How to sabotage a recovery: Raise taxes

Even before Covid-19, many Californians were struggling with the high cost of living here. The long-time willingness of many Californians to pay the “sunshine tax” premium for living in a state with great weather, universities, entrepreneurial culture, and lifestyle has eroded in the face of high costs of daily life.   

Things have gone from bad to worse during the pandemic crisis. The Sacramento response to the economic and jobs calamity has been not to cut costs, but instead propose more taxes – higher property taxes on commercial, industrial and agriculture property; a new sales tax on services; a new tax on jobs; and most recently another hike in income taxes for families and small businesses that make more than $1 million a year.

These tax proposals each present a host of policy problems, but more broadly they reveal a massive gap between the lawmakers making decisions in Sacramento and the views and needs of average Californians trying to get ahead and take care of their families.     

Sacramento politicians hear “tax” and envision billions of dollars in additional revenue to fix all those basic problems they haven’t solved to date – worsening schools, deteriorating infrastructure, homelessness, economic disparities – despite having spent a trillion dollars in the last five years to address these problems.  

California voters hear “tax” and think about the dollars coming out of their pockets, and wonder if they’ll ever see much benefit from government spending their money.

But beyond the politics, these measures have profound policy problems.

  • Hiking taxes on the wealthy will send a message to the very people who together provide 40% of personal income tax revenue: is it worth it to you to keep California as your home and business location?  One take-away from the recent catastrophe is that skilled individuals can work at or start a business from almost anywhere. And even higher income taxes will exacerbate the state’s budget volatility.
  • Creating a new tax on services will drive up the costs of nearly every good and service in the state, hamper our efforts to build affordable housing and infrastructure, and punish small businesses.
  • Prop 15 claims to target just big commercial and industrial owners, but it also taxes farmers and ranchers, driving up food costs, hikes costs on small businesses who lease their space, and eventually winds up being paid by consumers. 
  • tax on jobs created by large employers will have the predictable effect: fewer jobs created by these employers – at least in California.

A recent poll of California voters by EMC Research for the California Tax & Budget Research Project revealed some trends long felt by California voters and long understood by those who actually listen to them: 

  • 66% of likely voters at the November election said they agree that California taxes are out of control and they would oppose any tax increase.
  • 77% of these voters said they agree taxes on corporations and businesses just get passed on to consumers in the form of higher costs.

Covid-19 and the resulting impacts on the state budget don’t change this foundational reluctance toward taxes. 

When asked about the $54 billion budget deficit due to the pandemic, by a two-to-one margin voters said California is too expensive and highly taxed already, and would oppose any tax increases because they would make a bad economy worse and raise costs for consumers. They soundly rejected the position that the state needs to consider increasing taxes to fund schools, health care and COVID-related services.

Put simply, voters have had enough. They’re wise to the shell game pretending taxes on someone else won’t get passed on to all residents.

Nobody in California is immune to the havoc wreaked by the Covid-19 pandemic – a health crisis compounded by an economic collapse which is eroding our social cohesion. We’ve seen how an economic recovery can be thwarted by new virus outbreaks. Our elected leaders should similarly resist public policies that would prevent a healthy restoration of jobs and the economy.  

Loren Kaye is president of the California Foundation for Commerce and Education

This article was originally published by Fox and Hounds Daily.

Comments

  1. Rottweiler says

    Is this like the last gas tax repeal when voters said no and it meant yes? Look where that got us, we have to put that one on again because last time everyone thought no meant no we don’t want it and yet they voted for it. My point is don’t be a uninformed voter, read what nomenclature they change at the last moment to get their tax money passed. If it wasn’t for voters lack of attention the gas tax would have been eliminated last election. VOTE NO ON15 for now but always subject to change from our sleazy political forum aka over paid corrupt Democratic progressive leeches like Padillo.

  2. Anthony F Germano says

    Its never enough, never. We are all out of work for now but yet it sames everyone in Sacramento is still at it. TAX,TAX and more TAX. Yeah that’s the ticket, just keep taxing everyone to death. If this God Damn Virus doesn’t get us, The DO NOTHING POLITICIANS WILL. One more thing, when the rich people all leave this state, who will get taxed next. If the Major companies get the hell out of this toilet of a state, who will get taxed next. If you thought there were riots before, wait till we the good folk all join in too. We are going to need alot more police. Maybe it will be good that the crazies want less police after all.

  3. Peter Grace says

    The opening paragraph clearly states why CA is in the preverbal sewer! (Even before Covid-19, many Californians were struggling with the high cost of living here. The long-time willingness of many Californians to pay the “sunshine tax” premium for living in a state with great weather, universities, entrepreneurial culture, and lifestyle has eroded in the face of high costs of daily life.)
    So, let us break it down: the sunshine tax is a broad base term meaning, we will and can tax you without you knowing it!
    The weather, fires, lots of fires every year because the water storage and common-sense forestation is a non-issue!
    Next, the university, huh!!! They do not educate, the sole purpose of the UC environment is to create seriously high paying – UNION ONLY JOBS, OF COURSE, where outcomes are not a requirement. The entire education system in CA is beyond a joke – best to be accurate, calling it what it really is – abhorred from preschool to Ph.D.! Now go back to the 60s and 70s, all educational systems in CA were flying high the model for the world, then liberalism and unionization joined the education marketplace!
    Not sure about the entrepreneurial culture when many are leaving due to out of control costs, regulations, and of course, you cannot buy a house in those primo areas. (Found out yesterday a 1,200 sq. ft home in San Jose requires the buyer to pay over 1,000,000 dollars), enough said!
    Now we get to the best one lifestyle: all major cities are now cesspools of human debris being financed by draconian disguised policies that have never get resolved!
    The majority of elected and appointed positions are based on who you know, not are you fiscally sane, competent, honest, with integrity performing to ensure the diminishing taxpayer base remains solvent, that is the issue!

    • Anthony G. says

      Peter Grace, You have hit it square on the head. Everyone in this state should read this and the rest of the country for that matter. Bless you man.

  4. More than half the state population pays little or no taxes so these soaks the rich taxes will likely pass once again.
    It just means the roads leading out of the state will just get more crowded as the non-producers wave goodby to the producers. But only if they can get around the potholes.

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