Sacramento Democrats, desperate to avoid the kind of reduction in the size and scope of state government in California that are needed to balance the state’s books, are unbelievably still pursuing tax increases as a "solution" to chronic overspending, and a tax code that is predictably volatile as it disproportionately taxes the income of California’s wealthiest citizens.
In yesterday’s Los Angeles Times there is a story about how Democrats are supportive of a $1.50 per pack increase in cigarettes which, according to their analysis, would result in a $1.2 billion increase in tobacco tax revenues to the state’s general fund.
This is a stupid idea. As we have pointed out many times, Californians are among the most overtaxed people in the entire country, and the last thing we need is higher taxes, frankly, on anything. Never mind the fact that this takes us back down the path of the "sin tax" where all-knowing politicians in Sacramento hoist taxes on activities that they decide are "bad" for our collective community. Ironically, of course, taxes like these create income streams on which government becomes dependent, of activities that these "pious" legislators think is wrong. Suddenly the state has an interest in increasing the frowned-upon behavior — in order to attain more revenues.
My purpose for writing this commentary this morning, however, is not to startle readers with my opposition to a tax increase (that would be like trying to shock you with a alert that water…is wet!). The reason for writing this that I have to admit that while my intellectual argument against taxes on cigarettes is unchanged, I am not sure if my level of passion for fighting them remains the same.
Why, you ask?
For a long time now, there has been a coalition of business, industry and taxpayer protection groups fighting against all tax increases. That coalition (which in the case of fighting tobacco tax increases, I might add, has been very successful) was ripped apart in this recent special election, when business and industry groups decided to throw that coalition out the window, and abandon taxpayers, taxpayer groups, the Republican Party, and more – by and large, they all pushed political clout behind the February state budget deal which notably did not increase business or industry specific taxes, but did include massive increases in individual income taxes and sales taxes, and a significant reduction in the child-tax credit for families — all in all over $14 billion in new taxes.
It’s actually "worse" in that there were over a billion dollars of tax reductions/incentives for big business in that budget deal — setting up an optic of taxing everyone to give breaks to a few. Don’t get me wrong, business in California is overtaxed, but so are the rest of us.
But wait, there’s more! After backing that deal with its $14+ billion in higher taxes, these same big business and industry interests then dumped millions of dollars into advocating the passage of, among others, Proposition 1A which would have, if passed, triggered $16+ billion MORE in income and sales taxes.
A number of people from the business community attempted to justify supporting these taxes because of the so-called "spending cap" that was part of 1A. For the record, the campaign came and went and not once did an independent economist, who was not on the payroll of either the legislature or one of these interest groups, ever materialize to give credence that 1A’s alleged spending cap would do anything to restrain spending.
On the contrary, all of the independent analysts from the Pacific Research Institute, Claremont Institute, Howard Jarvis Taxpayers Association, National Tax Limitation Committee, the People’s Advocate, and Americans for Tax Reform all came to the same conclusion — that 1A’s "revenue smoothing" language was so modest so as to be ineffective against the will of the Governor and legislature bent on circumventing it. An accommodation to the public employee unions, no doubt.
Regardless of this, business and industry interests continued to drop millions of dollars into the passage of 1A.
Getting back to the Los Angeles Times piece and the Democrats’ frothing over a massive hike in the tobacco tax… I look at the campaign reports, and see that Phillip Morris, the tobacco giant, alone gave at least $350,000 to raise my taxes…
Pick your industry — tobacco, oil, entertainment, alcohol, building, entertainment — it seems like all of them decided to back a budget deal that avoided taxes on their particular product or business, in favor of taxes that hit everyone (you and me). All of these interests had another choice — a clear choice — which was to keep together the anti-tax coalition, and to oppose any new taxes to solve the state’s overspending crisis. In other words, they could have stood tall with taxpayers, and with taxpayers groups and the Republican Party — instead they chose side with Capitol special interest groups, public employee unions, and Democrats in support of these taxes.
Despite all of this, and the fact that a petulant side of me cynically wonders if it would be just-rewards if we ended up with higher oil severance taxes, tobacco taxes, entertainment taxes, split roll taxation and more — I still know and understand that all of these results would be bad for our economy, and ultimately bad for taxpayers.
But it doesn’t mean that I am not just a shade less passionate today about fighting these particular evils than I was just a few months ago.
After all, politics is a team sport, and your team only wins if it sticks together.
I should add, by the way, that these thoughts are not mine alone — but there have been a lot of conversations taking place in the wake of the defeat of the ballot proposition and the connected tax increases, and a realization of where much of the funding came from to pass them.
I will be interested to see if representatives of these various groups reach out to leaders of the anti-tax movement and express some sort of regret and apology for stiffing taxpayers. It seems to me that this would be a good idea.
Because it is no longer income and sales taxes that are on the table, now it is "their" taxes and to just assume that the "normal" coalition that would fight to protect their interests is as solid as it was before February’s debacle and the May special election would be to do so at their own peril.
For my part, a public statement from these groups simply apologizing and saying they were wrong to back all of these higher sales and income taxes — and a commitment never to do so in the future — will probably suffice. The absence of such a gesture would make me wary to jump into their foxhole, which is the most effective place for me, and people like me to position ourselves to fight the battle ahead…
Care to read comments, or make your own about today’s Daily Commentary?
Just click here to go to the FR Weblog, where this Commentary has its own blog post, and where you can read and make comments.