By Robert Gutierrez, Director of the California Tax Foundation
Most of California’s 39.5 million residents are here because they or their relatives decided at some point to pack up their belongings and head west, leaving behind homes, families and friends for the hope and opportunity that beckoned from the Golden State.
Things have changed. Today, domestic migration statistics and forecasts show that people are leaving California to move to other states. The San Francisco Bay Area even experienced a shortage of U-Haul trucks and trailers to move people to places like Arizona, Idaho, Tennessee and Nevada.
Many legislative leaders have argued that California’s sunshine, warm climate and excellent universities were more than enough to draw people here. But California is an expensive place to live and do business. Housing and rental prices are skyrocketing. Fuel and transportation costs are higher here than elsewhere. And, Californians believe they pay too much in taxes.
Recent polling by the Public Policy Institute of California shows that 61 percent of likely voters in this state believe their share of taxes paid to state and local governments is more than it should be. The poll also found that a staggering 81 percent believe California’s tax burden is higher per capita than the rest of the nation.
Stephen Moore, a respected economist and frequent columnist for the Wall Street Journal, spoke at CalTax’s 92nd Annual Meeting and reminded taxpayers that California is competing for jobs on a global scale. Higher taxes, along with proposals to raise tax rates, do harm by reinforcing the perception of bad business climate, he said.
“If you don’t cut your tax rates, you’re going to be in a world of hurt in California,” Moore said. “California, you just don’t take competitiveness seriously …. You can’t be pro-worker if you’re anti-business, it’s as simple as that.”
Tax Watch, a report released by the California Tax Foundation, illustrates Moore’s point only too well. According to the report’s findings, more than $269 billion per year in higher taxes and fees are pending before the state Legislature.
The largest single tax or fee proposal is a $200 billion annual tax hike to establish a healthcare system in which state government would pay all costs (SB 562). The Assembly leadership has pledged not to move the bill, but is actively pursuing alternative policies that likely would be funded via a similarly substantial tax increase. The report also includes a $49 billion annual tax on the purchase of services by businesses in California (SB 993), and a proposed constitutional amendment that would add a 10 percent new rate to the corporate income and franchise tax (ACA 22).
While state reserves are projected to top $13.5 billion this year, and tax revenue continues to grow as the economy grows, these new taxes and fees would take more than $1 trillion out of California taxpayers’ wallets in just the first four years alone.
State lawmakers should cautiously consider their approach to crafting new tax policy. Introducing $269 billion in higher taxes and fees, even if they are just mere proposals, does more harm than good in the effort to build an image of a state that promotes economic growth. California can continue to offer hope and opportunity to new generations, but only if lawmakers choose to be both pro-worker and pro-business.
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