Wednesday, January 29, 2003

posted 1/29/2003 06:02:00 PM by Daniel   0 comments

Further Update: McClintock sees the same contradiction.

Today's Los Angeles Times has the following quote: "Is it a tax levy or is it not a tax levy?" said McClintock. "If it's a tax levy it requires a two-third vote. If it's not a tax levy, it's subject to referendum."

The Democrat-appointed Legislative Counsel's spin is that this is a "tax levy" which reduces taxes (on vehicles worth less than $5,000). Never mind that the Vehicle License Fee for all others will go up radically; that's merely an "insufficient revenue" determination which was already permitted by the 1998 law and clarified by this bill.

Give the Assembly Democrats points for creativity. If the courts actually bought this theory (which is doubtful), it would effectively eliminate the referendum provision in the California Constitution. From now on all bills passed by the Legislature could simply include a tiny tax reduction on some minor fee. That would instantly turn them into "tax levies" which shielded them from a referendum but nevertheless did not require a 2/3 vote because the tax levy was a revenue reduction instead of a revenue increase.

Whatever the courts ultimately decide, this is a political loser and the Democrats know it. Davis is now explicitly saying he will veto a Car Tax increase. There appears to be little if any support for a Car Tax hike in the State Senate. And even the ever-reliable tax-and-spend Los Angeles Times editorialized today that there is No Way Around State Cuts: "The first step, however, should be meaningful budget cuts -- the kind that powerful special interests, including education, prisons and health care, will howl about. But that's where the big money goes and that's where savings are to be found."

The Sacramento chess game continues.

I previously said that State Senator Tom McClintock had made a brilliant chess move by threatening a referendum to block an increase in California's Vehicle Licensed Fee. Now we've seen the Democrats' countermove: The State Assembly passed it anyway, but added an amendment to exempt vehicles worth less than $5,000. Supposedly this makes it a tax levy which is not subject to a referendum. Republicans are naturally crying foul and are threatening to take it to court.

I think the Democrats have really boxed themselves in.

The California Constitution requires a 2/3 vote in both houses of the Legislature to raise taxes. Here's the exact wording from Article 13A, Section 3:

Section 3. From and after the effective date of this article, any changes in state taxes enacted for the purpose of increasing revenues collected pursuant thereto whether by increased rates or changes in methods of computation must be imposed by an Act passed by not less than two-thirds of all members elected to each of the two houses of the Legislature, except that no new ad valorem taxes on real property, or sales or transaction taxes on the sales of real property may be imposed.

Since Republicans boast enough votes in both houses to block the 2/3 majority needed for any tax hike, Democrats keep looking for ways around this restriction. The Vehicle License Fee was an attractive target because of a provision in the 1998 tax reduction bill which allowed the Car Tax to return to the original elevated levels if the State was found to be receiving insufficient revenue. So the Democrats figured they could pass a bill by a simple majority vote effectively defining the current budget crunch as insufficient revenue.

That's a rather questionable position. The above Section refers to "any changes in state taxes enacted for the purpose of increasing revenues". From a legal standpoint, neither side's interpretation is a slam dunk (although I personally think the case for a 2/3 majority is stronger).

But suppose the Democrats' argument was to prevail in court. McClintock proposed a fallback position, namely a referendum as authorized by Article 2, Section 9 of the California Constitution:

SEC. 9. (a) The referendum is the power of the electors to approve or reject statutes or parts of statutes except urgency statutes, statutes calling elections, and statutes providing for tax levies or appropriations for usual current expenses of the State.

(b) A referendum measure may be proposed by presenting to the Secretary of State, within 90 days after the enactment date of the statute, a petition certified to have been signed by electors equal in number to 5 percent of the votes for all candidates for Governor at the last gubernatorial election, asking that the statute or part of it be submitted to the electors. In the case of a statute enacted by a bill passed by the Legislature on or before the date the Legislature adjourns for a joint recess to reconvene in the second calendar year of the biennium of the legislative session, and in the possession of the Governor after that date, the petition may not be presented on or after January 1 next following the enactment date unless a copy of the petition is submitted to the Attorney General pursuant to subdivision (d) of Section 10 of Article II before January 1.

(c) The Secretary of State shall then submit the measure at the next general election held at least 31 days after it qualifies or at a special statewide election held prior to that general election. The Governor may call a special statewide election for the measure.

But note from Paragraph (a) in the above Section 9 that referendums do not apply to "statutes providing for tax levies". Hence Democrats deliberately modified their bill to exempt vehicles under $5,000, based on a legal opinion that such an amendment would classify it as a "tax levy" and thereby shield it from a referendum.

So which is it? If this is just a clarification of the 1998 bill rather than "changes in state taxes enacted for the purpose of increasing revenues" then it would not require a 2/3 vote but it would be subject to a referendum. Whereas if this is a "tax levy" then it can't be subjected to a referendum but it requires a 2/3 vote. I don't see how Democrats can have it both ways.

It appears that the Democrats in the State Legislature are desperately flailing around, because they are philosophically and politically incapable of enacting the major spending cuts that the current deficit requires. So they posture and pass bills which they know won't pass legal muster, just to be seen as doing something.

Gray Davis may be smart enough to see the trap and veto the Car Tax increase. But that still won't solve the budget deficit. Whether Democrats like it or not, big spending cuts are inevitable.

Friday, January 24, 2003

posted 1/24/2003 07:16:00 PM by Daniel   0 comments

Car Tax referendum?

California's budget battle was just racheted up a large notch. I didn't hear it myself, but this post indicates that State Senator Tom McClintock was just on the John & Ken radio talk show (KFI AM 640) an hour ago, and he threatened to lead a referendum against any hike in the Vehicle License Fee.

The Democrats are anxious to raise taxes to fill the enormous hole in California's budget, and the Vehicle License Fee (a.k.a. the VLF or Car Tax) is their favorite candidate. Not only would it raise an estimated $4.2 billion dollars over the next 18 months, but the increase can arguably be accomplished without the normal requirement for a 2/3 supermajority in the state legislature. That's because of an ambiguous provision in the original 1998 bill which lowered the tax; that provision allows the tax to go back up to its original level if the State finds itself with "insufficient monies" (without defining that condition). Hence Democrats argue that this would be a tax restoration rather than a tax increase. Republicans had promised to challenge that interpretation in court, but their chances were somewhat iffy (especially since California's court system is also facing potential budget cutbacks).

A referendum in California is difficult to pull off, given the extremely short circulating period (90 days from signing of the bill to verification of signatures) and the high cost and the technical barriers (e.g., the entire text of the bill, however long it may be, must be attached to each individual petition section). But it can be done and has been successfully done in the past. If all the taxpayer organizations (like the Howard Jarvis Taxpayers Association) swing into action behind Tom McClintock, I have no doubt that it will be done again.

That puts Democrats between a rock and a hard place. Do they go ahead and try to "restore" the Vehicle License Fee, knowing that it will almost certainly result in a referendum? If enough signatures are gathered, such a referendum will prevent the Car Tax hike from taking effect until the next statewide election (normally the March, 2004 presidential primary). But Governor Davis would almost be forced to call a special election sometime later this year. Politically, how could he argue that the Car Tax hike he had signed to help solve this year's deficit could now wait until next year, just to save a few million dollars in election expenses?

Even worse for the Democrats, any initiative measures that had already qualified for the March, 2004 ballot would also have to appear on that same special election ballot. That means Ward Connerly's Racial Privacy Initiative would share the ballot. Liberals were hoping that an exciting Democratic presidential primary and a dull Republican presidential primary would help defeat that initiative in March, 2004. But conservatives, who would be drawn to a special election to defeat a Car Tax hike, would likely help pass the Racial Privacy Initiative and vice versa.

All in all, it's a brilliant chess move by Tom McClintock. I can't wait to see what happens next.

Monday, January 20, 2003

posted 1/20/2003 05:05:00 PM by Daniel   0 comments

Oh, the Inhumanity!

Just when it seems that the human race has finally groped its way upward towards a significant level of maturity, this comes along. [Article link requires paid subscription to the Wall Street Journal; see excerpt below.]

It used to be that anyone outside of a person's immediate family wasn't considered to be truly human. Everyone else was a sub-human or an enemy, subject to being killed or conquered or enslaved or otherwise exploited without a second thought. Over the centuries the definition of humanity was slowly extended to include the rest of the tribe, then the rest of the nation, eventually even the rest of the world. Over the centuries it was extended to include tolerance for other cultures and other races and other religions. It's been a long, difficult struggle towards enlightenment, with many set-backs along the way.

But apparently we aren't quite ready to take the final step...

Fans Howl in Protest as Judge Decides X-Men Aren't Human
Marvel Fought to Have Characters Ruled Nonhuman to Win Lower Tariff on Toys
by Neil King Jr., Staff Reporter of The Wall Street Journal, January 20, 2003

Judge Judith Barzilay huddled late last year with a telepathic professor and a cast of mutants to ponder an age-old question: What does it mean to be human?

<< snip >>

Her ruling thundered through the world of Marvel Comics fans. The famed X-Men, those fighters of prejudice sworn to protect a world that hates and fears them, are not human, she decreed Jan. 3. Nor are many of the villains who do battle with Spiderman and the Fantastic Four. They're all "nonhuman creatures," concluded Judge Barzilay.

Marvel subsidiary Toy Biz Inc. pushed Judge Barzilay to declare its heroes nonhuman so it could win a lower duty rate on action figures imported from China in the mid-1990s. At the time, tariffs put higher duties on dolls than toys. According to the U.S. tariff code, human figures are dolls, while figures representing animals or "creatures," such as monsters and robots, are deemed toys.

<< snip >>

The most incredible aspect of this whole sordid affair is that the U.S. Government defended the X-Men's humanity, while Marvel stabbed them in their non-human backs.

Thursday, January 16, 2003

posted 1/16/2003 12:05:00 AM by Daniel   0 comments

The Inpection Trap.

According to this article, the Bush Administration is privately reassuring Republicans that it will produce the necessary evidence to marshall public support for a war against Iraq.

Many skeptics have been complaining that Bush has failed to demonstrate a connection between September 11th and Saddam Hussein, but they are totally missing the politics of the situation. Whether or not it exists, why would they ever expect Bush to provide such a connection at this point in the process?

What Bush is doing is creating an "inspection trap".

U.N. inspectors are busy running around in Iraq, but so far haven't uncovered "smoking gun" evidence of WMDs. Rumsfield is saying that "the absence of evidence is not evidence of absence." So anti-war activists are jumping on that. They are asking how Iraq can be required to prove a negative. They are more and more building their case around the failure of the Bush Administration to come up with concrete proof of either Iraqi WMDs or Iraqi-terrorist links. On the surface it seems like an effective anti-war strategy. It has had a limited amount of resonance with the American public, and it has had strong resonance with public opinion in other countries.

It is, as I said, a public relations trap.

Troops and material are still being moved into position for the upcoming war, and the pace is picking up rapidly, as indicated by all the recent reports about troop embarkments and other deployments. In a matter of weeks everything will be in place. Why would the Bush Administration want to prematurely reveal "smoking gun" evidence until the very day it was ready to flip the switch and start the actual aerial bombardment?

When the time comes, I guarantee you that Bush will make a major speech to the nation laying out his arguments for going to war in highly persuasive terms. He'll reveal previously-secret intelligence evidence which (true or not) will appear extremely convincing with regard to WMDs and terrorist ties. In effect the Administration is suckering its anti-war foes into putting all their eggs in one "straw man" basket, which Bush will conveniently knock down at the time of his own choosing. Public support for a war against Iraq will spike upward. Then, before Bush's opponents can assimilate the newly-revealed data and try to rebut it, the war will have started (and probably ended).

Those who think otherwise are again misunderestimating Bush.

Wednesday, January 15, 2003

posted 1/15/2003 04:57:00 PM by Daniel   0 comments

Russia is putting the heat on Europe over Kyoto.

This is hilarious. According a Reuters news article, Russia Delays Global Warming Pact, May Wreck Deal. Russia's inaction seems to really puzzle Clara Ferreira-Marques, the Reuters reporter, since "The delay could cost Moscow billions of dollars." And why exactly is that?

Pollution quotas for the protocol are based on 1990 levels, and because of the post-Soviet industrial downturn, Russia will not be able to use its full share in the medium term. It can sell its excess share under a mechanism fixed by the protocol.

According to Greenpeace, Russia could make $20 billion annually from quotas, about a quarter of 2003 budget revenues.

Here's the joke: The whole point for Russia of signing the Kyoto Treaty was so that it could rake in a windfall fortune by selling carbon dioxide emission credits. But obviously the only source of funds of that magnitude would have been from the United States. Since the U.S. refuses to sign Kyoto, the $20 billion per year in wealth transfer to Russia goes out the window, and Russia is left with nothing.

So why doesn't Russia sign it anyway? After all, even if that windfall fails to materialize, at least Russia won't be hurt economically by having to restrict its industries like many other countries.

The answer is that Russia wants to squeeze that money from other sources, i.e., European nations. Obviously Europe is a poorer target than the wealthy United States. The European Union and its member nations have much bigger economic and budgetary problems than the U.S. does. But the EU still has some financial resources, and there are other geopolitical concessions that Russia may be able to wring from them.

The dogma of Global Warming has become an obsession and a holy cause to Europeans. Their leaders and elites have so much political capital invested in Kyoto that it would be a catastrophe for them to let the Treaty go down the drain. After all, how will the European chattering classes damn and demonize Bush if it turns out that Russia is the country that actually pulls the plug? That threat gives Russia a lot of leverage.

Even aside from the questionable science behind global warming fears, Europe knows that the Kyoto Treaty is mostly a political and symbolic gesture which would have little real impact on atmospheric carbon dioxide levels. That's pretty obvious just from the fact that Russia could sell $20 billion per year in emission credits without effecting a single molecule of CO2. The real motivation behind Kyoto was envy, fear, and an inability to compete with the dynamic U.S. economy. Europe wanted to level the playing field with its own socialistic and moribund economy, by forcing the U.S. to artificially restrict its growth. Sure Kyoto would also damage Europe economically, but it would cripple the U.S. even worse. And in the current anti-American climate, that's far more important to Europe.

But Bush refused to play that game. He cavalierly unsigned the Kyto Treaty. He wouldn't even give it lip service, the way Clinton did. The European chattering classes are consequently in a huge huff, and they keep trying to beat America over the head for this "unilateral" and politically incorrect act. If they have to pay off Russia in order to keep Kyoto intact, they'll find a way to do so.

The final irony is that the U.S. economy remains unaffected by Kyoto, while Europe will have to implement its restrictions. In addition, Europe will have to ante up a substantial bribe to Russia.

So instead of leveling the playing field, the Kyoto Treaty is tilting the field further in our favor.