Symptoms and Diseases – Real Reform Needed in Sacramento

John Cox
California-based Businessman and Former Illinois Republican Official

California’s business environment is sick.  Curing it will take strong medicine – not just treating symptoms but curing the originating disease.

We read constantly the stories – businesses moving out, cities failing, schools threatened with closure, state universities raising tuition and cutting scholarships. Huge deficit spending, out of control pensions, entrenched bureaucracies and red tape – these are all other symptoms of government gone wrong in the Golden State.

The Governor’s answer? Raise taxes.  On ‘millionaires’ but also on consumers in the form of increases in sales taxes.

This is not even cough medicine; this is like introducing more germs into a diseased body.

California already relies on a small sliver of the population to generate the ever increasing revenues it needs for its far flung operations; as any businessperson will tell you, broadening your base of operation is a much better strategy. The Governor’s tax increases will only make this dependency worse (as would the other increases on the ballot).

As a CPA for over 35 years and a tax attorney for almost as long, I have seen the impact of tax increases on business decisions.  Taxes are one of the major expenses any businessperson incurs – in many cases it is the largest.  As a competent businessperson, I take account of expenses in deciding where to locate my businesses.

Indiana, a well managed and relatively low tax state, has received the bulk of the growth in new investment in my business.  Similarly, we have seen many California businesses, including icons like Apple and Intel, make substantial investments elsewhere, most usually in states with lower tax structures.

We cannot expect our financial situation to improve by making the reason why more businesses have moved or not expanded in this state worse.  This proposed increase is not just a tax on ‘millionaires’ – it is a tax on small businesses, most of which are organized as ‘flow through’ entities – like mine – where income of the business is taxed at the individual’s tax bracket.

A noted political columnist in California, Dan Walters of the Sacramento Bee, has recently noted that opponents of the Governor’s and other tax increases have yet to fund an effort to defeat them.

That changes today. I am announcing today a major contribution of my resources ($100,000 to start) and my time to stopping these tax increases and cure the disease that infects Sacramento.

Why am I doing this? I recently bought a home and moved my residence to this wonderful state.  Even though my businesses are out of state, I want this state to succeed.  I have roots here – my mother went to Berkeley and my late older brother was born in San Jose. My younger brother is a small businessman in Fresno.  I have several other relatives in the state and hope to raise my youngest daughter (now 7) in this state.

I have also committed a portion of my time and resources to reform of our political system.

I have spent over $3 million of my children’s inheritance – funds I earned and paid taxes on – to try to change things.

The time is now upon us when the profligate actions of the political class have threatened our future.

Raising taxes when the legislature has overspent and wasted vast sums (and continues to spend and waste) is like throwing gasoline on a fire or giving more germs to a sick person.  It just doesn’t make sense.

Saying no on Prop. 30 certainly treats the symptom.  Other reforms, such as Prop. 32 (limiting special interest money from both corporations and unions) treat part of the disease and are a major step in the right direction.

In future election cycles, we will see other reforms that will make money much less necessary for political campaigns and treat the disease of Sacramento corruption more specifically.

In the meantime, we need to say no on Prop. 30.

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