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Rancho Santa Fe moneybags Gerald Parsky is chairperson of a supposedly bipartisan blue-ribbon commission on California taxation. Hardly surprisingly, so-called conservatives on the commission are pushing initiatives that would reduce taxes of the rich and increase them for the middle class and poor. These initiatives include a flat income tax and elimination of the corporate income tax. My question: has anybody asked Parsky about his own activities in the secrecy-shrouded Caribbean tax haven of the Cayman Islands? Parsky's firm, Aurora Capital Group, buys companies with borrowed money and then sells stock to the public. Filings show that when taking control of companies, Aurora Capital set up entities in the Caymans controlled by Aurora partners, including Parsky. Why? There are no capital gains taxes in the Caymans. And there are no corporate or personal income taxes, withholding taxes, gift or inheritance taxes, sales taxes, or employment taxes. I revealed all this in a Reader column of June 15, 2006. The column mentioned that the Caymans may have been used to avoid disclosing certain matters, rather than for tax considerations. (Or in addition to tax considerations.) The major reasons may have been avoiding capital gains taxes, although there could have been other reasons. At the time, Parsky would not respond to my requests for information.

Comments
32

Rancho Santa Fe moneybags Gerald Parsky is chairperson of a supposedly bipartisan blue-ribbon commission on California taxation. Hardly surprisingly, so-called conservatives on the commission are pushing initiatives that would reduce taxes of the rich and increase them for the middle class and poor.

Wasn't that the Raygun philosophy, stolen out of the AB Laffer play book?

Didn't work out too well in the 80's, did it. And it won't work out any better today because it is a flawed model.

July 8, 2009

At the time, Parsky would not respond to my requests for information.

This suggests Parsky eventually spoke with you-did he? If yes, what was his position?

July 8, 2009

Response to post #1: You are correct. I am ashamed to say that I bought into much of that model during the Reagan years. After the model proved to be deeply flawed, I changed my mind -- humbly. Best, Don Bauder

July 8, 2009

Response to post #2: Parsky never responded to me. Best, Don Bauder

July 8, 2009

I'll be discursive here and talk about those tax proposals that Parsky and his blue-ribbon commission are floating. High income folks are deserting California, and even folks in my not-so-high income circles are talking about doing it. High state income tax, high sales tax and steep vehicle registration fees are turning them off. One couple has bought a home in LV, without selling out of coastal Orange County. They have re-registered to vote and re-registered their cars in Nevada, and also gotten NV drivers licenses. They will keep the "second home" in OC, while spending over half their time in LV. Yeah, right. Ironically, he's a retiree with a generous CalPers-based pension, and he's unwilling to pay some of it back to the state whose taxpayers financed it in the first place. Another lives just a few miles inside CA, while working mostly in Nevada. All she has to do is move across the state line to save a bundle in taxes. I hear others planning to do the same.

The sheep, who have been willing for a long time to be sheared by high CA taxes, are finally getting smart. Taxes here are high, and headed higher. So, these folks go from big tax payers in CA to non-taxpayers in CA. We've lost a lot of them already, and a higher marginal income tax rate here is just going to push more of them away. Laugh at the Laffer curve all you want, but it does work.

BTW, I don't propose higher taxes for the poor or middle class. They already are paying too much in this state. But trying to further soak the rich doesn't get more money out of them. Too many of 'em are smart enough to leave--or make it look as if they are gone.

July 8, 2009

Response to post #5: Some are fleeing, yes. But who wants to leave San Diego to live in 110 degree heat in Las Vegas? The undesirability of so many lower-tax states inhibits some of the higher-income people from leaving California. I cannot see how lower taxes (such as the flat tax) or a value added-like tax, or lower cap gains or eliminating corporate taxes would keep that many upper-income people in California, or save jobs. Many will threaten to leave, but few will actually do so. Then there is this factor: how ARE you going to keep the state from going bankrupt? There have to be revenue increases somewhere. Best, Don Bauder

July 8, 2009

Laugh at the Laffer curve all you want, but it does work.

BTW, I don't propose higher taxes for the poor or middle class. They already are paying too much in this state. But trying to further soak the rich doesn't get more money out of them.

You're getting the Laffer supply side mixed up with moderate taxes.

i do not think for a second CA is under taxed. It is vastly over taxed-especially on the poor and middle class, in the way of sales, user and excise taxes.

So how does cutting tax rates for the rich help the poor and middle class-as Laffer opines? It doesn't. There is no such thing as "trickle down" economics. More like maybe we'll throw down a few crumbs.

The tax cuts Raygun gave to the rich, on a % basis, were 7 times what he gave the poor and middle class. He then took away interest deductions on credit cards because of the lower marginal tax rates, and then started raising those tax rates while not allowing the interest deductions back on CC's.

It was a big scam.

If Ronnie had not run up huge budget deficits while we had that huge economic expansion in the 80's I would be worshipping at his feet. But the borrowed money he printed offset any gain from increased economic prosperity.

July 8, 2009

Opps, forgot.

I agree we do not need anymore tax increases on ANYONE-rich, middle class or the poor. Especially the poor-and by that I mean no more sales tax increases. It should be capped at 6-6.5%.

We need to freeze spending for a couple of years, and then we need to limit spending to no more than 5% of the previous years budget. That prevents 5%-10% yearly pay increases in public sector employment.

If the budget grows extremely fast, and after we have established a 15% rainy day fund, we can spend budget excesses on one time deals-like infra structure projects, roads, camp grounds-anything that does NOT establish an ongoing expense-like when we raised prison guard pay by 37% over a 4 year period in 1999-2003.

July 8, 2009

Response to post #7: I agree. The Reagan and Bush II tax cuts for the rich are one major reason for the vast disparity in wealth and income -- a disparity that even Alan Greenspan believes could lead to social unrest. The disparity in this country is as bad as it is in some emerging nations. Best, Don Bauder

July 8, 2009

Response to post #8: The choice, it seems to me, is between tax increases and bankruptcy for California. Yes, there are places that should be cut in the budget, but they are not politically achievable. Best, Don Bauder

July 8, 2009

The revenue increases will come from a rebounding economy. But that may take a long time. I'd hate to see that recovery stifled by highest-in-the-US state taxes and fees. We've just had a round of tax boosts, and now we're told that they don't come any where close to bridging the budget gap. What shall we do? Raise the sales tax another two percentage points? Place the income tax top rate at 20%? The state is going to have to go on a starvation spending diet, like it or not.

The failure of those ballot proposals means that the taxpayers here are not going to roll over and allow another, even more burdensome, round of tax increases. They've already had enough.

Many of those folks who are leaving for LV aren't living in 110 degree heat. They're actually still here, but pretend that they live there. But many people actually have left San Diego, such as a former newspaper financial columnist, if I'm not mistaken. The Golden State doesn't look all that golden to many who are here, and many who might have wanted to come here.

July 8, 2009

The revenue increases will come from a rebounding economy. But that may take a long time. I'd hate to see that recovery stifled by highest-in-the-US state taxes and fees. We've just had a round of tax boosts, and now we're told that they don't come any where close to bridging the budget gap.

=========================

CA raised taxes $12 billion, and within 6 weeks was another $26 billion in the red-for a grand a total of $38 billion. What does that tell you about the people running this state? Even if we were to close the $26 billion budget gap, who's not to say 6 months down the road we end up short another $15 billion.

This state is in chaos, major chaos, from it’s own making.

The fact is, this recession/depression is going to last for many, many years.

There will be no recovery this year or next (I was hoping 2010 would be the year-but now I'm sure that will not happen), and when we do hit bottom it is going to be a long ride to get back to the top. I think 6-10 years.

Pension costs just for state employees (not local muni's) have grown from $321 million in 2000 to $7.2 billion last year, an increase of 2,300% in 9 years, and it is rising exponentially.

If we print anymore “stimulas” money I have a fear our entire economy may collapse-taking the entire nation with it.

Very scary times in my book.

July 8, 2009

Response to post #11: I am not suggesting that spending should not be cut. Of course it should be. But that alone won't do the job. Taxes in California are extremely high, but will go higher. Actually, Californians who own a pre-Prop. 13 home have a great deal. We did when we lived on Mt. Helix. When we compared our property taxes with those of compatriots in other states, we couldn't believe what a deal we had. Best, Don Bauder

July 8, 2009

Response to post #12: It's possible the recession/depression will last 6-10 years. Japan's did. And now Japan is right back in the soup. Instead of encouraging people to spend through a stimulus, we should actually encourage them to continue their savings spree. There will be pain in the short term, but in the long term, a high savings rate would be the best thing for an economic recovery. Trouble is, the economy is not timed optimally with elections. Politicians don't want savings to go up because there are elections in 2010. All told, I think we may be out of the woods by late 2011. But if the economy springs back, so will inflation. Best, Don Bauder

July 8, 2009

There are many reasons why California is going broke. Lack of tax revenue is not one of them. Immigration is a major cause. Legal immigrants used to be able to collect social security benefits at age 50 through the Social Security Supplemental Income program even though they paid nothing into the system. When Newt Gingrich and his "Contract With America" changed the law and kicked the immigrants off SSI, California assumed the financial burden of funding a replacement program for SSI without federal funding. Since California is one of the only states who offer elderly immigrants free money, they all come here to feed off the system.

July 8, 2009

Legal immigrants used to be able to collect social security benefits at age 50 through the Social Security Supplemental Income program even though they paid nothing into the system. When Newt Gingrich and his "Contract With America" changed the law and kicked the immigrants off SSI, California assumed the financial burden of funding a replacement program for SSI without federal funding. Since California is one of the only states who offer elderly immigrants free money, they all come here to feed off the system.

By Burwell

Hmmm...thats news to me, do you know how much money is spent on this?

July 8, 2009

The Federal government funds a program called Aid to Families With Dependent Children (AFDC). The AFDC program guarantees a monthly income of up to $3,800 per month for families with US born children, without regard to the residency status of the parents. For example, if a parent with four children earns only $1,800 per month, the AFDC program will pay the immigrant $2,000 per month, or whatever it takes, to reach the $3,800 per month minimum income level. The Federal government will only fund up to 5 years worth of AFDC payments for each recipient. After the 5 year Federal funding period is up, California steps into the breach (Calworks program) and pays the tab until each child in the family reaches age 18. This is why immigrants can support large families on minimum wage jobs. The AFDC/Calworks program is the major driver of San Diego's economy. It subsidizes businesses that employ minimum wage workers, and forces businesses with high paying jobs to leave the state due to high taxes. The program is in effect a massive subsidy to business owners who are flooding San Diego with shufflebutt jobs.

July 8, 2009

Burwell, CalWorks (and AFDC) requires that applicants are either citizens or lawful immigrants. Lawful immigrants are legal immigrants. Legal immigrants are people, like you and me and our ancestors (unless you are 100% indigenous). I understand your frustration at the Federal and State welfare waste, but it isn't an immigrant issue, it's a political issue. Money buys votes.

Legal immigrants vote.

Don't blame the immigrants for the handouts - blame the corrupt politicians for buying their votes.

July 8, 2009

Response to post #15: There are many reasons for California going broke. Payments to immigrants contribute to the woes. Many other generous transfer payments do, too. That includes corporate welfare. Best, Don Bauder

July 9, 2009

Response to post #15: It's a question that deserves exploration. Best, Don Bauder

July 9, 2009

Response to post #17: Yours is a fascinating post. I can't response to the specifics of the law because I have not studied it. Your interpretation of how it affects business is quite interesting, and open to discussion. Best, Don Bauder

July 9, 2009

Response to post #18: Another point worth debating. Best, Don Bauder

July 9, 2009

Yes, very interesting discussion.

If Burwell is correct he makes a good point, and I did not not know AFDC was picked up by CA after the 5 year welfare period was up. That was implemented by Clinton and to my knowledge the 5 year limit was the drop dead limit- so I am shocked to hear that CA continues to pay until the child turns 18-and that goes for both illegal and legal immigrants.

I would like to know if refriedgringo's contention that this aid only goes to legal immigrants is the law-or if Burwell is correct.

And even if this does apply only to legal immigrants, as refriedgringo has stated, Burwell is 100% correct that the state government is subsidizing business by allowing them to pay a minimum wage that is supplemented by the government welfare program.

And it does indeed drive down wages. Just as illegal, and legal, immigrants drive down wages of unskilled and semi skilled jobs (construction is the largest I believe).

I never knew any of this. All news to me. Let's get to the bottom of this.

July 9, 2009

Response to post #23: Yes, we have a controversy here. Burwell and Refriedgringo should come forward with their arguments. Best, Don Bauder

July 9, 2009

I found this in the LA Times today;

"Godinez, a 43-year-old undocumented Mexican immigrant, left an abusive family and lives in transitional housing. Four of her five children are citizens and receive a total of about $650 each month from the state's CalWorks program. She also receives about $500 in federal food stamps and other vouchers."

http://www.latimes.com/news/local/la-me-illegal10-2009jul10,0,3398621.story

July 9, 2009

Response to post #25: That is quite interesting -- sheds light on the discussion. Best, Don Bauder

July 9, 2009

The numbers cited in the LA Times article are extremely low, and appear to be an outright distortion of the truth.

"One of the governor's proposals would place a five-year limit on state welfare payments to the U.S.-citizen children of illegal immigrants. That would affect approximately 100,000 U.S.-born children in about 48,000 California households headed by illegal immigrants, who receive a monthly average of $472."

Immigrant families in California have on average 5 children. The 48,000 families headed by illegal aliens should have at least 200,000 children, not 100,000 as the article falsely claims. There are more than 48,000 families in San Diego County headed by illegal aliens. There are probably at least 500,000 families in LA County alone that are headed by illegal aliens. The $472 average monthly welfare benefit figure is totally inconsistent with the figures I have seen. A family of six should receive a minimun welfare benefit, including WIC payments and food stamps, of between $2,000 and $3,000, depending on whether the family is enrolled in Section 8 housing. The article also claims there are only 2.7 million illegals in California. I believe there are between 6 million and 10 million illegals in California. This LA Times article is inaccurate and relies on suspect and biased data that the state legislature fabricated to support its political goals.

July 9, 2009

It's very easy to hang California's debt over the head of illegal aliens. I've been listening to this argument for over a decade - that somehow Mexicans are raping the treasury of the State of California. Yeah, right. The politicians are raping the treasury, and they're using the impovershed in order to do it.

Burwell, as I say, I understand your frustration, but you need to be targeting your representative. The illegals aren't the problem, politics is the problem.

July 9, 2009

Response to post #27: SurfPuppy, can you defend the LA Times? Best, Don Bauder

July 10, 2009

Response to post #28: The conflagration is raging in other states -- not just California. Best, Don Bauder

July 10, 2009

Don- I love the LA Times, but Burwell and refriedgringo are the ones here who know the issues-I do not.

They both seem to put forth valid arguments, the question is who is closer to the truth-Burwell or refriedgringo? Or is the truth soemwhere in the middle? I have no idea.

I do question Burwells claim of $10 million illegals in CA (6 million is very possible), which would be 1 illegal for every 3.8 Californians-but who knows.

I don't know the answer to these issues here.

I have stated that we could fix the illegal problem by making one major move- we could Annex Mexico and make it the 51st state.

That would improve the the situation for everyone.

July 10, 2009

Response to post #31: Burwell and refriedgringo have both raised interesting points. Their disagreement is not the major point. Best, Don Bauder

July 10, 2009

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