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Now is not the time for the crushing tax hikes a split roll would bring



Back in the 1980s, the Schylling Company produced an amusing toy, Ernest the Balancing Bear.


Ernest performed a “death-defying high wire act” on a string strung high across a room. Ernest the Bear pedaled his unicycle as fast and as furious as possible across the wire trying to keep his balance and not fall off into the abyss.


Sounds a lot like California taxpayers under normal circumstances, let alone during this economic free fall brought on by the COVID-19 pandemic.


Between March 15 and April 18, 3.4 million California residents applied for jobless benefits, more than all 2019 claims combined.  Expenses are rising in Sacramento with so many people qualifying for assistance as well as increased costs for health services in response to COVID-19.


Our state’s fiscal outlook has gone from an anticipated surplus to a budget problem in the blink of an eye. The Budget Stabilization Act, passed a few years ago gives California some grace with about $18 billion sitting in our rainy day fund, but it will not last for long and soon Ernest the Bear will be in a free fall.


For decades there have been calls for California to reform our tax system and there is no time like the present to get it done.


One of our largest problems is that personal income and capital gains taxes make up the largest section of our general fund revenue, about 70 percent in all, and shockingly only 1 percent of California taxpayers pay about 50 percent of that revenue stream.


This is a very small amount of taxpayers carrying the fiscal load for the rest of the state.

This is also a volatile source of revenue that brings in more when the wealthy do well and less in economically bad times. And we have now entered challenging economic times.


The nonpartisan Legislative Analyst’s Office is predicting that tax revenues from capital gains income will be several billion dollars below what the governor’s budget anticipated.  A diverse state the size of California cannot continue to go on with boom and bust budgeting.

How bad this downturn is going to be will depend on the length and severity of the COVID-19 health crisis.  What we do know is that brick-and-mortar retail spending had already been dropping and now we add the halt to the restaurant, hospitality, retail, service and tourism sectors.


To add insult to injury there will be an initiative on the November 2020 ballot that will attempt to completely kill off any chance of a rebound to the California economy and getting our people back to work.


If you signed the initiative in front of your local store you might have been lied to and told that it would save the historic 1978 Proposition 13. Nothing could be further from the truth. It’s looking to take it apart.  And what was just a terrible idea a few months ago now threatens to completely destroy any hope of a job rebound in California and a return to a robust economy.


This initiative would raise property taxes on commercial properties across California.  Your favorite restaurant you are patiently waiting to return to, the nail and hair salon we all hope to see again before 2021, your gym, hotels, the neighborhood bar…those few who just might be able to stay in business and hire employees will all be looking at an over $11 billion tax increase that will of course be passed on to the consumer.


Now is the time for leadership to make the hard choices that will return California to its former glory.


The state where innovative businesses wanted to put down roots and provide good paying jobs and opportunities.


Now is not the time for business as usual in California, which more often than not means raising additional taxes on hard working California businesses and taxpayers until it hurts.  This time there just might not be many of us left.


This article originally appeared in the Orange County Register.


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© 2019 by OCTax

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