Are Taxes the Solution to CA’s Homeless Problem?

800px-Helping_the_homelessApparently, politicians up and down the state think the solution to California’s homeless problem is taxes. In San Francisco, members of the board of supervisors want to tax the tech industry. In Los Angeles, the city council wants to raise property taxes on all property owners. On the state level, legislative leaders plan to shift income taxes from the rich paid to a fund to help those with mental illness to finance housing bonds for the homeless.

Homelessness is a complex problem and the solutions are not easy. As far back as 2001 a brief by the Public Policy Institute of California identified some of the reasons for a growing homeless population including the high cost of housing, debilitating personal habits and attributes of many of the homeless—alcoholism, crack cocaine addiction, and mental disorders— and income inequality. Its safe to say that since then the homeless situation has worsened.

But is raising taxes the solution?

In some cases it makes sense. Take the Proposition 63 income tax dedicated to help with mental illness. The fund was not being well spent according to an audit. The state effort to shift some revenue from that fund to a more useful function to finance bonds allows a foundation for helping the homeless across the state.

But the local solutions have less merit and again target business in large part as the answer to a problem.

In San Francisco, supporters of the tech tax blame the tech business for the homeless problem arguing that the booming tech industry is responsible for increased housing costs in the city. The tax would raise about $120 million a year.

Given that the city by the bay has been a haven for the homeless and downtrodden well before the boom in technology, it seems tech is being made a scapegoat. An attack on one industry could be an impetus for individual companies to pull up roots and find a friendlier business environment. The precedent setting idea of taxing one industry to solve a societal problem is dangerous for all sectors of the business community. The obvious question: Who’s next?

The Los Angeles approach is different but still questionable. The city council approved putting a $1.8 billion bond on the ballot, which will probably cost twice as much to pay off with interest and will be backed by property taxes. The council is also considering a parcel tax on all properties and may move forward with both plans until a final decision is made in August on which to put on the ballot.

The property taxes will fall heavily on residents who are struggling with the high costs of housing in the region. Homeowners, businesses and apartment owners will carry the burden. Renters covered by the city’s rent-control provisions will not have the tax passed on to them.

In both San Francisco and Los Angeles a two-thirds vote is required to pass the taxes.

Opposition from the business community and some local pols, including the mayor, are lining up against the tech tax in San Francisco. However, the mayor of Los Angeles has promised to find revenue for homeless issues and will support the final plan. Business reaction could be mixed, although the parcel tax, especially if the tax is calculated on a property’s square footage, will certainly bring out strong opposition from business.

One thing that is often ignored in looking for solutions to local problems is to improve the business climate, create jobs, and allow people to earn more. Admittedly, this is not a silver bullet solution for the homeless crisis but it should be talked about constantly instead of always falling back on the T-solution. Taxes.

This piece was originally published by Fox and Hounds Daily