Crossposted Orange County Register
The news – that some of the largest companies affected by the estimated $1 billion in corporate tax increases contained in Proposition 39 would not be mounting an effort to defeat the measure – is unfortunate, not only for those companies and others directly hit by the tax increase, but for California consumers, who will bear much of the new tax burden.
The narrative being used to advocate for Prop. 39 is actually untrue. Proponents (aided by lazy members of the media) would have you believe that, starting with the 2009 state budget deal, multistate companies started to get a new, unfair tax break that was not available to California-based companies. Businesses in the Golden State, proponents say, were placed at a competitive disadvantage.
This simply is not true. In the 2009 budget deal, multistate companies did not get a break – California-based companies got the break. In return for their support of broad-based temporary boosts in income, sales and car taxes contained in that 2009 deal, California-based companies secured a big tax break – companies were allowed, starting in 2011, to choose the lower of two options for calculating their taxes.
So to be clear, the 2009 gave a tax break to in-state companies, not to multistate companies. The Yes on 39 campaign is being completely false on this point and should be called out on it.
It is a tragedy that there does not appear to be substantive campaign ramping up to educate the voters on why Prop. 39 is a bad idea. Here are some reasons why Californians should oppose Prop. 39.
Prop. 39 raises taxes on companies that provide goods and services to California consumers. If you raise the cost of providing these goods and services, the prices for them will go up. For example, since no major automobile manufacturer calls California home, Prop. 39 will make it more expensive to sell cars in our state. These costs will be passed along in the purchase price of a car.
But this goes well beyond big-ticket items. These taxes will be hefted on multistate retailers like Walmart, which many people depend on for low-price goods. Even companies like Proctor and Gamble, who produce many of the staples that you use – from the cereal you eat to the shampoo you put in your hair – will undoubtedly raise prices.
It’s probably worth noting that multistate companies are some of California’s largest employers, and this tax increase no doubt will mean a loss of jobs.
Some California-based companies who compete with multistate firms seem to be happy that their competition will be hit with a new tax. But these California companies are not thinking strategically. One of the reasons California companies are at a competitive disadvantage is the over-regulation that comes out of Sacramento in absurd profusion.
Rather then rejoice in new taxes on multistate companies, California businesses need to go to Sacramento and urge politicians to lower or eliminate costly regulations so that California-based companies can offer their services and goods at lower costs. This would result in a win for the California consumer, who is more focused on getting the best products at the lowest price than on whether the company selling to them is California-based.
Of course, anytime a really wealthy person is dropping vast sums of their own money into a ballot measure, as Bay Area hedge-fund manager Tom Steyer is doing with tens of millions for Prop. 39, which he authored, you have to do an analysis to see whether or not the funder stands to benefit personally from passage of the measure.
Steyer manages funds that invest in clean energy. And, in the first five years after the passage of Prop. 39, a projected $5 billion raised by it would go into building “green” projects.
Like other tax increase measures on the Nov. 6 ballot, Prop. 39 contains no reforms whatsoever for how the politicians do business in Sacramento. So this is just another measure that would raise taxes at the expense of private-sector economic growth, to hand billions of dollars to the unpopular governor and Legislature to do with what they please.