Defeat of Prop. 1A Is a Win for Business

The phrase "feeding the alligators" is a metaphor about the dangers of appeasement. One may be able to buy temporary peace by feeding a threatening alligator but the problem is that the alligator will sooner or later get hungry again. And because it was previously fed it is now larger and more dangerous.

Regrettably the California business community has often chosen to feed the ever-growing alligator of government when it comes to important political battles. Thirty-one years ago California business interests were united in their opposition to Proposition 13 due to fear that if homeowners received tax relief the Legislature would try to make up the difference by raising levies on them. For short term protection for themselves business was willing to feed average taxpayers and homeowners to the alligator.

The more things change the more they remain the same. More than three decades after the passage of Proposition 13 these same interests were donating millions of dollars to the campaign to pass Proposition 1A which would have meant a tax increase of $16 billion of mostly regressive taxation falling on regular folks. Why? Gary Toebben chief executive of the Los Angeles Area Chamber of Commerce summed it up best. "We’re concerned that if this doesn’t pass the Legislature will come back and pass taxes that are more targeted toward business" he told the Los Angeles Business Journal.

One notable business exception in the battle over Proposition 1A was the National Federation of Independent Business which was strongly opposed. But then this organization represents thousands of smaller businesses that are more in touch with the concerns of most California taxpayers.

The divergence between grassroots taxpayer interests and business interests over Proposition 1A is ironic in that logically ordinary taxpayers and business should be marching in the same direction. Unlike the labor interests taxpayers recognize that business provides jobs and income to most in our state. When business succeeds the state prospers and as an additional bonus more tax revenue pours into state coffers to provide essential services.

Thinking taxpayers don’t want to see additional burdens on California businesses. They know that increased business costs are eventually passed along to consumers or result in lower wages and benefits. Average taxpayers are usually sympathetic to the "job killer" arguments frequently advanced by California business organizations.

Several recent surveys rate California is 47th out of 50 — or lower — in business climate. We understand that most business must compete nationally and even internationally and increases in taxes on business will only accelerate the exodus of business that have come to the conclusion that they must find a more tax friendly environment or close their doors. Any doubts that this threat is genuine are dispelled by almost daily news reports. For example the Metro Denver Economic Development Corp. has been advertising in California touting the tax advantages of moving to their state. Already Hewlett-Packard has agreed to build a $260 million dollar data center in Colorado as the company prepares to shut down its Palo Alto customer support office that employs 800 people.

Despite the usual lack of reciprocity taxpayers have long history of defending business. When in past years radical tax raisers have pushed splitting the property tax roll so that owners of commercial property would pay higher tax rates most taxpayers said no.

But here is the real irony. Had Proposition 1A passed the left of center labor interests would have argued compellingly that Californians don’t mind additional taxes. And like a larger and hungrier alligator these powerful interests would be back with a serious push for a split roll an oil severance tax a nickel-a-drink tax and a myriad of business-targeted taxes fees charges and assessments.

Make no mistake these labor interests will still make a push for these proposals but their internal political calculus has been severely altered. Like Governor Schwarzenegger they too have come to understand that any tax or fee increase is radioactive.

It is the hope of conservatives and grassroots taxpayer advocates that the business community has learned something from this. It is time that all those who believe in free enterprise and limited government stand shoulder to shoulder and stare down the alligator.

Jon Coupal is President of the Howard Jarvis Taxpayers Association — California’s largest taxpayer organization — which is dedicated to the protection of Proposition 13 and promoting taxpayers’ rights.