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Thursday, September 10, 2009

Thursday, September 10, 2009

Schwarzenegger Tax Commission Proposals: Will They Reduce State Revenues?

Thanks to Michael for alerting us to the fact that the Governor's tax reform commission has just released draft language of its proposals.  These include a reduction of the top rate of the state income tax and the complete phase-out of the corporate income tax, to be replaced by a "net business receipts tax."  Sac Bee coverage notes that the new income tax would be less progressive than the current one, offering incomes above $75,000 a 30% tax reduction. Corporate taxation also seems slated to fall, although the California Budget Project has calculated that the share of corporate income paid as California taxes is currently half of what it was in 1981 (see slide 8).
The Commission is chaired by former UC Regent Gerald Parsky, a major figure in California's Republican party, and includes among its members Berkeley Law Dean Chris Edley.  Dean Edley has signed a separate endorsement of the replacement of the corporate income tax in the context of the other tax changes.
My preliminary search has not yielded any projections of the revenue implications of the new proposals. Until I see these, I will assume that these changes will reduce the state of California's gross revenues. This would obviously increase the state budget deficit and put additional limits on revenue recovery for higher education, among other sectors.
I can't help seeing these tax proposals in the context of constantly declining public revenues for higher education nationally, which for various reasons has disproportionate hurt undergraduate education (see the review of the Delta Project work lying behind Jane Wellman's presentation to the UC Commission on the Future). In her UCOF testimony (overview here),  Wellman estimated viable cost reductions at 3% a year, with much effort.  This means that this year's 20% cut would take 6 years to make up, under the unlikely scenario of no further cuts and decent growth.
Any further loss in state revenue would be piling one disaster for higher ed on top of another.  Figures please.

22 comments:

Anonymous said...

We can direct our energies toward the state and national levels to fight against the defunding of public education and research at public universities, and we can do by standing ofr fiscal responsibility as opposed to Governor's Arnold's Bush-like tax cuts for the rich . . .

We can direct our energies toward encouraging students and their families to fight for the education and research they deserve and need . . .

or we can walk-out on Sept 24 and be blamed for exacerbating the problem by taking out our reduction of salary on the students.

Even if we could win the right to take furlough days on teaching days, what would that get us? A couple of days off from teaching? Some fantasy that we have regained shared governance? While UCOP and the State government keep cutting taxes and dismantling the system? And nothing is being done on the national level to address what is clearly a national problem, and not just a California problem.

The furlough fight is a trap. The faculty is walking right into it.

This blog is great. But please take off the list of links about Furlough news and replace it with lists of links about programs cut, class sizes increased, admissions trimmed, tuition and fees hiked, etc.

The Furlough fight is our very own version of a toxic asset. It will kill us.

Aldo Antonelli, UCD said...

Chris, the corporate income tax rate seems only loosely correlated with the share of corporate income paid in taxes (see slide 7 of the CBP presentation). The corporate tax rate was at 9.6% when corporations paid over 9.5% of their income in taxes in the early 1980's, and it was 8.84% when corporations paid only 5% or so in 2006. So something else must be going on beside just the tax rate. The personal income tax rate, on the other hand, is high and it does yield almost 50% of the state's revenues. It is also the one that is most subject to the vagaries of the economic cycle. The real scandal, it seems to me is the sweet deal gotten by corporations, rather than individuals, both as regards the income tax and the property tax (why should commercial property be protected by Prop 13 is beyond comprehension).

meranze said...

Chris,
Technically the Commission proposals are supposed to be revenue "neutral." What seems to be at the heart of what they are doing is that in the name of lowering tax volatility they are actually reducing the progressivity of the tax system. In that it is another example of the decline in a shared sense of public responsibility that we see in the case of public education funding. After all the value added tax is basically a sales tax in practice and lowering the income rates will help the wealthy far more than the working or middle classes. And sales taxes are the most regressive. By the way, reports today are that Parsky is now trying to propose off-shore drilling to raise revenue. Not sure what that has to do with a charge to rethink the tax code but it gives you a sense of the forces at play.

Anonymous said...

the only figures we'll be getting are in going to be in the tip jar, for consideration on their way out by all the wealthy international students at berkeley and UCLA who are so attracted by this university they simply cannot stay home in europe and asia, disdaining their own cheap but first rate universities in favor of our mess of a training camp.

Anonymous said...

have to admire the republiclones for pursuing their agenda ruthlessly. kill state government, privatize everything. count the number of for profit online universities, and look where their donations go. populist republicans have long disdained book larnin' and secretly or not so secretly hate the idea of a well-educated workforce (less easily manipulated), so they will kill education, now. let TV and youtube take over. watch the movie idiocracy for a last laugh, it is happening.

Chris Newfield said...

good points. The commission must have run numbers about yields that produced for example their proposed top rate of 6.55%. I would like to see them. I would like some tax folks to analyze the shifts in revenue sources that they entail, even if the total stays neutral. If anyone knows where the data are hanging out, please write.

Jenny said...

In response to Anonymous, the furlough fight is less about reduced work load (let's face it, faculty work day, night, and weekends) and more about 1) making visible the effects the cuts are having on the quality of education rather than placing a band aid over it, and 2) at this stage, shared governance, which is being threatened by the president's emergency powers.

Anonymous said...

Dear Jenny,

If we faculty make the cuts visible by taking furlough days on teaching days or by walkouts, then we will be blamed for making the students suffer, and it will be chalked up to our overriding interest in our salaries and time.

the whole premise that the cuts need to be made visible to the students assumes that UCOP actually succeeded in implementing cuts that students will not feel.

I reject that assumption as untrue and, consequently, the faculty strategy should be to get behind the students on the issues that matter to them and their parents - rather than to lead with a fight about the furloughs that is a direct faculty interest and, at most, an indirect interest for everyone else.

It is not fair that faculty protesting the furloughs will be blamed for damaging the students. It is not right. But it is already happening. See the Sacramento Bee reporting.

.

Anonymouse said...

Anonymous @ 10:54

I'm not sure if you're referring to the Sac Bee editorial on the walkout (which isn't reporting, it's opinion), but most of the commenters there seem to get it (though, to be fair, there's a lot of CSU/UC faculty weighing in). But that's just a quibble...

The bigger issue is, to use the concept that Lakoff popularized, framing. If we make the furloughs entirely about *us* (our money, our time, our careers), then it's a losing battle, you're right. However I haven't really heard that coming from any professors either on my campus or on the web.

The fact is that reduced resources will have direct effects on student education -- bottom line, full stop, period. Those resources include money, time, human resources, equipment (that now will go un-purchased), classrooms (that will often go uncleaned), etc. And whether the furloughs are taken on instructional days or on other days, they *will* impact students directly -- whether it's in less time for grading assignments, less preparation for lectures or seminars, less student-friendly office hours, less time for letters of recommendation, a switch from essay exams to multiple choice exams, no review sessions, no reading paper drafts, fewer organized workshops or events, etc. And remember, we'll all be getting more students per class, and less time to deal with them. So it's a complete fiction to say that "instructional time" means lectures only, since as we all know a lot more goes into orchestrating a course.

That said, there may (or may not) be a public relations problem with the walkout or future coordinated furlough days. However that can be addressed with clearer framing. The walkout is a low impact means for calling attention to the effects of how the budget problem is being handled, the main and most obvious components of which are: increased fees, fewer courses, and increased class sizes

(for more on fee increases, see: http://collegelife.freedomblogging.com/2009/09/09/uci-students-might-face-another-fee-hike/9379/)

The administration wants to pretend that things can run normally, despite this massive defunding. While I understand this inclination, they're not living in reality. We're educators, and part of our job now requires us to educate our students, their parents and the general public on how these cuts will impact students and the state as a whole. Hiding in the shadows and keeping our mouths shut is the last thing we should be doing.

(Sorry to transform the thread into yet another one on furloughs)

TB said...

Let me second Anonymouse here. Anonymous @ 10:54, you are also missing a very important point: by playing along with Yudof & Co and *pretending* that the cuts do not affect the quality of instruction we are actually doing ourselves (as a university rather than private individuals) a disservice in the long run. By creating the "optics" favoured by Yudof and the UCOP, we are sending the message that the university can take this hit and still function alright. In the long run, this will be very damaging to the university *including our students* as this takes the pressure off the legislature & the governor to restore the funding in the future. It is the long-term prospects of the UC system that this fight is about, not taking a day or two off teaching. (A personal disclaimer: I am one of those science faculty who can quite likely top off their salary from the research grants -- I have no immediate financial stake at this fight but I do not want to put up and see my university deteriorate further and further.) Yudof and UCOP should be forced to confront the regents, the legislature and the governor's office about these and future cuts rather than be allowed to hide behind the Potemkin facades created by the "right optics". Yes, that means that they should put up a vigorous PR campaign explaining the effects of the cuts to the public - the future of the UC system is at stake - and letting them off the hook is not the right way to go.
As a side remark (and I realise how unrealistic this is), an interesting idea would be to completely forgo all state funds and charge *all* students the market rate with the state providing direct stipends to the in-state students in order to offset the costs. This way there would be no questions about who actually screws the students, and the journalistic hacks like those at Sacramento Bee would have to lay the blame where it really belongs, on Sacramento politicians.

Kevin said...

As a side remark (and I realise how unrealistic this is), an interesting idea would be to completely forgo all state funds and charge *all* students the market rate with the state providing direct stipends to the in-state students in order to offset the costs. This way there would be no questions about who actually screws the students …

I'm in complete agreement with this idea. All "return to aid" from tuition should also be eliminated in such a scheme. This is essentially the way much of the world finances higher education.

Jenny said...

Dear Anonymous:
I agree with you that there is always the danger of playing into the "selfish faculty" spin that OP is putting on the walkout. Hence the Sac Bee reporting. This is why it is crucial to have student organizations not simply "go along" but lead the way. At our campus, student leaders said that they EXPECTED faculty to walk out as they saw it as a sympathy protest of the student's plight (rising fees being the main concern). Students are organizing a rally on the first day and publicizing their support in the school newspaper. So my position is: no walkout unless students are involved in organizing and support the action.

Anonymous said...

Dear Anonymouse & TB

Hmm, I think Anonymouse made exactly my point when s/he said:

"Anonymous @ 10:54, you are also missing a very important point: by playing along with Yudof & Co and *pretending* that the cuts do not affect the quality of instruction we are actually doing ourselves (as a university rather than private individuals) a disservice in the long run. By creating the 'optics' favoured by Yudof and the UCOP, we are sending the message that the university can take this hit and still function alright."

That was my point. Protest actions around the furloughs that pitch the issue as making the cuts palpable work exactly that way - they start from the assumption that until faculty take action the cuts are not felt by students. First off, that is not true. Second, it is a disastrous political strategy for the faculty.

Today the LA Times has an article about additional fee hikes. We should talk about that and build our strategy around that.

There are program cuts. We should build our strategy around that.

There are UCOP and Administrative salaries that are public relations nightmares for UCOP. We should build our strategy around that.

There are built-in subsidies in the very nature of universities and especially state supported universities, and we could build a strategy around that by exposing the subsidies to the rich and middle class and making the social & economic value of state supported universities clearer. TB's proposal to charge market rate tuition with state credits based on income would flush these issues out, and I would support it, first as a tactic and,second, as a fallback strategy if the state can not be brought around to fund the university properly:

No proper state funding, no more free lunch for snotty rich kids with BMWs on UC campuses.

As for "reframing," this cannot be done at will. I'm sorry, but the furlough issue is a lead weight around our necks. It cannot be re-framed. Sadly, I think we are going to learn that in the school of hard knocks.

Anonymous said...

oh, for Sac Bee reporting on the walkouts, see the Sept 3rd link on this blog page, which brings you to this headline and opening line:

"The Public Eye: Some UC profs plan walkout over furlough restriction"

"Talk about rolling out the welcome mat for new students."


That is not going to be re-framed. We have to shift the issue to one we can win on instead of chasing an issue that will bury us.

Jenny said...

The wheels have already been set in motion, so let's hope you are not right. The walk-out webpage (http://ucfacultywalkout.com/) states:
"On September 24, in solidarity with UC staff and students, faculty throughout the University of California system will walk out in defense of public education."
The way I figure, whether we like it or not, the first day of classes is the date that has been chosen to protest the decline of public education, so we have one of two choices: to let our protests be heard by signing the letter or going to the rallies or to stand silently by.

Anonymouse said...

Anonymous, you're actually quoting TB, not me. But that's fine, I agree with TB.

However I have yet to be convinced that the furlough issue is impossible to frame correctly, and since that's the administration's official position it makes me even more suspicious. Sure, one can point to editorials and reports in a couple of newspapers and their comments sections to show that there's overwhelming negativity towards us; however the same can be said for *every article on the internet with a comments section*, including ones that recapitulate administration talking points (seriously: find an article about rescuing sick kittens and it'll be mostly full of comments blaming the kittens' mothers and rants about illegal immigrants). I'm not saying that we don't have work to do -- no one gets off scott free in this state, and this economic climate -- but have yet to see more than anec-data to support the argument that "the people" (or whoever) will lash out. It will take some thought, some coordination, and some solidarity.

Aligning ourselves with students is crucial. We're all in this together, and the cuts are affecting all of us in one way or another. (I actually think that mid-year fee increases are far more despicable than furloughs) If we stand with them, we should expect them to stand with us. Same goes for staff. As I said, I don't think anyone out there envisions professors parading around campus with signs declaring "Save Our Ivory Towers Now!" or "Give Us Back Our Millions!" Though we're all coming from different places, we're all still stakeholders in the immediate and distant future of the UC, and the furloughs can and should be incorporated into the larger argument against what's going on.

Now it actually sounds like Anonymous and others are all more or less in agreement about this, it's just the degree of emphasis on furloughs and *us* that we're disagreeing on. Let's concentrate on simplifying and unifying arguments against what's happening to all of us.

Chris Connery said...

I don't know of any Sept. 24 action that is aimed primarily at the furloughs. Faculty action on the 24th, as I read it, is directed at:

1. educating students and the public about threats to public higher education

2.protesting violations of principles of shared governance-- and a range of specific policies-- in UCOP's response to the crisis.

At UCSC we are widely distributing CUCFA's handout- http://keepcaliforniaspromise.org/?p=230
which puts support for public higher education, and a revitalization of the Master Plan, at the center of the political effort. UPTE, and other unions on our campus who will be supporting the UPTE strike, are 100% behind this framing of the core issue.

Faculty at our campus are supporting the call for action in different ways-- on picket lines and/or giving talks at the base of campus; or in the classroom, distributing the CUCFA hand-out and beginning what will be a long discussion of the issues around the crisis. There is certainly room for a range of responses to the current situation. As the year progresses, we'll learn more about what is most effective.

meranze said...

Do any of the economists out there have any insight onto the Parsky commission numbers? I know that everyone wants to discuss furloughs and september 24th but I would be curious if anyone knows about the implications of these tax changes on the state and on state revenue

Kevin said...

If the walkout had been planed for the 2nd week of class, there would have been time to talk to the students and framing the debate. Having it on the first day of school makes that nearly impossible.

I have a grad class for 10 brand-new grad students that day---a class designed to orient them to the campus, the department, and their new field. There is no way that I can leave them hanging. The second meeting of the class (a week later) would have been possible.

This strike looks like it was designed by UCOP to make faculty and staff look as bad as possible.
How was responsible for the stupidity of the timing???

Jenny said...

I understand your dilemma, Kevin, I would not leave graduate students hanging as well (or freshmen for that matter). I too would have preferred the Oct 14th date that was floated. But I think the date was chosen to coincide with the union strike (not crossing the picket line) and due to the urgency of the crisis. Do what your conscience allows you to do, but know that graduate students are also being defunded. Two of my dissertation students are without any funding for next year. And they can't even find non-university jobs because they are in competition with all of the others who are jobless. At the very least, I think we should use the first say of class to alert students to what is going on rather than proceeding with business as usual.

Kevin said...

I understand about grad students being defunded. I have only 3 students left, and no funding of my own for any of them. One will be working as a TA all year (assuming we can get TAships from other departments, one is on the last dregs of a training grant and is trying to write an R-21 grant proposal with me, the other is planning to take a leave of absence and is desperately looking for health insurance---none of the insurance plans he's found will accept him). The new students coming in will probably not end up in my lab, as I'm about ready to give up on writing grant proposals---it was taking too much of my time with no returns whatsoever.

Since the class I'm teaching on the walkout day is one I think of as "how to be a graduate student" and we usually discuss strikes at some point in the quarter, I'll rearrange the syllabus to start with the discussion of strikes.

Anonymous said...

Wow. I don't live in CA but I want to so I'm watching the situation closely. What Arnie is doing seems Bass-Ackwards to me.
What is the general public's response to this kind of thing? Are they happy to see the State in decay to save a few bucks?

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