Cal Lawmaker Proposes Taxing Services to Pay Pensions

With California facing what Steven Greenhut calls “Death by Pension,” former Democrat Speaker of the California Assembly and newly elected State Senator Bob Hertzberg released details of his Senate Bill 8 tax manifesto. What he refers to as the “Upward Mobility Act” would raise $10 billion annually applying California’s sky high sales tax rates to all professional, construction, financial and agricultural services for the first time.

Hertzberg says his three pronged tax and spend objectives are:

1. “harmonizing the economy and the growth of the economy with the tax system”;
2. “supporting the core values that we care about, education, infrastructure”;
3. “bringing government closer to the people.”

Hertzberg is clever when he claims the “extra money will be spent on schools, higher education and local governments among other things.” But those schools and local government and other things have one “thing” in common: California’s public employee pensions and lifetime healthcare is grossly unfunded by about one half trillion dollars.

Hertzberg argues that his proposal would make the state’s economy more stable. But according to his campaign website, the only “economy” that seemed to have endorsed him was 39 unions. Hertzberg raised $1.5 million for his Senate race against two rivals who together only spent about $8,000. More than half Hertzberg’s cash came from donors in organized labor, healthcare, real estate and construction, Indian tribes and gambling interests, finance, insurance and energy–all of which have business before the California Legislature.

As Breitbart News reported last week, despite Governor Jerry Brown triumphantly unveiling a record $113 billion state budget last week that increased spending by $5.8 billion over inflation, unfunded public employee pension and healthcare costs are devouring the budget.

Steven Greenhut argues that California’s entire public-sector defined-benefit retirement plans are “absurdly generous”, considering that private sector working class taxpayers only receive 401K savings plans.

He points to the fact that the average pension for a recently retired Highway Patrolman is $98,000 a year. Their retirement formula is based on 3% of compensation for every year of service and retirement eligibility at age 50. Public pensions are paid for the life of the retiree and retiree’s spouse. The public pensioners also get inflation kickers.

Public sector union bosses have attacked Greenhut as insensitive to the fact Highway Patrolman are “public safety officers” that deserve such a life of ease after taking the risk of being shot and killed in the line of duty.

Greenhut points to an article in the Orange County Register reporting that the City of Newport Beach’s 14 full-time lifeguards are also considered “public safety officers.” As a former Newport Beach season lifeguard in the 1970s myself, I don’t remember ever taking the “risk of being shot and killed in the line of duty.”

Regardless, the article revealed that 13 full-time lifeguards earned more than $120,000 a year in total compensation in 2010. The majority of “lifeguards that year collected more than $150,000;” with the “two highest-paid collecting $211,451 and $203,481 in total compensation respectively.”

Several of those lifeguards reached age 50 and retired since the article. Given that most beach lifeguards begin working at age 16, the lifeguards that retired were eligible for 34 years of service, times 3% of final pay. That means some Newport Beach lifeguard retirees started collecting over $200,000 a year in retirement benefits at age 50.

Senator Bob Hertzberg’s public employee=sponsored Senate Bill 8 and its sales tax increase on services may make the “economy” more stable for public employees and their pensions in the short term. But more taxes will drive away private sector jobs and the taxes they would have paid.