Although it may seem far in the distant future, there has been a great deal of speculation regarding what ballot propositions might appear on the 2016 General Election ballot in California. Focusing on just those proposals having the potential for real harm to taxpayers, here is our short list:
Sales And Income Tax Extension
An extension of the temporary sales and income tax increase voters approved with Proposition 30 in 2012 is being advocated by public sector labor leaders. The proponents will argue that, since Californians are accustomed to paying these higher rates, it should be more palatable to voters to make these tax increases permanent as opposed to some “new” tax.
Oil Severance Tax
An oil severance tax – taxing petroleum as it is extracted – is likely to be advanced by those who see an opportunity to soak an unpopular industry. They will count on the public not noticing that these taxes will be passed on to California drivers in the form of higher gas prices.
Split Roll Property Tax
Those on the far left are salivating over the prospect of an increase in property taxes for commercial property. This attack on Proposition 13 would split the tax roll so that business property will pay much more. The impact on small business and jobs will be glossed over with the usual platitudes like, “It’s for the children.” They will totally ignore that higher taxes on businesses are passed through to consumers in the form of higher costs for goods and services.
A tobacco tax is also in the offing. The state tax on a pack of cigarettes is 87 cents. Those wanting more tax revenue would like to add another two dollars and will probably also claim it is a blow for public health because it will help smokers quit. Even if one opposes smoking, it has to be acknowledged that tobacco taxes are highly regressive as well as leading to more black market commerce which, by the way, goes untaxed.
Lowering of the Two-Thirds Vote For Bonds and/or Parcel Taxes
Of greatest concern to California homeowners is the possibility that the two-thirds vote requirement for local bonds and parcel taxes will be eliminated. These levies are repaid only by property owners. How realistic is this threat? Considering that, for the first time since Prop 13 was passed in 1978, a house of the California legislature actually passed this anti-13 proposal (ACA 8) the threat is very real.
The “bag tax” – a charge on single use bags – is actually not a tax increase proposal. Rather, this tax was enacted by the legislature but is now subject to repeal via the referendum power by those opposed to the tax. The tax reflects “nanny government” at its worst.
Here are a couple of observations about this potential tax “tsunami” at the ballot box.
- First, the threat from anti-taxpayer initiatives is even higher than in prior years because, for 2016, it is much easier to qualify initiative measures generally. This is due to the fact that the signature requirement is based on the most recent election’s voter turnout. 2014’s historically low turnout means that initiative measures now need far fewer signatures to qualify than in previous years.
- Second, what happens if all these tax hikes appear on the ballot? Would this be the ultimate “Dooms Day” for taxpayers? Perhaps. But, in an odd way, it might be a positive development. By overreaching and asking for the moon, the tax-and-spend crowd might ensure defeat of all the measures as voters begin to add up how much these proposals, in the aggregate, are going to cost.
- Third, while Californians in the last election were fairly generous in passing local tax measures, this does not necessarily translate into support for state tax hikes. Voters’ recent support for Proposition 30, discussed previously, was based on a perceived crisis for education if the taxes were not approved. Plus, the hikes were sold as “temporary.” Those conditions are not currently present. Californians are increasingly aware that we live in a high tax state and resistance to higher taxes will be high for the foreseeable future.
In any event, expect to see the groundwork laid for these and other tax raising initiatives very soon. It will be important for taxpayers to pay close attention and to keep a tight grip on their wallets.
See You Later, Sooners
In the 1930s, tens of thousands of farmers, mostly from Oklahoma, fled the Dust Bowl for California with hopes of a better life. It is ironic that California’s Farmers (Farmer Brothers coffee company, that is) has recently announced that it is fleeing our state for a less expensive destination that includes Oklahoma on the short list. Any humor, however, will no doubt be lost on the 350 employees who are about to lose their jobs paying $40,000 to $80,000.
Farmer Brothers, a fixture in California for over 100 years, is just another of a long list of firms that, fed up with California’s high taxes and anti-business environment, have left for less costly states. Other recent refugees include Chevron, Nestle, Sony, Charles Schwab, Occidental Petroleum, Toyota, Campbell Soup, Nissan and Comcast, all of which have moved all or a significant portion of their work force out of state.
These departures are treated with a great collective yawn from Sacramento. When asked, flacks for the governor and other senior elected officials try to convince the public that these losses are not due to state policies and that the jobs and tax revenue lost are not significant anyway. Some in the media have even been known to listen to these rationalizations from elected officials with a straight face and proceed to parrot back this nonsense in what they report. Those who claim that California is not hemorrhaging companies, and the jobs they provide, should be challenged to provide their list of major companies that are relocating to California or that are making a significant expansion of their California workforce.
Sure, California is benefiting from the national recovery like all other states and some jobs, mostly low-paying, are being created. But California’s job creation for good middle class employment is anemic compared to pro-growth states like Texas.
Californians should not be surprised to see these companies go. The Washington, D.C.-based Tax Foundation lists California at 48, two from the bottom, in its 2015 Tax Climate Index. (This will, no doubt, annoy those on the far left who claim, that because of Proposition 13, California businesses do not pay their “fair share” in taxes.) Then there is Chief Executive Magazine, whose survey of CEOs has ranked California dead last as a place to do business for ten years in a row.
The Dust Bowl of the 1930s made the land unproductive. Eighty years later, California’s Tax Bowl, where we lead, or nearly lead the nation in almost every tax category is making our state unproductive. Any small economic progress our state has been able to make has been in spite of, not because of, Sacramento’s policies.
Those who jumped the gun to stake out land in the Oklahoma Territory before President Grover Cleveland officially proclaimed it open to settlement in 1889, were nicknamed “Sooners.” (Today, the University of Oklahoma proudly uses this name for its athletic teams.) Perhaps it would be appropriate to call companies now leaving California as “Laters,” as in “See ya later.” Sacramento could raise revenue by selling this motto on a bumper sticker to those departing our state.
The articles were written by Jon Coupal, the president of the Howard Jarvis Taxpayers Association – California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayer’s rights.