California government may receive a windfall from huge capital-gains taxes on the sale of Facebook stock following the Palo Alto social-networking behemoth's recent initial public offering.
Or not.
Some were disappointed that the stock opened at $38 only to drop within a few days to $31.
A worst-case scenario for Gov. Jerry Brown and his Democratic Party colleagues desperate to shore up the state budget would be if resales of Facebook stock kept declining in value, not only eliminating capital gains, but providing tax deductions for selling shares at less than their purchase price.
The point isn't whether Facebook is a risky investment. It may or may not enrich the state's treasury. Brown estimated as much as $1.5 billion in tax revenue by fiscal year end.
But Moody's Investor Services warned: "Because capital-gains revenues are volatile and difficult to forecast, there is no guarantee that the state will receive the amount" it estimates, adding, "the state could receive much less, or much more."
The point is, Brown and friends don't know, one way or the other.
Nevertheless, as always, the powers that be in Sacramento put the best face on the prospects. And plan to spend accordingly. Their spending plans almost always outstrip their ability to fleece, ahem, make that to tax Californians.
What if Brown put the people he served first? Then he wouldn't continually disappoint. Brown's budget assumes his $8.5 billion tax increase will pass in November. Why not budget for it not passing? "He has," you say? Well, he has a contingency to trigger spending cuts if it doesn't pass.
That's not the same. It's a fundamentally flawed approach. It builds in disappointment. Brown should operate the way good businesses do. They underpromise and overdeliver. That minimizes disappointment and, occasionally, pleasantly surprises those served.
Instead, Brown overpromises, and consequently nearly always underdelivers. That maximizes disappointment. And leaves those served grumbling.
When ambitious promises fail to materialize, underserved people become irritated, feeling victimized by false advertisements. In the private sector, repeatedly overpromising and underdelivering results in customers who stop buying, and flee.
Brown's customers can't stop buying what government sells. But they can flee. And they have been, to other states.
Brown's revised proposed budget for the coming fiscal year, starting July 1, would spend a combined $224 billion in its general, special, bond and federal funds. That's $30 billion more than the state spent in 2007-08, the year before the recession hit.
If anything is obvious, it's that the top priority for Brown and fellow Democrats is getting more of the people's money, not serving people well.
They resemble Rocco, the gangster character in the 1948 movie "Key Largo," portrayed by Edward G. Robinson. Rocco was a ruthless mobster, and single-minded. What did Rocco want?
"He wants more. Don't you, Rocco?" says the character played by Humphrey Bogart.
"That's it! More," Rocco beams. "That's right, I want more!"
"Will you ever get enough? Will you, Rocco?"
"Well, I never have. No, I guess I won't."
The Capitol crowd resembles Rocco. They always want more tax money, and they have yet to get enough.
Brown laments that the general fund portion of his budget is $17 billion short of how much he wants to spend. He doesn't remind voters that, as the Wall Street Journal's Alyssa Finley pointed out, for "several years legislators have been using special funds (fees earmarked for specific purposes) to pay for programs that are usually financed by general fund spending." Instead, Brown says he needs more ? another $8.5 billion from taxpayers, to whom he literally has pleaded to increase their own taxes at the polls in November.
Will he ever get enough? To ask the question is to answer it.
Brown & Co. are like slick grifters, who con naive grandmotherly types. They promise great rewards, perhaps a gilded high-speed locomotive, or they pull at the heartstrings: "It's for the children."
They do whatever it takes to get granny to the bank to withdrawal her savings, using whatever pretense that works. Once her life savings are liquid, the old shell game soon separates the foolish taxpayers, uh, grandmothers, from their money.
Brown wants to persuade voters to approve just one more "temporary" tax increase. Even though the Capitol mob said the same thing in 2009, the last time they tried to shove a temporary tax increase down voters' throats. Voters responded with a loud "No," by 2-1 at the polls, probably because the vote came only months after the Legislature had shoved an even larger temporary tax increase down taxpayers' throats, on the promise it would be the last time.
More. It's the Sacramento motto. It should be embossed on their business cards.
In 2006, the Legislature celebrated saving the Earth from global warming by passing the arrogantly named Global Warming Solutions Act. We suspected it was more about control and money than temperatures.
Sure enough. Global warming, the nonthreatening condition that has risen and fallen for centuries before SUVs and smokestacks, remains unsolved. But the Act enabled Brown's Air Resources Board to impose a cap-and-trade scheme to force companies to pay billions to the state for the privilege of doing what they've always done, emit harmless CO2.
That pot of gold promises to provide Sacramento's tax-and-spenders much more of what they want most. Other people's money.
Earlier this year Brown admitted he hopes to use billions pried from industrial emitters' wallets to spend on his pet project, an all-but-gilded bullet train. If you wonder whether a train that requires massive construction, generating plenty of CO2 emissions in the process, is a tenuous link to fighting global warming, you're not alone.
But that's the M.O. of those who want "more." The Legislature previously sought to snatch cities and counties' gasoline and property taxes because, well, because it could. State lawmakers grabbed cities' and counties' redevelopment funds, because they could.
The Capitol gang even "borrowed" money designated for public schools to shore up gaps elsewhere in the budget. Because they could. Most recently, they want to use $400 million from a national settlement by banks earmarked for foreclosure prevention and investigation of fraud to pay the state's bills instead. Because they can.
When the governor emerges every January to declare yet another chapter in the government's ongoing saga of too-little revenue, too-much-spending, one might suspect he's not very good at budgeting.
We suspect Brown is brighter than he appears. We think he knows the initial 130-mile stretch of track for his high-speed train simply will squander $6 billion in state and federal funds. He reads the newspaper. He knows not another dime of federal funding will arrive any time in the foreseeable future.
Brown knows that if he's going to get more money, he first must squander the initial $6 billion. Once the seal is broken, and voter-approved bonds are sold to finance the dead-end train's initial leg, then it will be easier to persuade people that the remaining $6 billion in bonds should be sold, too. Even though that still would leave the train $50 billion to $100 billion short of what is needed to complete the project, it won't matter. Billions will be liquid. Fungible. That will make it possible to divert the cash for other spending plans. Time for the old shell game. If you doubt it, just ask cities and counties.
Brown and Capitol Democrats desperately seek jackpots, like crazed gamblers hoping the next roll of the dice will make up for their string of bad bets.
But they have a reverse Midas touch, spreading the poison inherent in taxation. Everything they touch wilts and dies. Witness the unmistakable exodus of taxpaying Californians and job-producing businesses to other states. In fact, these taxers and spenders are Rumplestiltskin in reverse. They spin straw from California's one-time Golden State.
Our hunch is that this won't end soon. Not as long as Brown & Co. can beg, borrow and steal: beg voters to "Please" approve more taxes, as the governor recently did; borrow, as the Legislature has from school funds; and steal from cities and counties.
Grandmas, lock up your savings. The Capitol Gang is on the prowl for "more."
Contact the writer: mlandsbaum@ocregister.com
Contact the writer: or 714-796-5025
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