The following story is from Drew Voros, the Contra Costa Times
Voros: Governor’s tax hike hits small business
For all of the talk we heard this political season about small business, Joe the Plumber and who in the business world tax hikes really whack, that talk took a walk only a few days after the confetti fell.
Our own Gov. Arnold Schwarzenegger quickly shed his sheep’s clothing to reveal his tax-wolf persona by announcing not just a 1.5 percent sales tax increase, but the “Taxinator” sighted his cross hairs on small business.
Casting aside his no-tax pledge as if it were an old Hollywood script, “Taxinator” proposed $5 billion in taxes that will come primarily through the cash registers of small business, or more specifically, cash registers where never before was a sales tax collected.
Rather than cut spending to match new, lower tax revenue levels unlikely to improve any time soon, “Taxinator” took a cue from his Kennedy in-laws: Raise everyone’s taxes and target new areas such as veterinarian services, appliance and furniture repairs, greens fees and auto repair services.
If all this is making you think you need a drink, think again. The Taxinator also wants a five-cent per-drink tax. Just what a struggling bar and restaurant industry needs right now.
When the governor campaigned to recall then Gov. Gray Davis, he rode the back of small business, saying that everything from workers comp to energy deregulation was threatening to kill jobs, businesses and a solid tax base. He would succeed where
Gov. Davis failed, he told us, by making jobs stick in the state and creating business-friendly policies.
Increasing the sales tax by more than 15 percent while singling out certain services for new taxation is a startling abandonment of his principles.
Fortunately, it looks that the governor’s plan will be dead on arrival. Unlike Schwarzenegger, the state’s Republican leadership plans to stand behind its no-tax pledge.
But clearly, the new ground here is the governor identifying businesses that have avoided sales taxation. Imagine being a business that might have to collect an extra 10 percent from customers.
Most of us believe in a fair taxation system, and maybe inequities exist that should be addressed. But to do it in a vacuum, with no public input, seems out of character for a governor who has painted himself as a friend of business.
To read the entire report simply go to:
http://www.contracostatimes.com/businessnewsletter/ci_10957813?nclick_check=1
Gilbert comments. Desperate times calls for some desperate measures. Before looking for more businesses to tax perhaps we should reduce the size of our state government and eliminate some of the newer programs that we simply cannot afford at this time.
As a member of Americans For Prosperity, who participated in our “Taxed to the Max” rally in Sacramento a few months ago, I guess it’s time to put on my green AFP T-shirt and make another pilgrimage to the Capital to express opposition to any new taxes.
What a difference a date makes.
Legislative Analyst Elizabeth Hill’s LAO Overview of the Governor’s (2005-06) Budget reads in part:
“The Governor’s proposal contains significant program savings–particularly in K-12 education, social services, and transportation–and borrowing to address the state’s 2005-06 budget shortfall.”
On page 5 it reads: The budget proposes total state spending in 2005-06 of $109 billion (excluding expenditures of federal funds and bond funds). This represents an increase of 4.4 percent from the current year. General fund spending is projected to increase from $82.3 billion to $85.7 billion, while special funds spending rises from $22.1 billion to $23.3 billion.”
It goes on to say that “the 2003-04 fiscal year concluded with a positive reserve of $2.9 billion.” Did Ms. Hill say we ended with a POSITIVE reserve?
What happened between that LAO report and today? Yes, we are in a recession but that does not explain the current budget. Quoting from Elizabeth Hills’ (January 14, 2008) 2008-09 Overview of the Governor’s proposed budget it reads: “the Governor’s budget proposes General Fund state spending in 2008-09 of $101 billion. After accounting for the administation’s proposals to change the 2007-08 budget, General Fund expenditures are projected to decline from $103.4 billion in 2007-08 ( a drop of 2.3 percent).”
Note: The budget signed by governor Schwarzenegger included $103.4 billion in the General Fund.
Folks. Even if we add a three percent annual COLA to the 2005-06 numbers that would still bring the General Fund budget up to $93 billion, $10 billion less than the 2008-09 budget.
At this time we suffer from both a revenue and a spending problem. Raising taxes or creating new taxes will not help the former and supporting entitlements surely does not aid the later.
Email reply:
Obama wants to spread the wealth. Arnold wants to spread the pain. ……………
That’s the difference of cheap talk and actually being in charge.
Arnold actually has found out the hard way that the propositions, including your oh-so-cherished Prop. 13, are actually preventing decent government.
The issue is not Gray Davis or Arnold Schwarzenegger, the issue is being able to plan things. And arbitrary propositions make it impossible to plan anything.
But of course, the rabid anti-taxers like you don’t want to hear anything about that. If one of your guys were in charge in Sacramento, he would end up having to do the same as Davis or Schwarzenegger are forced to do.
I believe the whole “small business” tax thing to be a red herring.
It’s designed to rile up the base just like Prop 8, Abortion and the war.
The fact is, most small business owners pay very little, taxes, even fewer thier fair share.
Look at the Farmewrs Agent who expenses his Family trips to Costco, how about the “Rennasaince grill” owner who deducts his $50K expidition, with it’s $4000. wheels as a business expense.
In my veiw small businesses cheat the public. Certainly far more than the single female with no kids.
In addition, it could be argued that small business use up more of the resources.
The truth is…..”The samll business” arguement is another GOP smoke screen to jkeep us from addressesing the real issues.
Joe. Your words: “But of course, the rabid anti-taxers like you don’t want to hear anything about that. If one of your guys were in charge in Sacramento, he would end up having to do the same as Davis or Schwarzenegger are forced to do.”
Let me set you straight. Arnold was “one of our guys.” Second. The Cutting Edge-a talk show http://www.cuttingedge-atalkshow.com covered Arnold during his bus tour for his reelection when he stopped at Tri City Park in Placentia in Aug of 2006. He was introduced to the Republican faithful in the crowd by Anaheim Mayor Curt Pringle who told us that Arnold dug us out of a $16 billion structural budget hole WITHOUT any tax increases. Yes Larry but Curt is not the governor. True. However, watch our video and you will see and hear the governor speak of reducing the $16.5 billion state deficit to $3.5 billion in less than two and a half years WITHOUT raising taxes. “Read my lips” surely applies here. You can see the program which can be found in our archives. Governor Schwarzenegger goes on to say that his reduction in the premiums for Workers Comp insurance enabled firms to hire more people, something you can do when taxes are NOT increased.
Watch the “free” video then come back with your opinion. Thank you!
duplojohn.
Smoke screen? Perhaps. It may be in the same angst that was used when we were told that thousands of public school teachers were about to be layed off befroe th ebudget was finally signed.
He is frustrated. I am told that outside the “big five” he doesn’t even know the names of the Republican members of our legislature. Someone actually had name tags made for a meeting which they wore so he might know them by name. That’s an inside baseball story that I believe actually happened.
We (AFP)were able to lobby Republicans to hold their ground on the budget and I am confident that we will again prevail in blocking these silly tax proposals.
From the San Diego Union:
““Housing in San Diego has obviously fallen off a cliff,” Rascoff said. “San Diego’s home prices are now back where they were in the middle of 2003. You’ve rewound the clock five years in terms of home prices.”
But the decline has not been uniform across neighborhoods or among housing types. Rascoff said certain areas have fallen less than others, such as La Jolla which is down 12.3 percent over the past year. Parts of Chula Vista are down more than 30 percent.
Upper-end homes have dropped in value by 10 percent to $661,559; middle-tier homes by 18 percent to $388,635; and starter, lower-cost properties, off 27 percent to $263,647. Single-family homes are off 17.9 percent to $422,812, and condos have dropped 18.3 percent to $287,082.”
=============*You guys wonder why their are systemic deficits? Stand
by…what they say is $28 Billion will be the structural deficit by 2010?
That’s the rumor!
rw
Ron & Anna. Help me out here. Where is the linkage between this structural deficit and Arnold’s trial balloon of NEW taxes as stated in this post?
With the lack of new housing and commercial building development this past year, compounded by property owners having their homes reassessed due to the decline in valuations, the property tax revenue stream will surely decline.
Larry, Arnold has not been one of the anti-tax Republicans around Tom McClintock. If there had been a primary, he would never had made it past that. If I remember right, McClintock also ran in the recall elections, and lost badly…
And as far as the damage the rabid anti-tax people do… Opposing efforts by the firefighters to buy better equipment a couple years back. Equipment that would have been very helpful in fighting the fires here, e.g., the Santiago fire. But hey, what is a wildfire against saving taxes??? Instead of spending a small amount of taxes up front you guys apparently rather like to spend a lot when the damage is done…
Here is the story from the OC Register: http://www.ocregister.com/news/county-fire-orange-1911091-firefighters-resources
“Spitzer called the lack of resources being delivered by the state “unconscionable.”
That rankled firefighters, who remember that both Campbell and Spitzer campaigned against their funding measure and signed the ballot arguments against it.”
There was a similar story in San Diego county a couple years back…
Joe. What you are referring to is Measures B, C & E that were placed on the same Ballot by the OC BOS as aternative choices to the OCFA Measure D back in 2005.
What makes you think that I do not support our local firefighters?
Having served for several years on the Advisory Board of POFF, Peace Officers Firefighters Fellowship ministry, we prayed for hundreds of police and fire fighters who put their lives on the line to protect our families, homes and businesses.
Perhaps you might check my bio out with OCFA Chief Chip Prather before making unfounded accusations. No apology necessary.
“we prayed for hundreds of police and fire fighters”
How about spending the money, including tax money, so that these people can actually do their work?
Prayers don’t help them do their work, money does.
So, do you support spending more tax money, or having tax increases, so our firefighters can do their work?
Joe.
After you contact Chief Prather I will respond to your comment
Larry, trying to evade my question, eh? I’ve been asking you, not Chief Prather…
Again, do you support spending more tax money, or having tax increases, so our firefighters can do their work? What is it, yes or no?
I am not making any accusations as you seem to imply, I am asking you a question. For some reason, you don’t seem to want to answer it. I think people can draw their own conclusions from that…
Oh, and btw, I am asking this as son of a former volunteer firefighter…
Joe.
This post is about new taxes being proposed by the governor. The electorate of Orange County voted a few years ago on the distribution of 172 funds. Do I need to give you the final totals of that election?
Perhaps one of us will do a post on your issue but that is not on my plate tonight.
Larry, why are you refusing to answer my question? Is there something that you don’t want me (and the public) to know?
I am asking if *you* do support spending tax money to get firefighters the equipment they need, even if that means tax hikes? That is very well within the topic of your post.
I didn’t ask about what the electorate of Orange County voted on a couple years ago. It is *you* who brought that into the discussion as a red herring…
Joe, thank you, thank you, thank you. Its fun to watch you continue to press Larry for an answer on his willingness to raise taxes to pay for anything. Well Larry? When do you raise taxes and who do you raise them on? You can’t cut your way out of this one. Because of the Foreclosure Crisis California’s tax revenues will be a fraction of what they need to be for the state to make payroll and pay their bills.
Aside from this simple question that Joe keeps asking, what is your view of how taxes could be done fairly and in a large enough quantity to operate without borrowing – a Republican tactic that is going to merely push the problems into another election cycle.
Joe. I am so glad that you have a new friend in anonymous.
The last time I checked my list of elected officials in CA I could not find my name. My role as a blogger is to initiate dialogue. Solving the current financial mess is in the hands of our elected officals who have powers not found in my keyboard. When they ask me to consult with them I will be happy to comply.
Solving problems of this magnitude is not a quick fix. We have mandatory obligations in our state budget that are cast in stone. That is why I opposed Prop 1 A in this election. Discretionary expenditures would be one place to begin as we engage in turning over every rock looking for areas to cut.
For Joe and anonymous the solution is a quick fix. Let’s raise taxes and the problem will go away. Not true. Raise taxes and fees and add some regulatory roadblocks. That will result in chasing future manufacturing expansion out of state. I have seen it myself in the high tech arena of Silicon Valley.
When you get the 875,000 or so necessary signatures to place include a ballot measure in a future election I will answer your question on how I will vote. Until that date I am not in the loop. Therefore you will not get a direct response from me.
PS: Joe. You are wrong. You questioned adequate equipment for firefighters. That was part of the debate such as three on a truck, that took place in the County election which I referenced above. As such it is not a red herring.
Everyone wants to increase this tax and that tax and I laugh for at least at this moment I can. I like my job I like to work I sure would hate to lose that opportunity and end up unemployed.
What people are not understanding is for example lets take the payroll tax: as a small business owner you are probably just barely surviving (which I know to be the case for many). The payroll tax is raised and you can’t meet the demand so you lay two people off. Then business slows down because people do not want to wait for their orders for a week for something they should get in 2 days. So you have to lay off two more which effectively leaves the owner and a two man skeleton staff which can not possibly keep the business operational. So the business closes down, so that leave 7 more people unemployed aren’t the unemployment numbers high enough already?
Yeah Ok, your post shows that you haven’t thought things through. Nice try, though.
If a company can’t make a profit then the company would have to raise prices, or have other cost cutting measures, including layoffs if necessary. That’s a fact of life. If a company can’t deal with that, tough luck. There are others who can.
To take your example, if there is no tax money to repair the street and the potholes in front of the store, people won’t come to the store, either, so the employer would have to lay off people as well. Doomed if you do, and doomed if you don’t.
If people don’t want to wait for their orders, they would most likely be fine with paying more to get their orders done quicker. Or they go to the competitor who can handle their orders quicker, because they do things more efficiently.
Business is a complex thing, and there is a lot more to it than taxes…
“Solving problems of this magnitude is not a quick fix.”
Indeed. Finally a wise word from you.
Blindly cutting taxes, or blasting the people in charge when they have determined that it may be necessary to increase taxes to fulfill the obligations the state has is wrong, since as you so nicely say, such “quick fixes” don’t work.
Oh, and I don’t advocate raising taxes, I advocate that the state fulfills the obligations the state has taken on. Part of these obligations come from propositions, including propositions like Prop. 13 that limit ways taxes can be obtained to fulfill the obligations the state has.
Now, it may be, in the long run, possible to reduce the obligations the state has. But as you so nicely say, that is not a quick fix, and until this is done, the state has to fulfill its obligations. The state can not say, “oh, our tax revenue has taken a hit because of the economy, so we can’t pay our firefighters anymore.”
And while you are “just a blogger”, you also, as you said yourself, go demonstrating against tax increases in Sacramento. It is that role that I disagree with.
Joe.
In addition to fighting tax increases I also fight to protect people who are about to lose their homes and businesses. All as an unpaid volunteer.
My angst was the increase in the size of our state and federal governments.
Until someone can justify every program than I will oppose increasing taxes.
Perhaps you have not followed our work with redevelopment agencies. Let me share our most recent data. As of 2006 our CA “bonded indebtedness” for redevelopment agencies exceeded $81 billion dollars. “LA County alone has lost over $2 billion in general fund revenues since 1990 to redevelopment diversion. These are funds desperately needed to keep open public hospitals, staff emergency rooms, stack library shelves and fully fund law enforcement.”
This is called “tax increment diversion” where property tax increases within redevelopmennt “project areas” go to local agencies rather than public needs as you describe with fire protection.
We need to stand back and look at the entire picture, not just one public agency.
Larry Gilbert, Orange County Co-Director, Californians United for Redevelopment Education, CURE
Since prices are falling and even more prices are going to fall, the state and county most likely is entering a period of deflation.
So instead of COLA increases for the retired and government employees etc. will there not be COLA decreases? Being an adjustment, it should go down too. A COLA adjustment decrease of 40 percent on retirement pay and wages on January 1st should take care of the states cash flow problems.Since prices are falling and even more prices are going to fall, the state and county most likely is entering a period of deflation.
Cook. In adding a COLA to my numbers I did not adjust for the increased population for which we do incur some additional expenses. In 2004 we had 35.4 million residents. In Jan 2007 it is reported that we had 37.7 million or roughly a seven percent increase in that timeframe.
Several years ago Senator Dick Ackerman gave me a slick one page flyer from a southern state in which they were luring California companies to relocate with promises of relaxed taxation and regulatory red tape. It spoke of easy access to transportation, cheaper energy costs, and possibly lower wages. My point is that should we place further burdens on our local manufacturing industry we may end up chasing them away rather than being business friendly.