San Diego Business Journal

Tax Hikes Make State's Budget Woes Worse


Listening to the major media, you would think that the California budget crisis is because a group of lawmakers refuse to vote for a tax increase. Some have said that if we scrapped the two-thirds vote requirement for taxes, the problem would go away.

That is the equivalent of blaming the family for a gambling addict's problems. Since they refuse to give him money to burn, he must hawk his personal possessions and waste his paycheck to feed the habit. If they only gave him more money, the problem would go away. Right?

Simply put, higher taxes cannot be part of the budget solution because underlying California's budget crisis is a "competitiveness crisis." An economic crisis that is getting worse, not better. An economic crisis that more taxes will only exacerbate.

That becomes clearer each day.

We have already had too many companies like El Cajon-based Buck Knives leave California , companies lured away to states with more attractive regulatory and tax structures, better education, stronger infrastructure, better and more affordable workers' comp and health care.

We have watched California cities universally slide down Forbes magazine's list of "best cities for business."

We have heard too many other governors say that California government is the centerpiece of their own state's business development strategy.

Today I read the nonpartisan Tax Foundation's new index of state business taxes and it was equally troubling.

Wanna guess how California did? We ranked an embarrassing 49th. But, hey, we can always cherry-pick a few companies from Mississippi, right?

One factor used to create this index was a "fiscal stability" ranking , a measurement of how confident businesses can be of future tax laws. Again, California measured 49th.

When state Treasurer Phil Angelides said that the rancor in the Legislature was causing tremors on Wall Street and upsetting plans to borrow our way out of the deficit, he forgot to mention how the thirst for new taxes and continued spending is making states like Idaho look attractive as centers of commerce. Yes, Idaho.

Is it not amazing that the Golden State now finds itself where it is , competing with Idaho and Mississippi?

Only a brutal acceptance of this reality and a committed effort to achieving fundamental economic reform, improved quality of life, and increased competitiveness will lead California to brighter days. Fortunately, in the same effort lies a solution to the budget.

So the next time somebody says that the budget crisis is caused by the "anti-tax crowd," suggest they visit San Diego County and talk to the former employees of Buck Knives. Better yet, suggest they ask Idaho Gov. Dirk Kempthorne what he thinks about California's solving the budget through tax hikes.

I bet he is a big fan.

Passantino is director of public affairs for the Los Angeles-based Reason Foundation.