Contact: Ron Roach (916) 441-0490

INSIDE TAXES COMMENTARY -- September 15, 1996

No on 217: higher taxes chase away jobs

By Larry McCarthy

Before California voters decide on Proposition 217, they should see it for what it is: a $700 million tax increase, imposing on Californians what would effectively be the highest personal income tax rates in the nation.

The retroactive tax increase in this initiative on the November 5 general election ballot would be permanent, applying 10% and 11% tax rates to income earned since January 1, 1996.

It hurts small business. While promoters of the tax increase contend it would only soak the rich, Proposition 217 would hurt the state's small business owners. Of California businesses, 84% pay personal, not corporate, income taxes. These include many of the small companies that create 60% of all our new jobs.

Proposition 217 would chase jobs away from California to other states that have lower tax rates.

Furthermore, the initiative that put Proposition 217 on the ballot contains no accountability for how the new tax money would be spent.

It is just as likely that some of these new tax dollars would be used to hire lobbyists in Sacramento (Los Angeles County, for example, spent $694,532 to lobby the Legislature and state government during just the first three months of 1996). The initiative states that there will be more dollars for libraries, parks or police. It is unlikely this will happen.

Another ill-advised side-effect of Proposition 217 is found in its fine print and would affect local property taxes. For example, if your city attracts more new employers or new homes, a formula in Proposition 217 would cause your city to lose its fair share of property taxes. And residents of new cities could be subject to double taxation to pay for local services. Residents and businesses would continue to pay property taxes, but under Proposition 217 none of that property tax would be available to the new city for police, fire and other services. Instead, other local taxes and fees would have to be imposed to pay for these services.

The California Taxpayers' Association (Cal-Tax) Board of Directors has analyzed Proposition 217 and concluded that it is bad for California's economy. Taxes are already too high.

-- Larry McCarthy is president of the California Taxpayers' Association (Cal-Tax), and co-chair of Californians for Jobs, Not More Taxes, the campaign committee formed to defeat Proposition 217.