Dan Walters: Steve Peace's tax scheme lives again

Sacramento Bee ^ | 8/4/10 | Dan Walters

[SmithL]

Anyone seen Steve Peace lurking around the Capitol?

Peace, a Democratic state legislator in the 1980s and 1990s, was fond of floating big ideas, which usually involved big money. And some of them, unfortunately, were enacted into law, such as deregulation schemes for workers' compensation insurance and electric power.

The latter, drafted during what lobbyists dubbed the "Steve Peace death march," was one of the biggest disasters in California history. But Peace continued to spout high-concept notions, the last of which cost Gray Davis his governorship.

Peace was Davis' budget director when, in 2002, the newly re-elected governor unveiled a revised budget that wildly inflated the projected deficit in hopes, it seemed, that it would make his "cuts" appear much larger than his new taxes.

It backfired badly. Davis was accused of having hidden a whopping deficit and within weeks, a successful recall drive was mounted to drive him from office.

Peace has continued to prowl the periphery of politics. He was instrumental, for instance, in crafting the "top-two" primary measure, enacted by voters, that was put on the ballot last year as part of a budget deal.

One of Peace's oft-voiced ideas was that the state could exploit the federal income tax deductibility of state income taxes by boosting the latter while reducing non-deductible sales taxes, thereby compelling the feds to indirectly subsidize the state budget.

Democratic leaders have now dusted off Peace's notion as the centerpiece of a plan that, if enacted, would forestall the deep education and social services cuts that Gov. Arnold Schwarzenegger wants. The Democrats also want to impose a new oil extraction tax and higher taxes on cars and to suspend corporate tax breaks enacted last year.

[ash-housewares]

This is a good tip from Walters- he knows where the bodies are buried, or, in this case, up and walking around again