Situation Would Prove Too Taxing

by Jack Stewart
July 20, 2009
(as posted in the LA Business Journal on July 20, 2009)

New taxpayers, not new taxes, will pull Los Angeles and the rest of the country out of this recession.

That’s a distinction that marks an important difference because these are two entirely different byproducts of government action. One helps and the other hurts.

It is also the reason that small businesses and large employers have joined taxpayer organizations throughout the state standing together as Californians Against Higher Taxes to fight even more job-killing tax hikes.

California businesses and families are already paying their share of $12.5 billion in higher taxes this year imposed by the state. And in Los Angeles, another half-cent has been added to what was already among the highest sales taxes in the country.

Meanwhile, the call for even more taxes is like a drumbeat in the state Capitol and at City Hall.

One public employee union has outlined plans for 31 new taxes on businesses and consumers to rake in $40 billion. And all of that is the opening salvo in an expected campaign next year to reduce the two-thirds majority vote requirement for the Legislature to approve new taxes. If the attempt to break down that restraint is successful, it will make it easier for the politicians to raise our taxes even higher.

Every new tax dollar taken from the L.A. economy is a dollar taken away from a business that could be creating new jobs or at least holding on to its current employees.

Tax increases would lead to unemployment beyond our already unacceptable levels and would work to undermine a potential economic recovery.

Southern California was built on the shoulders of a strong middle class that found good paying jobs in manufacturing, aerospace and other industries. High taxes have been pushing those jobs out of state.

Shrinking middle class

Last month, the Milken Institute released its latest report on California manufacturing, announcing that from 2000 through 2007, California’s industrial workforce declined by 390,000 jobs, solid middle-class jobs. The study found the two major reasons for the decline were high taxes and over-regulation.

Since 2007, California has lost an additional 174,000 manufacturing jobs. In Los Angeles County, manufacturing has been cut in half since 1990 (824,700 jobs in 1990 to 400,600 in 2009). Now is not the time to increase the tax burden on manufacturers.

The Orange County Register recently reported that small businesses in California are not shedding jobs as quickly as they have been. This is an indication that the recession could be slowing and perhaps even ready for a turnaround.

William Dunkelberg, the National Federation of Independent Business’ chief economist, said, “Job creation is not happening yet, but job destruction is slowing, the prelude to the restart of rising private employment in the coming months.”

Small businesses create two-thirds of all new jobs. It is easy to see the crippling impact that new taxes would have at this critical juncture, just as the job creators seem be on the verge of turning the tide.

Every new job means that someone is paying income taxes as well as spending money in ways that support other businesses and jobs, generating sales taxes and other revenues.

Government needs to be doing all it can to get L.A. businesses back on their feet so they can create the taxpayers that will solve our budget woes.

New and higher taxes would pull us in the wrong direction.

Jack Stewart is president and chief executive of the California Manufacturers & Technology Association, which is a member of Californians Against Higher Taxes.

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