Friday, June 4, 2010
IN MY OPINION (Column)
There Is Nothing So Permanent as a ‘Temporary’ Tax
By JON COUPAL
Like the proverbial wolf that continues to lick the knife blade because it enjoys the taste of its own blood, the Democrats are back with another huge tax increase.
At a time when the state’s economy and taxpayers are still staggering under the burden of last year’s $12.6 billion tax increase, Democrats are pushing a plan to raise taxes by yet another $5 billion and to borrow an additional $8.7 billion.
Among the proposals are extensions of the increases in the sales, income and car tax that were approved last year by the usual suspects, but were due to expire after two years. This goes to prove the adage that there is nothing so permanent as the temporary. In a recent column, Joel Fox, the president of the Small Business Action Committee, provided a number of excellent examples of “temporary” taxes that seem never to disappear. Among those is the federal telephone tax established to pay for the Spanish American War, which remained in place for 108 years after the war ended.
Politicians know how to play the game. To minimize opposition to a new tax, they market it as temporary. But once taxpayers become accustomed to paying it, they look to extend it or make it permanent. For a California example, look at the 1.25% sales tax increase Pete Wilson backed in 1991 to deal with a budget gap. A half-cent was supposed to be temporary, but when it came time to expire, the Legislature placed it on the ballot, promoting it as necessary for “public safety.” Voters—by then used to paying the higher tax—swallowed the hook and we continue to pay the entire 1.25% increase initiated almost 20 years ago.
As for the borrowing, our state’s credit is so bad, lawmakers want to borrow money against the California Beverage Recycling Fund in an arrangement known as securitization. Basically, it would allow them to spend money on current programs by guaranteeing repayment with future recycling revenues. What most Californians think is a fee designed to make sure that beverage can and bottle litter is picked up, and that those resources are recycled, turns out to be just another Ponzi scheme by the Sacramento politicians. However, it clearly illustrates the contortions through which lawmakers will go to allow themselves to continue to spend regardless of the economic realities or the burden it places on ordinary taxpayers.
Average Californians do not have to be told times are tough. An unemployment rate of 12.6%—over 21% when the underemployed are counted–may be just a number to most people, but virtually everyone knows the real impact of our failing economy because they have a friend or family member who is unemployed, even if they themselves continue to have a job. These statistics represent real suffering by real California families.
Legislators should not deceive themselves. Only part of the problem is linked to the national recession. The state’s problems predate the recession and reflect a deeper policy-induced crisis. These tax grasping politicians would do well to review the 2010 edition of Rich States, Poor States, an economic competitive index of states by economist Arthur Laffer and published by the American Legislative Exchange Council. In the category of economic outlook, California ranks 46 out of 50 with 50 being worst.
It is no coincidence the states ranking near the bottom are high tax states that are suffering a high level of domestic out-migration, which Laffer calls the “moving van effect.” In other words, people and businesses are mobile; they can leave unfriendly economic states and move to tax friendly states. In domestic migration, California ranks a dismal 49, meaning that taxpayers are fleeing our state.
However, in spite of the evidence, lawmakers move inexorably forward toward economic collapse. In an almost cartoonish satire of their lack of concern for the interests of average taxpayers, last week, the four legislative ringleaders behind the 2009 tax increase blithely traveled to Boston to accept Profiles in Courage Awards from the Kennedy Foundation for their raising taxes in face of public opposition—and in defiance of logic. Meanwhile, those California taxpayers who have not left the state, soldier on without accolades.
Copyright 2010, Metropolitan News Company