Tim Brinton NewsArt

Endorsements: Proposition 39 is a tax code fix worthy of your 'yes' vote

Published: Sunday, Sep. 23, 2012 - 12:00 am | Page 6E
Last Modified: Monday, Sep. 24, 2012 - 4:20 pm

At its best, the initiative process offers voters a way to bypass legislators who have become paralyzed by moneyed interests.

Proposition 39 shows how direct democracy should work. The initiative on the Nov. 6 ballot would close a $1 billion corporate tax loophole, one that legislators are incapable of shutting.

In 2009, then-Gov. Arnold Schwarzenegger cobbled together votes for a deal that included a $1 billion tax break for companies whose headquarters and most of their employees are located outside California, but sell heavily into the state.

Essentially, out-of-state corporations such as cigarette maker Altria gained the privilege to determine which of two methods of taxation allowed them to pay the least in state taxes, and they are allowed to toggle back and forth each year so as to gain the greatest benefit.

No sooner had the measure passed than dissenting legislators sought its repeal. They failed each time, though one version came close to passing this year, stalling only after public attention focused on an amendment that would have given tobacco giant Altria a special exemption.

San Francisco hedge fund founder Tom Steyer is providing most of the money for the Yes-on-39 campaign. He's among the billionaires who signed the Bill Gates-Warren Buffett pledge promising to leave half his wealth to charity.

The measure would achieve some tax fairness. While personal income taxes provide an ever larger share of the state's tax revenue, corporate taxes provide a smaller portion, about 10 percent, down from 14.6 percent in 1980-81.

The guts of the initiative track word-for-word legislation carried last year by Sen. Kevin de León, D-Los Angeles. That's significant because the Legislature's staffers vetted the measure.

If it's approved, the initiative would generate $1 billion a year. Half would go into the general fund, and the other half would fund new energy efficiency programs, such as weatherizing public schools, and energy-related job training.

We might prefer that all the money go into the general fund. But the energy earmarking would end after five years, after which the entire amount would flow into the general fund. No initiative is perfect. But Proposition 39 is a necessary medicine to correct a mistake that lawmakers made in 2009 and haven't yet been able to rectify.

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