Just What California Needs! Another Push to Raise Taxes!

Bradley J. Fikes Bradley J. Fikes 16 Comments

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Yet another attempt to raise California’s taxes is rearing its head, this time from a group calling itself Think Long California. It’s already getting the usual uncritical reception from a fawning media.

(UPDATE II: The LA Times for a change doesn’t fall into this category. It published a fair article on the tax hike proposal, complete with appropriate headline)

Tax hike given its proper description

Tax hike given its proper description

 

The Huffington Post bluntly spells out the net effect of this  (UPDATE: I added this image below from a HuffPost article on the effort for Alger’s benefit, because he expressed doubt in the comments that this is really a tax increase):

Steven Greenhut at the limited-government site CalWatchDog puts this effort into perspective:

“California has produced a cottage industry of phony reformers who claim they want to fix the state, but they never want to touch the real problems — public sector unions, overspending, inadequate representation, too much regulation, etc. They always have names such as California Forward or whatnot.

“The latest is called Think Long — a group of well-known “reformers” including Willie Brown, Condoleezza Rice, Eli Broad, Gray Davis and Arnold Schwarzenegger. Please, pick yourself up off the floor after laughing so hard you coughed up your spleen. Didn’t many of these folks have their chance and blow it?

“Brown, Davis and Schwarzenegger did more to create our problem than to fix it. Their solution is — drum roll please — a massive tax restructuring that leads to much higher taxes. Hold the presses. Don’t think too long and hard on this nonsense.”

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(DISCLAIMER: Opinions I express here are not necessarily those of my employer, the North County Times.)

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Comments 16

  1. Bradley,

    I am no expert on this group, but the UT says its plan is to “..reduce personal income tax rates across the board while eliminating most deductions; reduce the corporate tax rate for California companies while increasing taxes on out-of-state businesses; and lower the state sales tax on goods while expanding it to all services but health care and education.”

    This doesn’t necessarily sound like an attempt to “raise California’s taxes.” Also, you failed to include that members of the group included George Schultz, Nicolas Berggruen, Eli Broad, Eric Schmidt and Gerald Parsky.

    I think (and hope) that you are being too quick to dismiss this group.

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  3. Bradley,

    Touche.

    After reading the HP story, I still think if they reduced the sales tax on goods to 5% (matching the proposed sales tax on service), instead of only reducing it by 1/2 of 1%, they might be on to something.

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    Alger, I agree with you. I would like to see a transparent effort to adjust taxes so they balance more rationally. California is far too dependent on income taxes. Trouble is that such adjustments, while sound in theory, have a habit of turning into stealth tax increases.

  5. Bradley,

    I completely agree that we are too dependent on income tax. We also need to fix a system that forces businesses to put too much emphasis on the tax consequences of their decisions rather than the business consequences of their decisions. We need to broaden the base on what we tax while lowering the rates we impose.

    We probably disagree on the proper role of government and how much money is necessary to fulfill that role, but I think you would agree that any growth in government revenue should come from a growing economy and not simply by increasing tax rates. For that reason, or maybe because I am a naive optimist, I am willing to give this group’s proposals a fair look before simply discounting it as another attempt to raise taxes.

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    Alger,
    I do agree that growth in government tax revenue should come from an expanding economy and not by increasing tax rates. However, I do think it is fair to characterize it as another attempt to raise taxes, because it anticipates $10 billion more in taxes. Now were this initiative designed to be revenue-neutral, that would be another story. We shall hear much more of it in the next year.

  7. Larry,

    I don’t know. If the corporate tax rate was reduced, the sales tax rate on goods was reduced and the personal income tax rates were reduced, how many businesses would leave?

  8. Bradley,

    Considering how much is being cut from our schools, a tax reform plan that brougt in more revenue might not be such a bad idea IF that reform also leads to economic growth. A plan that includes cuts in the corporate and individual tax rates might do just that.

    The biggest and best argument conservatives use against tax increases is that they will stunt economic growth. What if this plan were to do the opposite?

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    Alger,
    California’s economy is still reeling from recession, unemployment remains in double digits, the people are heavily indebted, have lost enormous sums on real estate, and companies are fleeing to more lightly taxed and regulated states. To raise taxes under these circumstances is guaranteed to worsen the economy.

    Only people who’ve lost all knowledge of fundamental economics (or who don’t care about the consequences since they would benefit) would propose such a tax increase.

  10. Bradley,

    Did you miss the part where they are proposing to LOWER tax rates? Isn’t it the mantra of the conservatives that lower tax rates will bring in more revenue?

  11. Actually, the lower income tax rates will put us in the same sinking boat as the feds. No, not the RATE — it’s the fact that perhaps half of Californians will not be paying ANY CA income tax under the new plan.

    That’s a trap. Once people understand they have nothing to lose from raising income taxes on “the rich” (a.k.a. anyone who makes more than they do), the future is easy to foretell.

    Remember, this is not the LAST change in the tax system. No doubt the big spenders will push for higher (likely “temporary”) income tax increases — but never on the folks who were removed from the income tax rolls.

  12. I am very confused as to why the true conservatives on this blog believe that reducing corporate tax rates and reducing the top personal income tax rate to 7.5% is a bad thing. I am even more confused as to why anyone thinks this is going to cause businesses to leave.

    From the actual paper: “A family with income of $90,000, which would have paid $1,449 in personal income taxes under
    the current system, would now pay $832 – a more
    than 40% reduction in their state personal income
    tax. …a business with a taxable income of $480,000 that
    would have paid $39,452 in income taxes under the
    current system will pay $33,114 under the proposed
    system.”

    I fail to see the problem. Please enlighten me.

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    Alger,
    The problem is that new taxes more than offset the lowered taxes. That’s why the net effect is a $10 billion tax increase. It would be a lot easier to defend if it were revenue-neutral.

    And Richard also points out that totally exempting a large part of the population from state income taxes is an open invitation for more of the class warfare politics that’s so economically damaging,

  14. Bradley,

    I would be happy with a plan that lowered personal income tax rates, lowered business income tax rates and lowered the sales tax on goods even if meant losing some deductions and expanding sales tax to include most services.

    I could also accept the plan even it increased the total revenue to the government. It sounds like you could not. I guess we agree to disagree.

    Have a Happy Thanksgiving; I will remember to be thankful that we can still have this discussion without any personal animosity.

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    Alger,
    The good feeling is mutual. I work on Thanksgiving, but that’s of my choice. It’s a change from business writing. I’ll be writing about a Salvation Army Thanksgiving dinner in Escondido, and other North County happenings. So if anyone who reads this has North County-focused Thanksgiving news to report, place a comment here or email bfikes@nctimes.com.

    Happy Thanksgiving to all!

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