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Posted on 08/23/2002 1:22:11 PM PDT by John Jorsett
The California state budget battle continues in Sacramento. And counterproductive tax increases are still on the table.
Particularly in a high tax state like California, tax hikes are never a good idea. Higher taxes allow politicians to go on wasteful spending binges, or provide a bailout for past profligacy. In this case, many California state officials are looking to whitewash past extravagances that have generated a budget deficit topping $23 billion.
Assorted tax increases are being considered. A favorite, of course, is a tobacco tax hike. Under consideration is a whopping 245% increase in the cigarette tax from 87 cents per pack to $3. Among the other assorted levies in the mix are a 3 1/3% tax on sales of commercial property, a 5% tax on satellite TV subscriptions, and a suspension of net operating loss tax provisions for businesses.
For good measure, there are those in the legislature who still want to boost income tax rates. In a recent letter to Darrell McKigney, president of the Small Business Committee, Assemblyman Joe Nation wrote: "Senator John Burton has proposed Senate Bill 1255, which would raise the personal income tax rate from 9.3% to 10% for individuals earning $130,000 per year and couples earning $260,000 per year. SB 1255 would also increase the rate from 10% to 11% for individuals earning $260,000 per year and couples earning $520,000 per year. This measure has yet to be heard by any Senate policy committees. However, should SB 1255 eventually come before me on the Assembly Floor, I will give it my support."
Meanwhile, the legislators proposing these various tax increases seem oblivious to the impact that such measures would have on business, investment and the economy. And like other parts of the nation, California's economy is not exactly robust right now. In fact, the only growth industry in the state of late is government, and that's not good news.
According to the U.S. Bureau of Labor Statistics, total employment in California was down in July by 0.2% versus 12 months earlier. Mining employment was down 3.3%; construction jobs down 2%; manufacturing employment fell by 4.4%; transportation and public utility jobs down 4%; finance, insurance and real estate jobs declined by 0.1%; and service jobs dropped by 0.3%. Wholesale and retail trade experienced a small 1% gain. However, government employment in California jumped by 3.1% in July versus a year earlier.
Earnings data from the U.S. Bureau of Economic Analysis reveal a similar trend. For example, private-sector earnings recently peaked in California during the fourth quarter of 2000, and had fallen by about 2% by the first quarter of 2002 (most recent data available). However, public sector earnings continued on a relentless upward growth path. Over the period of the fourth quarter of 2000 to the first quarter of 2002, government earnings increased by 14%.
Economic growth, though, is generated in the private sector, not through more government spending or more pay being doled out to government bureaucrats.
Unfortunately, the tax increases being considered in California, if imposed, would dampen economic activity, and would suck more resources away from productive, private sector ventures, in order to feed bigger government.
For example, tobacco tax increases would boost cross-border and underground sales, with a wide array of retail stores in the state - many small businesses - getting hit hardest. A tax on commercial real estate sales would hurt the real estate market, again with many small players feeling the costs most severely. And finally, any kind of income tax increase would diminish incentives for working, investing and risk taking in the Golden State.
California's economy needs a major dose of fiscal responsibility. That means not only addressing the actual source of the state's budget problems - that is, on the spending side of the equation - but also looking for ways to create a policy environment far more friendly to the entrepreneurs and small businesses that generate economic growth and jobs.
According to the "Small Business Survival Index 2002," a report I write for the Small Business Survival Committee that ranks the states according to their respective policy climates for small business and entrepreneurship, California ranks a dismal 46th in the nation. That poor ranking is in large part due to burdensome taxes. Even higher taxes will further damage the state's competitive position and economy. Indeed, rather than looking to increase income tax rates, the state's already onerous personal, capital gains and corporate income tax rates need to be cut.
California's elected officials must move the state's budget debate away from considering tax increases. Instead, they must concentrate on reducing the size and scope of state government, and providing tax and regulatory relief to consumers and businesses. By doing so, California will get back on a path of economic opportunity and prosperity.
Regrettably, since when did doing the right and proper thing for California ever stop the Democrats in the state capital from doing the exact opposite!
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calgov2002: for old calgov2002 articles. calgov2002: for new calgov2002 articles. Other Bump Lists at: Free Republic Bump List Register |
That's for darn sure. The California Damnocrats have been doing the exact opposite of the right thing for 3 decades now, and have turned this dang state on it's ear.
I wish California would just flush and start all over.
A quick link is here : California Payroll Tax Basics
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