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A California Christmas Wish List


Dear Santa,

Well, it’s that time of year again, and I’d like to think I was a good little economist in 2013. I guess that means it’s time for my Christmas wish list, although I’m sure there are more than a few folks who think I deserve less than a stocking full of coal! I’m hoping I might find a few of my wishes under my tree this year, since candidly, last year was a bit of a bust. But I have faith in you Santa!

My first wish is for CEQA reform—you remember, the California Environmental Quality Act? Both Governor Jerry Brown and I had it on our lists last year. CEQA is that well-intentioned 1970 statute designed to promote smart development, but which has ended up being grossly abused by special interests looking for kickbacks, NIMBYs intent on fighting any growth, and unscrupulous lawyers out for self enrichment. Ultimately, in the 40+ years since it passed, CEQA has strangled all sorts of investment in California leading to, among many other things, a serious housing shortage and extremely high housing costs.

Well, there must have been some confusion at the North Pole. We, Jerry and I, specifically requested the SB-731 model of CEQA reform, which would have been a solid first step in fixing one of the largest barriers to growth in the state’s economy. Unfortunately, we ended up with a cheap knockoff called model SB-743, which wasn’t real reform at all. Hopefully we can get that little mix up corrected this year… right Santa?

My next wish would be for a little rationality to descend upon the good people of San Francisco. I know they mean well when they pass various restrictions on converting apartments into condos, expanding rent control, and creating inclusionary housing mandates. After all, low-income families are having a really tough time in San Francisco’s increasingly unaffordable housing market, which is not something any of us want at Christmas or any other time.

But why then did the City’s voters turn around and reject a massive new housing development that would have done much to alleviate the short supply that now exists and that is driving up prices? Even you, Santa, can’t fight the basic forces of supply and demand—we both remember that whole Elmo fiasco. How can we get people to see that if you want cheaper housing, you have to either make more of it, or get people to move away. And you might consider sprinkling a bit of your magic market powder across the entire state, as this housing shortage is everywhere, but definitely start with the City by the Bay.

Speaking of irrationality, can we get a little tax reform in California? Geez Santa, this was at the top of my list last year. With a supermajority in Sacramento for the first time in decades I thought that I might finally see some basic changes put into place that fix the crazy things our state has done in the past. But nothing at all—just an empty box. We are still the only major oil producing state without an oil extraction tax. We still have one of the most progressive income taxes in the nation and one of the most regressive property tax systems (because of that awful, awful Prop 13). We haven’t even considered a tax on services to go along with our sales tax on goods. We just keep heaping higher taxes on top of that same old shrinking portion of the spending basket. It doesn’t seem fair Santa.

Now mind you, I’m not asking for more taxes—Californians pay enough already. But a few simple changes would make state revenues less volatile and easier to forecast, spread the tax burden out far more fairly, and make the state much more tax friendly. You might be surprised to hear me say it, but let’s move in the direction of Texas a bit — flatter, lower income taxes, higher real estate taxes based on a fair model of current market value, and a broader set of use taxes.

Another of my wishes this year is for policy debates based on research and analysis, not anecdotes and propaganda. How many laws are passed because a single person’s sad circumstance is hauled on stage by a pandering politician—despite the fact that the person’s situation is a complete outlier and not remotely representative of the situation as a whole? Yeah Santa, I was thinking of that silly Homeowner Bill of Rights that passed in January of this year.  How did you guess? Maybe because its authors didn’t appear to consider any real evidence when they wrote the law, which has ultimately done nothing to help a market that was already recovering on its own and could still cost future homeowners by making credit even harder to get.

And Santa, I’m still seeing those so-called “policy studies” which start with an answer and then proceed to twist and distort data in order to rationalize that answer no matter how ridiculous and contrary to actual facts. I’m referring to the propaganda stories that Prop 13 is for retired people (even though it has nothing to do with age), and that it has controlled and stabilized state revenues (even though the swings in revenues and massive deficits are now the worst in the state’s history because of over reliance on income taxes). I’m sure we can do better Santa, with just a little of your help.

For my final wish, we seem to be spending a whole lot of money on a high-speed train that would connect Los Angeles and San Francisco. It seems shiny and nice, but really, I very rarely have trouble getting to the Bay Area from where I live in Los Angeles on all those wonderful flights that go back and forth daily. Indeed, sometimes it takes me longer to drive to LAX than it does to fly to San Francisco. Maybe it would be better to not build that cool train and use all those funds to build, fix, and expand local highway systems?

Well, this was a big list. I know it’s a lot, but as mentioned, even one or two would be a great start to 2014. Thanks Santa, and have a great New Year!



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