Saturday, June 19, 2010

Of Sacred Cows And Sick Children

Business columnist Michael Hiltzig has a really feisty column up today, one that kicks ass and takes names. It focuses on what really is behind a great deal of California's budget mess.

I believe we can all agree on the root cause of the state's $20-billion budget gap.

It's welfare: all those millions of taxpayer dollars going to recipients who line up for their government handouts instead of competing in the marketplace on a level playing field like the rest of us, who don't pay their fair share of taxes and who get protected by a politically powerful lobby.

Yes, I'm talking about the business community.

For all the hand-wringing by Gov. Arnold Schwarzenegger about how there's almost nothing left to cut in the state budget except services to children, the aged and the destitute, hundreds of millions of dollars are spent every year on handouts to business. That's despite the lack of evidence that some of these programs keep employers in the state, lure employers from out of state or are cost-effective in any general way.

The governor is asking the Legislature to take such draconian steps as eliminating CalWORKS, the state's principal family welfare program (serving 1.1 million children), and downsizing child care and mental health programs.

Meanwhile, corporate welfare programs such as tax breaks for some of our largest companies and "incentives" for our largest industries are to survive. To his credit, Schwarzenegger has proposed delaying some new corporate tax breaks.


Mr. Hiltzig points to the movie industry tax breaks and "enterprise zones" as two of the most egregious of the programs which cost the state hundreds of millions of dollars without proof that such concessions do any good with respect to employment. Then he moves on to the unsupported assumption that California is anti-business and these programs are necessary to change that image:

The chief mechanism for corporate welfare in California is the tax system. Some industries whacked hard by other states are untouched by California — this is the only major oil-producing state that doesn't levy a severance tax on oil taken from the ground, even though such a tax could yield billions of dollars a year.

Despite this state's reputation for being tough on business, other states rely far more on business taxes than we do. According to a survey by the accounting firm Ernst & Young, California ranked 35th in terms of business' share of state and local taxes in 2007. (That is, in 33 other states and the District of Columbia, business carried a higher burden relative to individual taxpayers than in California.) Measured by business taxes as a percentage of gross state product, California ranked 32nd.
[Emphasis added]

Yet Gov. Schwarzenegger has decided that the next budget cuts will be to programs that provide needed services to the poor and elderly. Taxing the membership of the Chamber of Commerce fairly is off the table.

How unsurprising.



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