Last week, the Los Angeles Times’ Liam Dillon reported that the business community is not engaging on the big tax fights appearing on the November ballot: Proposition 55, the income tax extension and Proposition 56, the increased tobacco tax. While business leaders say the positions taken is colored by political circumstances around these particular measures, business must stay clear of the trap in which numerous tax increases add up to a suffocating tax burden.
Dillon noted the shift in position of business from 2012 when the California Chamber of Commerce opposed the cigarette tax and stayed neutral on Proposition 30’s income and sales tax increases. Today, CalChamber has no position on the tobacco tax and, while officially opposed to the Prop 55 tax extension, is expending no effort or money to defeat it.
Of course, Prop 55 will be hard to take down considering it is a tax on the rich (the sales tax piece of Prop 30 is not in Prop 55), it is a tax that already exists, and it’s for schools—at least according to extensive advertising. (Funds for Medi-Cal and the rainy day find and other budget concerns are not mentioned in the ads.) In addition, the Chamber certainly considered that Proposition 30’s lead supporter was Gov. Jerry Brown, someone the business organization didn’t want to cross. This time the governor is on the sidelines, at least for appearance sake.
Another reason that business may be taking a step back is because of a future tax measure aimed at the business community at large—property tax increases on commercial property, known as the split roll. If the income taxes are extended for schools it would be less likely that school interests could justify a split roll to voters.
I discussed this possible strategy on tax ballot measures by big business on this page last July and mentioned it to the reporter. (I was interviewed for the Times article but was not quoted.) That theory was confirmed in the Times article by Rob Lapsley, president of the California Business Roundtable, who said, if the split roll is advanced “they (proponents of a split roll) can count on one of the most well-funded opposition campaigns they will have ever seen.”
Still, even if Proposition 55 is successful that may not stop the unions backing a split roll proposal because there isn’t enough money to cover the pension debt that is building in the state.
Local chambers have generally stayed away from the income tax increase as too big a battle or simply nominally opposing it without breaking a sweat to defeat it. A number of local business groups, as pointed out in the Times article, back the Proposition 56 tobacco tax citing the cost of smoking on society.
Yet, local chambers and business organizations present a dichotomy when dealing with taxes. Surveys show that the tax issue is the number one problem members identify. Yet, the business organizations tend to support many local taxes. The Los Angeles County Business Federation, for example, has a yearly survey that consistently shows taxes as their business members number one concern. Yet, the organization’s board, made up of the group’s members, has endorsed seven different local taxes and bonds this election.