California, take a breath

Gino DiCaro
Vice President of Communications for the California Manufacturers & Technology Association

California is broke.  The poor are worried about losing benefits. California companies don’t want to pay more taxes. Someone has to lose for the other to win, right?


The media likes a good fight, and the bell has rung in Sacramento for a heavyweight bout. In this corner, greedy businesses get tax breaks and in that corner the poorest and most vulnerable citizens are denied healthcare.  But the question is: Will the policy choices at the end of this cage match make us a better and more successful state?

The other night, I heard a father tell his screaming, red-faced child: "Take a breath, buddy, take a breath."   We have become that child.  Let’s take a breath.

Policymakers have daunting decisions to make. We need to be guided by deep analysis to make strategic value-driven decisions. We don’t need the media to perpetuate the notion that this should or will be decided simply by who has the strongest lobby in Sacramento.  

Sadly, this notion was perpetuated in a San Jose Mercury non-editorial piece this week that in so many words, and with limited retort, stated that the poor will lose because of back room deals that gave business $2.5 billion dollars.

Readers and voters should be afforded more than this.  Let’s face it, after the recent May 19 "elective yawp" on taxes and the budget, the voters have finally become very real pressure points for our policymakers to make decisions.  So let’s give them the entire picture.

Here are some point/counterpoints to consider for the article:

    Mercury: "Corporate tax giveaways from dead-of-night budget agreements in September and February will cost the state as much as $2.5 billion in revenues at a time when lawmakers are contemplating eliminating programs for the poor, a budget analyst said Wednesday."

    Counterpoint: That budget analyst is a well respected and ubiquitous lobbyist for the poor in the State Capitol but that statement is very inflammatory and does nothing to solve any problems.   A further analysis would indicate that California has one of the highest corporate tax rates in the country.   Businesses were hit with $9 billion in tax increases in the last two budget deals — one increase was a first-in-the-country corporate tax penalty policy that was completed in 24 hours in the fall budget and now has removed $2.7 billion dollars from the economy in the form of overpayments.

    Mercury: "The problem with dark-of-the-night deals is that you never get a chance to get a debate over value choices," she said.  "These tax breaks represent a reduction of one-third the income taxes paid by California corporations…"

    Counterpoint:  The same lobbyist used "dead-of-the-night" in her first quote and "dark-of-the-night" in her second.   It’s like a Martin Scorcese film in here.  Again, the entire quote needs more analysis.  "Value choices" is a spot-on term for the budget tipping point(s).  Solutions will all come down to what we value most.  Programs for the poor are the very obvious part of that equation.  Creating more opportunity for careers and high wage jobs is equally as important.  If we value the high wage employment so desperately needed in California, we need to a certain extent tax policy articles (and a debate) that juxtapose the $9 billion in increases heaped on corporations versus job creating tax policies.  Again, we already have one of the highest tax rates in the country, as well as one of the highest per capita government spending budgets.

    SJ Mercury:  "The single sales factor, the memo said, spurs job creation by eliminating the tax penalty for increasing the number of employees on payroll.  A 2005 study contradicted those arguments. The Center on Budget and Policy Priorities, a nonprofit research institute in Washington, D.C., found that while most states have lost manufacturing jobs since 1995, states that went to the single sales tax formula did not fare much better."

    Counterpoint: Most states have lost manufacturing jobs since since 2000 (a common CMTA year of reference) and I’m assuming since 1995, per the article.  As a percentage of gross state product (GSP) though, no competing state has lost as much as California since 2000.  According to a yet-to-be-released report on California manufacturing, the industry’s share of the state’s GSP has declined 9.8 percent.  Comparatively, Texas manufacturing gained 24 percent of its GSP and Oregon gained 66 percent.  And as stated so many times before in this blog, California has lost 30 percent of its industrial base since December, 2000, more than any other state.

    SJ Mercury:  "While the Franchise Tax Board is not authorized to release the names of taxpayers, Ross noted that a handful have aggressively pushed the single sales factor legislation in previous efforts, including Apple, Genentech, Paramount Theaters, Disney, Intel and Warner Brothers.

    MPowered: Are we to deduce that a large portion of Californians don’t want the jobs these companies bring to California?  Is the fact that we’ve gained 163,000 government jobs and lost 235,000 private sector jobs since 2001 a good thing?

Let this blog be CMTA’s virtual breath going into understandably difficult and engaging times.   We’ll do everything we can to temper the conflict that the media is spawning, making a difficult situation worse for our policymakers.   That breath will unveil principles and facts that help our policymakers find ways to grow the economy, employ our workers and, according to the aforementioned lobbyist’s website, "improve public policies affecting the economic and social well-being of low- and middle-income Californians."


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