California’s proposed tax hike will destroy 23,000 jobs

California Governor Jerry Brown said he would use a proposed sales tax increase as the vehicle to get the Golden State out of its growing deficit problems. That solution has met with a great deal of criticism from the State Board of Equalization.

George Runner said the Governor’s plan to increase taxes on working Californians is not the answer. His office released an analysis proving the half-cent sales tax increase will cost California thousands of jobs and millions of dollars in lost investment.

This isn’t the first time California lawmakers have tried to solve Sacramento’s spending problems with tax increases. However, the growing state deficit poses serious hurdles for Californians to consider.

“We project a $10 billion operating shortfall (the difference between annual revenues and expenditures) in 2012-13. The $3 billion “carry-in” deficit from 2011-12 and the projected $10 billion operating shortfall mean that the Legislature and the Governor will need to address a $13 billion budget problem between now and the time that the state adopts a 2012-13 budget plan,” according to California’s Legislative Analyst Office.

“Tax policy has consequences,” Runner explained. “As this analysis shows, a higher sales tax rate would take money out of the pockets of working Californians, destroying more than 23,000 jobs and $267 million in business investment. The projected job losses would be equivalent to every worker in a medium-sized California city like Glendora or West Sacramento losing their jobs.”

A stubborn economy and lagging unemployment numbers have led to weary taxpayers. In the past few years, Californians have voted down proposed tax increases by large margins.

Runner explains that lawmakers often rely on static analyses that ignore behavioral changes by consumers and business owners when they set out to increase taxes.

The analysis, conducted by the State Board of Equalization, projects that nearly all of the proposed sales tax increase would be passed along to consumers. “The state would receive $222 million less in revenues than projected by a static analysis, an 8% loss in potential revenue,” Runner said.

Add to that the argument from taxpayer advocacy groups who contend spending has increased during this recession.

“It is a common myth that state spending has been slashed in recent years. While it is true that General Fund spending is down as a result of the recession, overall state spending is actually up sharply, growing by more than $19 billion over the last four years,” according to the Howard Jarvis Taxpayers Association.

Runner finished by adding that; “Since July of last year, lower tax rates have enabled Californians to keep more of their hard-earned dollars, and our economy is growing stronger. Let’s not rewind our progress by reinstating, even a portion, of the tax burden Californians endured during the Great Recession.”

The full analysis can be found online at; www.boe.ca.gov/Runner/info/pdf/Dynamic_Revenue.pdf.

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