In 2012, California voters approved Proposition 30, the largest state tax increase in American history, because of a huge budgetary shortfall. We were promised it would be temporary and end in 2017.
But now, the usual suspects, whose appetite for more tax dollars is insatiable, want to break that promise and extend the nation’s highest income tax rates for 12 more years with Proposition 55.
The reality is that we don’t need higher taxes. The state budget recovered from a $16 billion deficit in 2012 and is balanced. We have reduced debt, increased school spending and put billions into the “rainy day fund” and still have a $2.7 billion surplus.
So given these facts, why is Proposition 55 seemingly on the path to passage? Because the 800-pound gorillas of special interests have raised more than $50 million, and the opponents have raised exactly zero.
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That amount of money buys a lot of disinformation. And unless you’ve eschewed television, radio and online ads, you’ve been subjected to the media blitz that is the Yes on Proposition 55 campaign.
Because Proposition 55 is a tax on wealthy individuals – defined as people making more than $263,000 a year – why aren’t these “evil” rich folks funding an opposition campaign?
First, it may be the conventional wisdom that such a campaign would be a lost cause. But history shows that such assumptions are frequently wrong. Second, public sector unions are known for thuggish behavior, including harassing their perceived enemies at their homes and businesses. Third, proponents are spinning the measure as “for the children” and not “for the unions,” which is far closer to the truth. Potential funders of an opposition campaign might be afraid of being labeled as anti-education.
Whatever the reason, there are legitimate concerns regarding the economic damage Proposition 55 could inflict on California. Because many small business owners pay their taxes as individual sole proprietorships or through “S” corporations, the National Federation of Independent Businesses opposes Prop 55.
California has already seen an exodus of wealthy and businesses fleeing the state. If Proposition 55 passes, that trend will surely accelerate.
So why doesn’t the business community take a stand against Proposition 55 in a meaningful way financially? For small businesses, it’s probably because they’re just getting by and can’t afford to engage. Complying with California’s byzantine business regulations keeps them too busy to focus on politics.
But opposition from some large business interests is muted due to the assumption that if they give the public sector unions a few billion dollars now, they won’t pursue even worse policies for businesses such as “split roll” – the removing of Proposition 13’s property tax protections from commercial property.
That belief is foolish. The “feed the alligators” theory has never worked. That’s because, sooner or later, the alligators get hungry again.
Jon Coupal is president of the Howard Jarvis Taxpayers Association and signed the official ballot argument against Proposition 55. He can be contacted at email@example.com.