First step on taxes

JUST ABOUT EVERYONE blames the bad economy for the budget problems that are devastating local and state government programs and services all over the country. And that's a big part of the problem, obviously – but it's not the only reason schools, hospitals, parks, homeless programs, and even fire departments are on the chopping block.

As New York Times columnist Bob Herbert has pointed out repeatedly in the past few months, the antitax furor that has swept this country in the past 10 years has made it almost impossible for local agencies to raise the revenue they need to maintain an adequate level of services. California is one of the worst states: Here, it's impossible to raise property taxes and almost impossible to raise revenue through any progressive local levies. So – except during short-lived economic booms – infrastructure crumbles, education lags, and the needy get very little help. We've estimated that San Francisco has a structural budget gap of at least $100 million – that's the difference between what it costs to run the city at a tolerable level of service and the amount of revenue available in an average year.

Now, with state and local governments facing their worst fiscal crisis since World War II, Assemblymember Mark Leno (D-San Francisco) has proposed a relatively modest tax plan that would not only help cities and counties but also might strike a significant blow against the antitax mentality. His bill, A.B. 1690, is hardly perfect and wouldn't solve all of San Francisco's financial problems, but it's a positive step and deserves broad-based support.

As Rachel Brahinsky reports on page 20, the bill would allow local agencies to create "public safety districts" (which could include an entire city or county) that could enact an income tax on residents. The tax would be based on the state income tax system, which is relatively progressive.

Leno has cast the plan as a public safety measure: the law would require that an amount equivalent to half of the new revenue raised by the tax got to cops, firefighters, and sheriffs. But in a city like San Francisco, those agencies already get so much money that the city could (perfectly legally) simply continue public safety funding at existing levels, using existing budget sources – and divert all of the new tax money to other programs. And the bill would eliminate the requirement that the income tax be approved by a two-thirds local vote (an almost impossible burden).

The plan isn't perfect, by any means. A better measure would include the right to tax the incomes of local corporations (on a unitary basis, so they couldn't hide their profits elsewhere). It should specifically exempt the first, say, $50,000 of income, so only the top tier would pay. And the bill ought to include the right to tax commuters (as New York City is fighting to do).

But A.B. 1690 is a decent start – and if it marks the beginning of a move to allow local government more flexibility to enact progressive taxes, it's a very big deal indeed.