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Jon Coupal- Columnist

Jon Coupal is an attorney and president of the Howard Jarvis Taxpayers Association -- California's largest taxpayer organization with offices in Los Angeles and Sacramento. [go to website] [go to Coupal index]

The Tax Ratchet Effect
Taxes never seem to go away...

[Jon Coupal] 10/22/04

Those who are handy with tools will know that a ratchet is a notched, mechanical device that allows motion in one direction only. The phenomenon that taxes only move in one direction -- up -- is amply demonstrated throughout California on a continual basis.

In 1996, Californians enacted Proposition 218, sponsored by the Howard Jarvis Taxpayers Association, which required that new or increased local taxes be approved by voters. Shortly thereafter, Los Angeles County Supervisors placed a fire suppression tax on the ballot in unincorporated areas of the county and in the 48 communities that contract with the county for service. The measure, which cost the average homeowner about $50 a year, passed with over 80 percent of the vote.

The voters believed the officials who told them the levy was necessary to provide a high level of fire protection and they overwhelmingly supported the new tax.

Turn the clock forward to 2004. A few weeks ago, an odd thing happened. County Fire Chief P. Michael Freeman approached supervisors suggesting they lower the fire tax. Because of a 10 percent increase in property tax revenues, his department was running a surplus and the chief wanted to cut the tax burden on each homeowner by $3.

Now, it has been said that taking a dollar from a bureaucrat is like trying to take a piece of raw meat from a hyena, but the fire chief has proven to be the exception to this rule. The supervisors are another matter, and it is not surprising that they decided to keep the money.

Here we see the tax ratchet effect at work. The voters had shown good faith when they responded to the county's request by agreeing to raise their taxes. Now that the county no longer needs the entire amount, the supervisors are determined to keep the money. This is the same board that is now promoting a half cent sales tax increase, Measure A on the November ballot, for law enforcement.

Measure A contains a provision that would allow the supervisors to lower the tax after seven years. Can anyone actually say they believe this to be a realistic possibility while keeping a straight face?

In 1991, then-Governor Pete Wilson tried to solve state budget crises through a number of tax increases including a 1.25 percent boost in the sales tax. To make the sales tax hike slightly more palatable, a half cent was to be "temporary." Of course, that meant that the rest was permanent. No matter, because as soon as the half cent was ready to be phased out, politicians came back with a ballot measure, Prop. 172, to make the half cent tax permanent for "public safety." An expensive campaign, which instilled fear by showing the impact of recent wildfires, persuaded voters to approve the tax.

So a penny-and-a-quarter sales tax increase became permanent, proving once again that over time, taxes go up, not down.

Now, Sacramento County has its own Measure A, a sales tax increase for transportation. However, it has been argued that this is not a new levy, but the extension of a voter approved tax that has come to the end of its authorized term. The fact the county residents have been paying this tax for a while may make some complacent. If Measure A passes, it will demonstrate once again that a tax -- once approved -- rarely, if ever, sunsets. Once a temporary tax is in place, it may as well be considered permanent.

If anyone still has doubts about the permanency of temporary taxes, they should take a look at their phone bill. The federal excise tax on phone service was imposed to defray the expenses of the Spanish American War. Unless we're mistaken, the Spanish-American war ended a while back. But the tax still remains.

Before approving any new tax, voters would do well to remember that the tax ratchet, in the hands of politicians and bureaucrats, moves in only one direction. CRO

copyright 2004 Howard Jarvis Taxpayers association


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