Longtime anti-tax leader Joel Fox, who serves as President of the Small Business Action Committee, sent over this column, to consider as part of our coverage of the state budget process…
Lost in the dramatic scene of locked-in Senators and the contentious budget debate in the Senate is the very important acknowledgement by Assembly members, especially amongst the majority, that, yes, it is tough to do business in California. The tax cuts/incentives for California companies approved in the Assembly budget could be a crack in the wall for those who think money that comes to government grows on trees.
California is in a tough competitive business climate and the efforts in the Assembly to recognize this fact is a potential bright spot that should not be ignored.
According to the Kosmont-Rose Institute Cost of Doing Business study from 2004 the cost of doing business in California is 30% above the Western State average and 32% above the national average. Regulatory costs are 105% higher in California than other Western states. Moreover, the study states, "Businesses are leaving California because costs are high and there is little incentive to stay."
Assembly Minority leader Mike Villines and some of his colleagues wanted to give businesses a reason to stay in California and by convincing the majority members of the Assembly to go along in certain cases, the door has been opened to a more business friendly state for large and small businesses alike—although there is much more to do.
The charge made by Senate Pro-Tem Don Perata: "How can you throw them (people on government assistance) over for Hollywood movie moguls and multinational corporations" is political rhetoric that fails Economics 101.
The way government gets revenue to help those who truly need it is to keep businesses in California so that they can prosper and grow and produce the revenue.
Run-away movie production doesn’t gain a thing for the poor. Neither does it help California workers. My best example is personal: As someone who has a son who is in and out of jobs in Hollywood, keeping more production at home will keep him and his co-workers on the job more often and allow them to spend more in California and pay more taxes as they earn more.
It should be recognized that an error in drafting in the Assembly bill threatens the important Research & Development Tax Credit, but that was unintentional and can easily be fixed. It is not uncommon for the legislature to go back and fix wording in bills to achieve the bill’s original intent.
When corporate executives rank California as the least favorable place to do business, as they did in another study, then something needs to be done to change that perception.
Perhaps, the Assembly just took the first step in receiving that message and doing something about it.
(You can find out more about the Small Business Action Committee by clicking on their ad to the right.)
July 23rd, 2007 at 12:00 am
Which of course reinforces Keynes argument that the already powerful will always work to increase government subsidies for themselves and that is why completely free enterprise never works and the government needs to do something to make sure the poor don’t fall too far behind.