Contact: Ron Roach (916) 441-0490

INSIDE TAXES COMMENTARY -- November 15, 1996

Election message: Yes on the economy and jobs; no on taxes!

By Larry McCarthy

The message is loud and clear: California voters cast their ballots for a stronger economy and more jobs, and against higher taxes.

Of the dozen November 5 statewide ballot propositions that resulted from initiative petitions, half were labeled "job killers" by their opponents, a coalition of business and taxpayer groups. All but one was rejected.

According to a study by Spectrum Economics of Palo Alto, job losses from the initiatives could have ranged up to 664,000. The cumulative impact of the six ranged up to $11 billion a year -- the equivalent of more than doubling the state corporate income tax.

Proposition 217, the $700-million-a-year tax hike, was one of the job killers. It sought to retroactively and permanently raise taxes by restoring 10% and 11% top brackets for state income taxes, then tried to pass it off as just a little tax bite for the wealthy, who would hardly feel it.

Not so. Two-thirds of those who would file under those higher brackets have business income. They are small businesses, the job-providing investors in the state's economy.

For some, the 217 proponents' media blitz weeks before the general election was a catalyst for action. After listening to a radio spot promoting the tax-hike initiative, Howard "Ted" Greene, founder and chairman of Amylin Pharmaceuticals, Inc., in San Diego called offices of the California Taxpayers' Association, asking Cal-Tax how he could help defeat the measure.

"Prop. 217 just corks it for me," Greene said. "In five years, when my children are out of high school, I'm out of here." He said he would seek a state with a more hospitable business climate. He said his accountant told him he wasn't alone; that other clients were on the brink of fleeing California's ultra-progressive tax structure (even without Proposition 217, the top 10% of the taxpayers are paying two-thirds of the income tax collected in California).

He acknowledged that he could afford to pay a higher tax bill, but that was not the point. It was a matter of principle.

"If people of this state vote to penalize success, then I don't want to be here," he said.

A vote for 217, Greene said, was a "clear message to California's most successful citizens" that they should "take your money and your expertise to Seattle, Austin, or Fort Lauderdale." States of Washington, Texas and Florida do not have a personal income tax. He also listed a dozen states with marginal tax rates below those of California.

It also is significant for the future of the state's economy that other job-killer initiatives were defeated, including schemes to regulate health care (Props. 214 and 216), and to line the pockets of trial lawyers, including those who specialize in hit-and-run lawsuits against companies whose stock fluctuates in the volatile high-tech marketplace (Props. 207 and 211). Voters also lashed out against local governments that have raised taxes (sometimes disguised as fees) without putting the questions to voters, passing the Right to Vote on Taxes Act (Prop. 218).

California's economy dodged bullets fired by the so-called spending lobby and other interests on November 5. Pro-tax advocates of these schemes, including state and local government employee unions, trial lawyers, the teachers' association, and local government officials, should see this message from the electorate:

We want more jobs, not more taxes.

-- Larry McCarthy is president of the California Taxpayers' Association (Cal-Tax).