Low taxes are bad for business


The teachers at San Francisco's public schools are talking about going on strike. The contracts talks with the district are at an impasse. Things look bleak.

Well, they don't look as bleak as things in Philadelphia, but that's not really much in the way of good news.

Part of the issue: The district wants the teachers to accept up to nine furlough days next year. Even if the governor's tax measure passes, four furlough days are still on the schedule.

The teachers are complaining -- with good reason -- that the forced days off and other concessions cost them money, as much as $5,000 a year. But there's another issue here: Furlough days are horrible for working parents -- and for the businesses that employ them.

Ron Leuty has a nice column on this in the San Francisco Business Times, which doesn't let you read all the stories unless you subscribe, but here's the gist:

For parents, SFUSD parents who already have barely managed through four furlough days each of the past two school years, nine each year becomes intolerable. That totals up to nearly two school weeks for which we must find some sort of childcare or one-day mini-camps -- and it's cash out of our pocket. Or it means time off. For businesses, that means lost productivity, down work time and employees who are paying more for -- and worrying more about -- childcare.

For low-income parents who have to miss a day's work and a day's pay every time the kids are out of school, it's a serious economic issue. And the local businesses, particularly small businesses which aren't equipped to deal with excess employee absenteeism, it's a nightmare.

Leuty doesn't place any blame or explain how we got to this situation, so I will: Prop. 13 (and later, Prop. 218) made it really hard to raise local taxes, and a handful of Republicans are making it hard to raise state taxes, so there's not enough money for the schools. Americans today, particularly wealthy Americans and corporations, are taxed far less than they were for most of the century, certainly the post-War era.

Local business leaders love to talk about the value of public schools. I don't think many serious people who have looked at the finances believe that the SFUSD is fat, bloated, or wasting a lot of money; these days, even the anti-government folks have to admit it's a pretty lean operation.

So why won't those business folks (and, for the matter, the Business Times) start campaigning for changes in Prop. 13 to allow communities to fund the schools and avoid these debilitating furlough days? What, is this problem supposed to get fixed by magic?



The alternative, if the money isn't there, is either cut the pay of all teachers by the same effective percentage, or fire that percentage of teachers.

Given those choices, most people would say that a few extra days off isn't so bad. Sure the teachers get less pay (duh) but they also get extra days off.

While for those parents who are inconvenienced, yes, it's an issue, but then seeing your kids' school as free babysitting is a flawed strategy as well.

Your invocation of Prop 13 is a red herring here. California has simply increased it's income and sales tax levels to compensate - both are the highest in the country outside of NYC and maybe a couple of other places. The approval numbers for Prop 13 continue to be huge - 70% or so - you are wasting your time even thinking about it going away.

We need to do more with less and, in the eyes of most voters the real cost issue is the outsized pension and benefit packages for teachers and other public employees. Which of course takes us right back to those contract negotiations.

Posted by Anonymous on May. 04, 2012 @ 3:34 pm

Califonria has NOT increased its sales and income taxes to compensate. Overall tax levels are lower than they were pre-Prop. 13. Total general fund revenue to the state has in no way kept up with growth and inflation. That's just factually wrong.

Posted by tim on May. 04, 2012 @ 4:01 pm

the nation. Sales taxes alone nudge 10% in some cities and counties, while some folks pay more than 10% in state income tax. Some proposals have that increasing dramatically.

NH, SD, WY, TX, FL, AK, WA and NV all manage without a state income tax. OR and various other States have no sales tax. CA has both and at a huge level.

So CA's problem isn't that its taxes are too low. And even with Prop 13, property tax reveneues are huge because property values are huge. And even with Prop 13, property taxes increase on average at 7% pa because of home sales - hardly a burden How fast would you like it to increase by?

CA's taxes are massive. We have a spending problem, not a revenue problem.

Posted by Anonymous on May. 04, 2012 @ 4:13 pm

A: never.

Anonymous is a bottomless pit of factually incorrect garbage.

Posted by lillipublicans on May. 06, 2012 @ 11:38 am

Saying it's false don't make it so.

Posted by Anonymous on May. 06, 2012 @ 1:35 pm

... is that California "has the highest combination of sales and income taxes in

the nation."

That is a lie.

Just to be clear, it is a lie in the sense that it conveys a false meaning under a false basis.

The truth is that Californian's pay lower taxes overall than about half the states. The fact that California citizens have higher average income and spending than others is the basis for your lie.

Posted by lillipublicans on May. 06, 2012 @ 2:03 pm

sales tax rates are over 20%.

Oh wait, trick question, because you can't, because there isn't one. QED.

States just play games with their taxes e.g.

Texas has no state income tax so has high property taxes
Oregon has no state sales tax and so has high income taxes
California has/ low property taxes and so has high sales AND income taxes

They get their money one way or the other. Prop 13 is largely irrelevant and has, in any event, allowed 7% increases in revenues each year since 1979.

Prop 13 is the only protection we have against a tyrannical greedy government, and was a huge stride forwards for democracy.

Posted by Anonymous on May. 06, 2012 @ 2:56 pm

Schools are the worst place to 'save' money. The entire community suffers -- parents, businesses, kids, and neighbors -- and the local economy suffers with it.

However, I'm puzzled that no one mentions how San Francisco is dragged down by a little-known side effect of Prop 13 -- a minuscule allocation of the property taxes it does collect to its schools.

When Prop 13 passed in 1978, legislators scrambled to figure out the tax revenues that were left. Then- and now-Governor Brown volunteered the State's $5B surplus to backfill the most popular loser -- the schools.

San Francisco said YES and allocated only about 10% of its property taxes to its schools (the rest to City and County services), while nearby areas (the SF Peninsula, Marin) continued to allocate 35-40% of property tax to their schools. Initially, the State back-filled almost all these schools, but 34 years later, the schools in most surrounding areas with SF's wealth are collecting property taxes well in excess of State back-fill levels ('revenue limit'), which means the schools are able to spend more unrestricted funds per pupil (even in SSF, for example).

In 1992 the State began to claw back the relatively excessive allocations to County and City services in SF, LA and elsewhere (so-called 'ERAF: Educational Revenue Augmentation Funds) -- but only up to the back-fill revenue limit. Since the 'revenue limit' amount is about $5K/child, this is laughable in a high cost-of-living area trying to educate a large proportion of language learners, disabled, and other high cost kids.

This has left SF schools scrambling for every penny of State and Federal grant money and special funding they can get -- with the result that they actually spend $11K per child ... but an unusually large percentage of this is on different levels of administration (almost 20%--seemingly to obtain, manage, track and report on those grants).

What a vicious, silly, economically destructive cycle. It is so interesting how Prop 13, initially pitched as keeping old people in their homes, has led to an uneven playing field for commercial property owners, an unproductive business environment, a downward spiraling investment in California's future -- and a disproportionate investment in City, County and School Administrative costs. All well outside of voter/taxpayer control.

Posted by Guest on May. 05, 2012 @ 8:31 am

ways. SF collects 1.2% or so of property tax values each year, as does every other CA county. But home values are far higher here meaning that that 10% goes much further than other area's.

Also, the State's allocation of resources takes into account local variations and, as far as possible, seeks to even out allocations from richer area's to poorer area's. So it is perhaps inevitable that SF will be disadvantaged but then, of course, that is only because it has more to spare. And a good progressive will always support redistribution or resources to poorer places, right?

That said, attnetion can be paid to any regional variation and injustice without necessarily rolling back Prop 13 - the formula for allocation can simply be split differently in a revenue-neutral way. Expect the other counties to oppse you, however.

In the end, we're wealthy here in SF, there aren't many kids here compared with other places, and many of those that are here attend private schools. Overall education in SF and the Bay Area is pretty good.

Finally, SF voters are free to approve increases in the ad valoren tax rate, or approve targeted parcel taxes, in excess of the Prop 13 limits. Prop 13 sensibly allows localities to over-ride its limits, so you can only blame your fellow voters if they choose not to spend more on schools.

Posted by Anonymous on May. 05, 2012 @ 10:40 am

Santa Clara County alone has 31 school districts- how many extra high paid administrators does such a system create with the requisite giant pensions the state has no money for. CalSTRS is a bigger disaster than Calpers and that's saying a lot.

Teachers wages could be cut. Furlough days are typical government inefficiency. The reality is, given length of school year and the extraordinary value of a guaranteed pension- teachers are well compensated in this economy (not to mention the health care). They should stop whining, and if it so bad and they are talented, go work for a private school.

Sick of all the government employee whining when these folks' benefits are very, very expensive. They should be thankful.

Brown's tax increase, which is a tax on the poor (sales tax increase) to cover the huge pensions of government employees, is NOT going to pass. Munger will be there to make it very clear it's not primarily "new revenue for schools." I'd be surprised at this point if Brown's tax increase gets 40%. At least Munger's is honest. If anything should pass, it should be her tax increase.

Posted by Guest on May. 05, 2012 @ 2:47 pm

and that these institutions be forced to live within their means like the rest of us have to. I'm done with their sense of "special" entitlement.

Posted by Anonymous on May. 05, 2012 @ 4:32 pm

Munger's won't pass since it's more or less an income tax increase on everyone (Brown's tax increase is too a tax on everyone which he is fraudulently trying to sell as a "Millionaire's Tax") but she'll have the resources to expose Brown's plan for the fraud that it is and how little it will actually do for schools. That's important.

They'll both get less than 40% of the vote.

Posted by Guest on May. 05, 2012 @ 5:11 pm
Posted by Matlock on May. 05, 2012 @ 6:43 pm

How many of you who want lower taxes and want the schools to "live within their means" have kids in the public schools. I suspect none of you have any idea what the teachers at the local schools are doing, how well so many of them perform with scandalously low resources.



Posted by tim on May. 05, 2012 @ 7:47 pm

I posted and have no kids. Frankly, my intuition tells me and from what I've heard and read, teachers are not the problem. Schools receive adequate money and the dollars are wasted in the payroll and benefits of all the non- teaching positions/i.e. admin. I don't have a scintilla doubt that Catholic or private schools are doing more with less because they are not weighted down by the bloat of union rules and costs.

Everyone wants our public schools to be better. It is the primary vehicle to solving income inequality, not throwing a brick off a roof. Some just don't think giving schools more money at this state, equals a better educated child.

Posted by Guest on May. 06, 2012 @ 7:06 am

two children. I chose to send them to private school primarily because I was unhappy with SF's bussing policy. My neighborhood school was excellent and a short walk from my home but my kids weren't allowed to go there. It is disgusting that they were required to bus across town in the interests of imposing what are effectively race quota's.

More generally, SF simply doesn't have many kids, and therefore doesn't have many voters with kids. Why should they vote for tax hikes for schools they will never use.

Moreover, many people prefer to move to the suburbs when they have kids and need more space and less crime.

Posted by Anonymous on May. 06, 2012 @ 8:07 am

This is probably a good time to re-post this excellent and detailed report:

It's not what the highest marginal rate is. It's about *who* pays the taxes, and how much you actually do pay (as opposed to what's on paper). When you look at income, sales, and property taxes, add them together, you find a very different picture than the one the right wing likes to advance.

Unless you're in the top 1%, California is actually not a bad place to be. We actually have one of the least regressive tax structures in the country, whereas the tax burden falls disproportionately on the poor in most states. Which is not to say it's *progressive* mind you, just not as *regressive* as some other places. Reading this report just makes you angry at how badly low income people are screwed.

Posted by Greg on May. 06, 2012 @ 5:01 pm

sufficient to meet reasonable needs. It's not about class warfare.

In the French election this week-end, the leftie said that he wants "less rich people". The rightie says he wants "less poor people". Seeing issues in those simplistic class terms is the problem.

Posted by Guest on May. 06, 2012 @ 5:59 pm

I followed the French election closely, and I heard nothing of the sort. Perhaps Sarkozy wants "less poor people" in the sense that he wants to sweep them off the street and kick them out of the country... maybe. And maybe you interpret Hollande's call for higher taxes on millionaires as wanting "less rich people." I interpret it as getting the rich to pay their share.

Oh, and who won that contest? Um... yeah. The problem with Sarkozy was that he was seen a president only for the rich, while imposing austerity on everyone else. Hollande successfully argued that the austerity was limiting growth, and now France has given Sarkozy the boot. Good riddance to bad rubbish, I say.

The issue with revenue is not just about whether it's sufficient or not. Yes, that's one issue. But just as important is how fairly the tax system is structured. You want a tax system that gets the most revenue while imposing the least burden on the fewest amount of people. Arguments about highest marginal tax rates are deceptive, because they say little about how taxes affect the vast majority of people. You can get the exact same amount of money through a regressive vs a progressive tax structure; the difference is that the first way hurts a whole lot more for a whole lot more people.

Posted by Greg on May. 06, 2012 @ 7:20 pm

that's a big part of why neither of us live there. The remarks I cited were made during the debates, or close enough.

"Fairness" in taxes is a subjective concept. The richest couple of percent pay half of all taxes - they might argue that's not fair either.

Posted by Guest on May. 07, 2012 @ 9:58 am

"that's a big part of why neither of us live there."

Speak for yourself. I would if I could.

"The remarks I cited were made during the debates, or close enough."

If "close enough" means "not at all what they said, but what I interpretet them to say," then I guess it's close enough for you.

"Fairness" in taxes is a subjective concept."

Yes it is. Just like "liberty", "justice", "civility", "ethics", and whole number of human values we strive for. But just because your definition may vary from mine doesn't mean that we as a society shouldn't strive to achieve those values. To throw our hands up and say that just because "fairness" is a subjective concept, then "oh well, I guess we should just let the strong and the rich take whatever they please"... that's barbarism. That is the philosophy of Ayn Rand, the philosophy of a reptile.

"The richest couple of percent pay half of all taxes - they might argue that's not fair either. "

I'm sure they might. I'm sure they do. And they're wrong.

Posted by Greg on May. 08, 2012 @ 7:20 am

It seems you can't advance any policy without first deciding who the "enemy" is and who to attack.

The idea that taxing the rich more would lead us all to nirvana is a myth. The rich will find 100 ways of avoiding any new taxes and, as usual, it will be the working middle-class who have to pay more in tax. we've seen that plotline many times.

When you get tired of hating, we'll talk.

Posted by Guest on May. 09, 2012 @ 4:17 pm

but you might not like it there so much if you could. They don't make naturalization easy either.
Enjoy living in a multicultural melting pot? I sure do! Why, if most americans saw someone telling a Taqueria owner that their business name should be in English, because seeing another language on a sign is an affront to his national identity and heritage, they'd consider him an intolerant bigot who should mind his own business! In France, it's official policy!
Of course every country has some problems with xenophobia, but France has it codified into law. They even have the French National Academy, a bureaucracy dedicated to fighting any encrosion of multiculturalism into the purity of national identity.
Taking your hometown for granted is too easy, as is romanticizing a place you've never lived.

Posted by myklValentine on May. 10, 2012 @ 1:11 am

he can say that safe in the risk that France would never take him in anyway. And if he mouthed off there against the government the way he does here, he'd probably be arrested.

Posted by Anonymous on May. 10, 2012 @ 5:53 am

Corrupt government is bad for business and for students. If government was not being run like a siphoning operation extracting resources from tens of millions of working families to be shunted into the pockets of the 1%, then it might warrant more money. But every red cent that we fork over can and will be used by elected officials to benefit the 1% at the expense of the 99%.

Yes, all things being equal, in a pure economic sense higher taxes are better. But all things are not equal, classical and Keynesian economics collapse when confronted with unanticipated externalities.

I'm not saying starve the beast by any means, just underfeed it until the corporate parasites of the 1% fall off.

Posted by marcos on May. 07, 2012 @ 7:53 am

Muni is the classic example. Muni's budget has exploded over the last ten years and if anything, the product and the service have gotten worse. And no, there has been no correlating major increase in population.

Or take City road repair, we are spending more and getting less. Great piece in the Exam ignored by everyone else:


Need more examples? You really don't.

We should be reforming these items first, searching for best practices, before taxing our fellow citizens further in difficult economic times.

Stop the madness.

Posted by Guest on May. 07, 2012 @ 8:46 am

The problem here is that Muni needs more money to function but there is no evidence that if we give more money to Ed Lee that he will spend it on the provision of transit.

More money to a corrupt government means more expansive and expensive corruption.

Posted by marcos on May. 08, 2012 @ 7:56 am

If they can't run a decent service on what they have, we should give them less. In business, you never reward failure. Starve losers; reward success.

Posted by Anonymous on May. 08, 2012 @ 6:37 pm

It's far from clear that throwing more money at the California school system is going to effectuate positive change. Tenure and seniority rules are so entrenched that the system puts adult privileges over kids' education. These laws make it virtually impossible to get rid of underperforming teachers. Other states -- including even Illinois, a generally labor friendly state -- have changed their policies to make it possible to move the bad teachers out. California, which is effectively run by the CTA, has done nothing in that regard.

We have a recent, local example. The SF Superintendant tried to save some newer teachers from layoff who were serving underprivileged school. The union cried foul, saying that it went against seniority rules. I'm sure many teachers are great, but the union leadership only seems to care about seniority and policies guaranteeing jobs-for-life.

Posted by The Commish on May. 09, 2012 @ 8:18 am