a beautiful idea... Spattered with "brain" matter... And I'm indifferent how it got on the walls.

  • RPGuy16||

    My understanding is that the California rule is an interpretation of the state constitution. So it isn't necessary to wait for the courts to change their interpretation - you can change the constitution. In my view states should amend their constitutions to prohibit all defined benefit plans. Government employees should be paid from current budgets.

  • Enemy of the State||

    Yeah, cutting them "reasonably" will be easy, cuz we all agree on the meaning of "reasonable", amirite?

    The CA Bar Association nods and smiles in agreement...

  • ||

    Ah, the problem with course not doing their job.

    Its simple really. Everything anybody got when they got it is fine and can't be taken. But there is no reason that what they haven't got can't be changed.

    Dumb courts. Can't wait til that's gone.

  • Empress Trudy||

    I feel that Reason has gone off the rails a bit, pining for the good old days when a still vibrant defence based economy was printing money.

  • Longtobefree||

    Budgets and tax policy not withstanding, the man slept with Linda Ronstadt.
    (Contrary to the article, she was not a sexpot, but an amazing singer who was also unbelievably beautiful.)

  • Trollificus||

    Pretty woman, pretty voice, Jerry gets some man points for scoring that, but I bet Bonnie Raitt was better in bed.

  • Deplorable Victor||

    So what? Are you so stupid and shallow you place stock in who somebody f()cked?

  • Deplorable Victor||

    No... Don't let him do it. Ruin these monsters. The only good Freakifornia is an utterly destroyed one.

  • Jerry B.||

    Current California employees have a contract with the State to pay them certain pension benefits. If the State wants to reduce this, it should do what the Federal government did, and change the pension system for new hires and let current employees either stay with their current system or opt for the new one.

  • ||

    The problem is you simply cannot have politicians across the table from union scum negotiators. Government (the people) should be represented by private sector business people with no skin in the game.


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