Our View: California businesses facing new tax hikes
Ready for even more California tax increases? Corporate taxes could be going up another $1 billion a year. That's in addition to the $735 million a year in extra cigarette taxes if Proposition 29 passes in June. Come November, voters could green-light $9 billion in higher income and sales taxes sought by Gov. Jerry Brown, and/or a $10 billion income tax increase sponsored by activist lawyer Molly Munger.
The corporate tax increase would come from repealing one of the few tax breaks of recent years, a $1 billion break for corporations that was part of the deal for Gov. Arnold Schwarzenegger's $13 billion tax increases in 2009. The tax increases have expired.
As the Legislative Analyst explained in a 2010 report, "While the current (corporate-tax) formula considers the location of firms' sales, property and payroll, starting in 2011 firms will have the option to consider only their sales ('single sales')." It's called the "single sales factor." Advocates for higher taxes want to cancel that choice, returning to the pre-2011 model.
The tax increase is advancing on two fronts, in the Legislature and as a November ballot measure. Assembly Speaker John Perez, D-Los Angeles, is sponsoring Assembly Bill 1500, which would cancel the lower tax option.
He's also sponsoring a companion piece, A.B. 1501, which would go into effect only if A.B. 1500 passes. A.B. 1501 would spend the increased tax money on middle-class college scholarships.
A.B.1500 requires a two-thirds vote of the Legislature because it's a tax increase. Republican legislators have been solid in opposing tax increases in this legislative session, and likely won't break ranks as an election approaches. But the Perez proposal does show how dangerous California will be for taxpayers should Republican ranks fall below the one-third level in both houses of the Legislature, which they well could do after November.
Making an end run around the legislative process is an initiative for the November ballot by yet-another wealthy Californian who wants the government to raise taxes. On Tuesday, hedge-fund manager Tom Steyer submitted 900,000 signatures to place his initiative on the ballot. "We think we're on the ballot for sure," he said.
The initiative, which aims to raise more than $1 billion a year from companies, directs about half the additional tax money for the first five years "toward energy conservation efforts at schools and other public buildings," reported the Sacramento Bee. The rest would go to the general fund. After five years, all the money would go to the general fund.
Steyer said the initiative would create green jobs. But taxes kill jobs by sucking money out of the private sector. Similar green-jobs claims were made about Assembly Bill 32, the Global Warming Solutions Act of 2006, by Gov. Arnold Schwarzenegger. But A.B. 32 didn't prevent state unemployment from soaring well above the national rate.
California's real employment problem is not a lack of green jobs, but the state's severe anti-jobs climate, to which A.B. 32 and the specter of Steyer's initiative contribute.
On Monday, the Assembly Revenue and Taxation Committee held hearings on the Perez bills. Dorothy Rothrock of the California Manufacturers and Technology Association testified: "By moving to a mandatory single-sales factor... (t)his will further erode California's ability to attract and compete with other states for business investment and hiring."
These bills and the Steyer initiative should be opposed. One of these days, California is going to have to stop chasing businesses and jobs out of the state.