EDITORIAL: “VOTE 1A TO SEND YOUR JOB TO TEXAS”

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By Assemblyman Joel Anderson “California is about to increase taxes on businesses. If you would like information about moving your business to Texas, press 1.” This was an automated phone call I received in February during budget negotiations. Slick recruiting methods used by other states should be a wake-up call to the State Legislature that increasing taxes on Californians only drives jobs and companies out of state, or worse, out of business.

Skyrocketing job losses seem conspicuously absent from the debate surrounding Proposition 1A and the state budget. That should be a grave concern to all Californians. California faces a massive budget deficit and there is no easy solution. We need budget reform that works and does not come at the price of extending huge, job-killing tax and fee increases. Any solution to the budget crisis requires us to examine the simple reason we got into this situation: our state government spends more money than it takes in.

After years of masking this ongoing deficit by sleight-of-hand fiscal maneuvers, our habitual overspending has finally caught up with us. The reason that our spending constantly outpaces our revenue is that we follow an unsound method of revenue projection. We look at past economic behavior in our state and assume that economic behavior will remain static, even if we impose an array of tax and fee increases. Then, we spend money based on those overly-optimistic projected revenues.

This method of static revenue projection is deeply flawed. First, the reality is that the economy is cyclical. We cannot assume that the booming economy of the past several years will continue to provide the same revenue to our state forever. That is why revenues continue to plummet. Second, when legislators raise taxes or fees, people change their economic behavior. After all, when you have less money, you spend less. For example, assume that we significantly increase the sales tax and car tax (Prop 1A does both). With the added cost, most families considering a new car will either buy a less expensive car or delay the purchase altogether. Yet our budget erroneously predicts that they will make the exact same purchase as before the tax and fee increase, regardless of the additional cost. The end result is catastrophic revenue shortfalls.

 

The solution we need is an honest spending cap. An effective spending cap would be based on dynamic revenue projections that prevent the kind of overly-optimistic outlooks that caused this budget deficit. I realize that compromise is sometimes necessary to create incremental changes. To be clear, the spending cap in Prop 1A is a pitifully small step in the right direction and I understand why some of my colleagues support it. But the cost is just too high. The spending cap in Prop 1A, while an improvement from the existing methods of budgeting, still follows static revenue projections. This opens the door for the same kind of overspending that led to the current deficit. Prop 1A also comes with steep tax and fee increases. Extending these additional taxes and fees for another twoyears in the midst of a deep recession is a recipe for economic disaster. To increase revenue for the state, we need to focus on job creation, not tax hikes. Supporters of Prop 1A would like to increase revenue by giving state government a bigger slice of the economic pie through tax and fee increases.

 

I want to increase the size of the pie. We can do this by creating jobs and growing the economy— it increases government revenue. We cannot squeeze billions of additional dollars out of the private sector when families and businesses are already cash-strapped, without severe repercussions. Revenues will again increase when our economy rebounds, not before. Saddling the private sector with the level of taxation in Prop 1A will delay economic recovery and could make our revenue shortfalls even worse in the long run.

 

For the sake of hardworking Californians, we must reach a common sense agreement that implements real structural reforms, without harmful tax and fee increases. I cannot ask Californians to bear this heavy tax burden for such small gains. Prop 1A falls woefully short of garnering my support.

 

The opinions expressed in this editorial reflect the views of the author and do not necessarily reflect the views of East County Magazine. If you wish to submit an editorial for consideration, please contact editor@eastcountymagazine.org.


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