Thursday, October 28, 2010

California Ballot Propositions Threaten Major Tax Hikes

A range of far left-wing lobbying groups is pushing for a major shift in California's tax structure. The effort got a boost this week by the findings of a pro-tax commission, reported at LAT, "California's Business Tax Burden No Heavier Than Average." Of course, out-of-control spending explains the state's fiscal problems, and the commission's report is a scam. See, "LA Times Thinks (Incorrectly!) That Business is Undertaxed":
The fundamental problem with the Times article, and much of the left-of-center criticism of California business taxation - is that they posit a world where public policy is a passive pawn in the hands of manipulative corporations ...
That's right, although that's WAY left-of-center criticism, for example, with the California Teachers Association's attacks on "corporate greed" seen in this "Yes on 24" video clip:

See also WSJ, "The Tax Me More State: Two Initiatives Would Further Punish California":

The Tax Foundation announced this week that California has the second worst business tax climate of the 50 states, with only New York more hostile to employers. Congratulations, but it gets worse. If a pair of ballot measures pass next week, the Golden State could soon take the tax lead and make even Albany look like Hong Kong.

Proposition 24 would raise $1.3 billion of new taxes on businesses, while Proposition 25 would allow the state legislature to pass budgets and tax increases with a simple majority vote, instead of the current mandated two-thirds supermajority.

The most pernicious is Proposition 25, which is being sold as a good government measure to end the state's annual fiscal follies and pass a budget on time. But what matters more than how a budget passes is what's in it. And the two-thirds rule that has prevailed since the passage of Proposition 13 in 1978 has been the lone restraint on the government unions and their political valets who have spent California to the brink of insolvency.

Only last year, voters were spared another huge tax increase when Democrats who control the legislature agreed with Governor Arnold Schwarzenegger on a budget deal. Using their leverage from the two-thirds rule, a GOP minority demanded a referendum, and the voters rejected the deal. The annual budget squabbles may be messy, but they draw much-needed public attention to what the spending interests would prefer to keep secret in Sacramento.

Proposition 25 is deceptive because its "intent" language that purports to explain its meaning to voters claims that the law "retains a two-thirds vote requirement for taxes." But "intent" sections aren't included in the state Constitution. Instead, the proposition clears the way for a straight majority vote for budgets and the more amorphous category of bills "related to the budget." That's an exception wide enough to drive a tax increase through, and nearly every state taxpayer group and their legal experts are convinced that this is an attempt to end-run Proposition 13.

Proposition 24 is also deceptive, starting with its title, "The Tax Fairness Act." It is opposed by just about every iconic employer left in the state ...

We'd prefer no such tax carve outs and a flatter tax code ... but in California they're the only break from the state's preposterously high tax rates. California imposes the fourth highest personal income tax rate on small business income (10.55%), the third highest state-local sales tax (9%), and the 13th highest corporate tax rate (8.84%).

The main sponsor and funder of these tax initiatives is — you'll never guess — the California teachers union. Need we say more? The unions are desperate for more taxpayer cash lest they have to adjust their health-care benefits and pensions as workers in the private economy have had to do. They seem to believe they have no stake in the state's economic growth so they can pile on taxes even with a 12.4% state jobless rate. A horrific 21.9% of the state's residents are either unemployed, can't find a full time job, or have become so discouraged they are only marginally attached to the labor force. But public employees, protected by the political class, live in an alternative universe ...