THE LEONARD LETTER
A weekly electronic newsletter from
Bill Leonard, Member
State Board of Equalization
October 13, 2003

"Great ability develops and reveals itself increasingly with every new assignment." Baltasar Gracian (1601-58) Spanish Jesuit philosopher and writer

UNDER THE DOME

***Recall Ruminations***

First of all, I am both pleased and relieved with the recall results. I said all along that it was a very risky endeavor for the Republican party. If Schwarzenegger would have lost, the resulting recriminations and finger pointing among Republicans might have crushed our already fractured unity and would likely have kept Republicans out of statewide office for a very long time. But, like other high-stakes wagering, the upside to this gambit is huge. There is much that Governor-elect Schwarzenegger can do to help restore our state's fiscal health. I will be outlining some of these in the November issue of the California Political Review. If Schwarzenegger keeps to the philosophy that he laid out in the Wall Street Journal before the election-- a philosophy that is downright Reaganesque, by the way-- I have every confidence things will get much better for all Californians.

***By the Numbers***

California has a new Governor and in choosing him we have become a fascinating study of politics and electoral behavior. Early on in the recall I expressed in this space concerns for questions about legitimacy that could arise from the electoral math. Those concerns have not been realized since Arnold Schwarzenegger received more votes (3,850,804 total) than the number of people who wanted to retain Gray Davis (3,668,076). Indeed, the "no on recall" vote is nearly identical with last November's Davis re-election vote, which indicates that the "Yes on recall" winning margin came from voters who voted for a third party candidate last November and newly activated voters, whether newly registered or those who did not vote last November.

Turnout was not as high as many predicted, just shy of 52% and only 1.3% higher than last November's election. Turnout for the replacement candidate questions was 49.6%, nearly one point lower than the number who voted last fall.

Schwarzenegger won biggest in several northern counties: Sutter (64.6%), Glenn (62.4%), Kern (61.7%), Yuba (62.3%) and Lassen (60.9%). In all, he carried 50 counties. The electorate was 69% White, 18% Latino, 6% Black and 3% Asian. This will come as no surprise, but exit polling revealed that the voters were in an overwhelmingly foul mood -- 72% saw the state on the wrong track. Our new Governor's challenge is to turn that negativity around through his new leadership and policy direction.

***Little Room for Partisan Mischief***

I ran into our Secretary of State, Kevin Shelley, a few days before the election. I called him "Chad" to get a rise out of him about his role in giving the final tally his imprimatur. State law gives him until November 15 to do so. However, county election officials have until November 11 to report their count to him. Even though he faces some pressure to either speed up or slow down the process, Kevin told me that in past elections, the counties have taken nearly all their allotted time to finish counting ballots before reporting the results to the state. I called a county election office to find out why, and the reason I was given is the increasing number of absentee ballots that need to be counted. And it is only afterwards that the provisional ballots get counted because in many cases the voters used provisionals because they were told that records indicate they should have already voted absentee. In short, it appears that Shelley has little wiggle room, so partisan pressure will not likely bear on the timing of the final certification.

***Take This One to the Bank***

The appointment rumor mill is in full swing. One of the rumors I am hearing that simply make no sense involves Tom McClintock becoming director of the Department of Finance. While I think he would be exceptional at that job, the Constitution strictly forbids legislators from being appointed to positions by the governor. Article IV, Section 13 says, "A member of the Legislature may not, during the term for which the member is elected, hold any office or employment under the State other than an elective office." I tried to change this law in the late '80s, but the Senate killed my reform.

***Some Sour Grapes***

Despite the fact that Davis gave a graceful concession speech, some Democrats lost their composure on election night. Senator John Vasconcellos was quoted in the Oakland Tribune saying, "If people want this actor to govern ... they don't need or deserve me." No John, the people deserve much, much better. Senator Sheila Kuehl was quoted in the Sacramento Bee saying, "I don't know if everybody is going to go to the State of the State because frankly I don't think there is going to be a lot of content that anyone's interested in."

These comments show the severe denial of the liberal wing of the former party in power. They still do not grasp how badly they have failed the people. The Democrats should be clinically depressed over the election results, but the intellectual pretension is just plain ugly. Message to the Dem caucus: You had your chance at one-party governing and the result of your rule is that the state has never been in worse shape.

***As Goes Hawaii...***

If I were granted one wish in this post-election week, it would be that this new Administration follow the example of Hawaii's Governor Linda Lingle. She accomplished what most thought was impossible. It had been 40 years since Hawaii last elected a Republican Governor and up until her stunning victory, the state had never elected a woman. Her victory was hard fought against mud slinging and dirty tricks. In her Inaugural address she made a promise to Hawaii and she and her administration have lived up to that promise: "Today begins a new day for Hawaii. It does not matter who you supported in the campaign. If you are a friend of Hawaii, you are a friend of this Administration."

ISSUE FOCUS

***Incentivizing Contraband***

"A lot of people who were selling pot or heroin are now selling cigarettes. You can make the same amount of money, and you don't get locked away as long." These are the words of a 25-year-old quoted in the New York Times explaining how former drug dealers are now making $100 to $150 a day selling contraband cigarettes in Harlem as a result of higher cigarette taxes and a ban on public smoking in bars and restaurants.

No doubt you could find a number of people making such money in California who would share a similar sentiment. We have the fourth highest cigarette tax in the country and our tobacco tax is the highest in the nation. Prop. 10 in 1999 added an extra 50 cents per pack, bringing the tax per pack of cigarettes to 87 cents. The tobacco tax rate as of July 1, 2003 was 46.76%.

With taxes that high, criminals know there is a huge market for cheaper, illegal tobacco products. The BOE estimates that California loses $270 million per year because of tobacco-related tax evasion schemes. Philip Morris filed a lawsuit earlier this year against five importers who allegedly brought in more than 215,000 cartons of fake Marlboros and other Philip Morris brand products. The company is also suing hundreds of retailers who were pedaling the contraband. According to a Philip Morris spokesman, most of the counterfeit cigarettes found in Southern California contain Chinese tobacco. Much of the smuggled cargo feature phony tax stamps.

Such tax evasion hurts the state's bottom line and limits the programs-such as breast cancer research and child health programs-that the voters intended to benefit from the tax. Honest businesspeople are disadvantaged by unscrupulous sellers who undercut legitimate products. Law enforcement is also at risk since such smuggling is accompanied by an increase in thefts, hijackings and other crimes.

On November 6, 2003, I am hosting a conference about the Underground Economy with the Foundation for Fair Contracting. The event will be from 8:30am-4:30pm in the State Capitol Building. If you would like additional information or want to register for this free discussion of how our state can deal with the issues created by the underground economy, please contact Margaret Pennington of my staff at margaret.pennington@boe.ca.gov

In another case, an appellant, in an attempt to obtain a majority of the Board's support, misrepresented one Board member's position to another Board member---apparently believing there would no communication that would make this apparent. The result was a loss of the appellant's credibility.

I sit on the Board as a friend to the taxpayer, but I am disappointed with those who refuse to approach their tax dealings honestly or with integrity.

MISCELLANY

***Three More Words to Know***

Each week, the Leonard Letter features a few of the words from a list of 100 words that some educators say every high school student should know. The full list may be viewed at http://www.houghtonmifflinbooks.com/booksellers/press_release/100words/.

55. Nanotechnology (n) --- The science and technology of building electronic circuits and devices from single atoms and molecules: California's job climate must become more inviting if we are to attract the high-paying and creative jobs that come with fields like nanotechnology.

56. Nihilism (n) --- 1) Philosophy. a. An extreme form of skepticism that denies all existence; b. a doctrine holding that all values are baseless and that nothing can be known or communicated; 2) Rejection of all distinctions in moral or religious value and a willingness to repudiate all previous theories of morality or religious belief; 3) The belief that destruction of existing political or social institutions is necessary for future improvement: George Will's criticism of the recall crosses the line and wrongfully paints Californians as nihilistic for their having rejected the traditional means of representative government in their eagerness to fix what is wrong in the state.

57. Nomenclature (n) --- A system of names used in an art or science: California's political nomenclature is adapting with the recall and identifying a new breed of voter called the Schwarzenegger Conservative.

BOE AND LEGISLATIVE DATES

October 13 --- Columbus Day observed.

October 15 --- BoE meets in Sacramento.

November 15 --- Statement of the Vote --- The last day for the Secretary of State to prepare, certify, and file a statement of the Vote.

November 18 & 19 --- BoE meets in Sacramento.

NOTABLE DATES/ HISTORY

October 13, 1775 --- Continental Congress orders construction of a naval fleet

October 13, 1792 --- Washington lays cornerstone of the Executive Mansion (White House)

October 14, 1774 --- 1st Continental Congress in Philadelphia declares colonial rights

October 15, 1789 --- First Presidental tour (George Washington in New England)

October 15, 1966 --- LBJ signs a bill creating the Department of Transportation

October 16, 1649 --- The American colony of Maine passes legislation granting religious freedom to all its citizens, on condition that those of contrary religious persuasions behave acceptably.

October 17, 1989 --- The Loma Prieta earthquake strikes, killing more than 60 people

October 18, 1867 --- U.S. takes formal possession of Alaska from Russia ($7.2 million)

October 19, 1765 --- Stamp Act Congress meets in NY, writes Declaration of Rights & Liberties

GENERAL TAX INFORMATION

For answers to your general tax questions, call the Board of Equalization information center. Customer service representatives are available to help you from 8:00 a.m. to 5:00 p.m. Pacific time, Monday through Friday (except state holidays).

Toll-free number: 800-400-7115

TDD service for the hearing impaired
TDD phones: 800-735-2929
Voice phones: 800-735-2922

HOW TO CONTACT ME

Bill Leonard
Board of Equalization
450 N Street, MIC: 78
Suite 2337
Sacramento, CA 95814
Telephone: (916) 445-2181
Fax: (916) 327-4003

 Email to: Bill.Leonard@boe.ca.gov