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California’s tax policies make recession worse

“Get the monkey off your back and relocate to Las Vegas”, barks a new ad trying to lure hard-working small businesses away from California. If legislators don’t listen, small businesses that have already been hit hard by the effects of a fragile economy and the billions in taxes that were passed earlier this year will go under.  A struggling economy and a legislature that already passed $12 billion in taxes this year isn’t enough to keep even more new taxes off the table. Instead of considering billions more in new tax proposals, lawmakers should be focusing on creating jobs and growing the economy to get California out of this downward spiral.

The Legislature is back and up to their old tricks. The budget that was passed in February and revised in July will need to be “fixed” again this fall. If history is our guide, we all know that it will be an uphill battle and an unpleasant environment for small businesses. There are currently $2 billion in tax hikes being proposed, including taxes on everything from gas, internet purchases and vehicle license fees. One very regressive tax proposal increases tobacco levies and would have a devastating impact on California’s small business retailers. Another proposal that targets oil and energy companies could, according to the state’s non-partisan Legislative Analyst’s Office, cost the state up to 10,000 well paying jobs.  Lawmakers need to be reminded of the burden they have placed on taxpayers and the real cost of additional taxes on California’s job creators.

Small businesses are the workhorses of the California economy. They make up 99 percent of all employers, and they create three-quarters of all new jobs. We need small businesses in order to get Californians back to work and that in turn will drive our economic growth and lead us out of our current financial landslide.  

California’s unemployment rate of 11.6 percent is one of the highest in the nation and is projected go even higher. More taxes would only make it worse. Instead of putting small businesses out of business and eliminating jobs, we need to keep them open and get people back to work. If people are working, they have money to feed their families, pay their mortgages and utilities and put money back into their communities. Oh, and that includes state taxes that pay for valuable social programs.

The impact of new taxes on small businesses is severe. New, unanticipated costs will force small business owners to make some very tough decisions. Small businesses will have to scale back on employee benefits, cut wages and hours and worst of all – lay off employees.

The Legislature is not the only threat to California businesses when it comes to talk of taxes.  The oddly-named Commission on the 21st Century Economy is preparing to release a set of recommendations to modernize California’s tax system, but the commission’s lack of transparency with regard to its proceedings has unnerved small business. . . and nervous small businesses do not create jobs. Of particular concern is the imposition of a new tax on business, known as the Business Net Receipts Tax, that unduly impacts the very businesses who employ the majority of Californians.

Businesses already pay a hefty amount in taxes and California is ranked as the 6th most expensive state to do business. We cannot allow ads like this to attack our state and be our reality and our future. The Legislature needs to create a friendly and profitable business climate or we will see businesses fleeing to other states just to remain open.

With the Legislature back, taxpayers need to strike a chord with lawmakers and reinforce that job creation is the best way to get our economy back on track. We need our economy to grow and new taxes are not the way to do it.  New taxes will further damage California’s economy.


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