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The Time for Reform is Now … and SBAC is Going to Help

Joel Fox
Editor of Fox & Hounds and President of the Small Business Action Committee

The name of the No on Proposition 30 committee, of which I am a co-chairman, is Californians for Reforms and Jobs, Not Taxes. The name is not just a slogan. Reforms are necessary to improve California’s business climate and overall well-being. The Small Business Action Committee (SBAC) will push for reforms on the November ballot while opposing taxes that would stifle the quest for needed reforms.

If Proposition 30 passes there will be no incentive for reform. Politicians will think they have solved California’s budget problems. In reality, they would patch over a problem that will likely become worse by making the tax system even more volatile, damaging the economy at a vulnerable time, and undercutting reform efforts.

I’ve quoted Stanford economists Michael Boskin and John Cogan before on this point: Absent real reform, there is little likelihood the long-run budget will be balanced, and a high likelihood the “temporary” tax hikes will not only become permanent but form the new base from which even higher taxes are demanded.

The time for reform is now.

SBAC will take an active part in not only opposing the tax measure, but will support other reforms on the ballot such as Propositions 31 (budget reform) and 32 (political contribution reform).

Defenders of the status quo are well funded for these ballot fights and reformers, to be heard, must secure resources wherever possible to deliver the message for change.

The situation today is similar to what occurred 100 years ago when reformers attempted to stop California government control by special interests—at that time, the railroads.

The reformers were successful then and reformers today must take the government back from special interests again.

As modest as the pension reform bill signed by the governor was, that measure would not have passed if not for the conviction that some reform must precede the November vote on taxes. Keeping the pressure on is important.

As even the governor acknowledges, we need more pension reform. But that is not all. We need spending reform, school reforms (with only 50% of the money getting into the classroom), budget reforms, and political reforms.

Setting the stage for those reforms will be measures presented to voters in November.

As I wrote earlier this week, Proposition 31 reduces the influence of Sacramento over local governments to manage their affairs, improves oversight of government programs while altering the budget process and offers more powers to the governor to control spending during fiscal emergencies. These are all sensible steps to deal with California’s constant budget problems.

Proposition 32 will get more attention because it proposes to prohibit contributions from corporations and unions to candidates and to prohibit payroll deductions for political purposes.

SBAC supported both the election reforms of open primaries and redistricting in recent elections. Now we must do campaign finance reform with Prop 32.

There is no question that special interests influence the direction of government in California.

Corporations are big funders of candidate campaigns. In addition, in running the No on Prop 30 effort, we have seen corporations attempt to curry favor with the governor and legislative leaders by making large contributions to the campaign to pass the income and sales tax increases. The corporations will happily support tax increases on small businesses and the average taxpayer if they can avoid new taxes on corporations.

It is small business, not big business that is in the cross hairs of this tax plan. Most small businesses are S Corporations, partnerships, or sole proprietorships. They pay their business taxes at the rates for individuals and as the non-partisan Tax Foundation noted: California’s taxes on small businesses are some of the most burdensome in the nation.

The situation for small business will only become more difficult if Proposition 30 passes.

Yet, corporations are funding the Yes campaign.

As for the unions overwhelming influence on the political process, no one can make a better case on that point than the longest serving Assembly Speaker in California history. Willie Brown wrote in his September 2 San Francisco Chronicle column:

As reforms go, the pension deal that Sacramento lawmakers reached last week is just a start to correct the mistakes that former lawmakers, including me, have made over the years.

But for all the talk about how the changes were needed to make the governor’s tax plan more palatable to voters this fall, the fact is that lawmakers bucked the unions for one reason and one reason only: They want to keep their jobs.

The unions are really bent out of shape because they weren’t allowed in the room during the negotiations, as they usually are. But why should they be in the room?

The world is changing. Years ago it was the likes of Southern Pacific and other big businesses calling the shots in Sacramento, and we were all highly critical of them.

These days it’s labor. That’s not the portrayal union leaders like to see in the media, but it’s the truth.

SBAC’s position on these propositions is not an attempt to find a reason to oppose taxes. In fact, SBAC supported the temporary taxes on the 2009 special election ballot – however, that tax proposal was coupled with a rainy day fund reform measure. If that rainy day fund plan had been in place the past decade, California would not have experienced huge budget deficits.

There are few opportunities to achieve reform and set a positive direction for the state. This November’s ballot presents such a rare chance and SBAC will work toward the reforms’ success.

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