Terry McLaughlin: Tax relief a step toward a more affordable California
February 28, 2018
For millions of our citizens, California has been rendered unaffordable because of policies, regulations, restrictions and legislation emanating from our leadership in Sacramento.
The nonpartisan Tax Foundation has reported that from 1990 to 2010, 3.4 million residents relocated to other states — 80 percent of the growth gained in the previous 30 years. According to the year-end report of the real estate database Property Shark, California is home to 77 percent of the country's most expensive zip codes. Perhaps that explains this massive exodus, as well as why one-third of California's renters spend at least half of their take-home pay on rent and only about 40 percent can afford to purchase a median-priced home. Is it any surprise that California currently has the highest poverty rate in the nation (23.8 percent) when housing prices are factored in?
Add to these statistics the fact that, according to the Howard Jarvis Taxpayers Association, Californians have the highest personal income taxes, sales taxes and gas taxes in the nation. Since Gov. Brown took office in 2010, over $15 billion in annual tax increases have been enacted, even though Sacramento is currently sitting on a $4.6 billion budget surplus, which is expected to rise to $7 billion this fiscal year.
Small businesses, which employ about half of our state's private sector workers, suffer under these policies as well. According to the Institute for Justice, California is the third-worst state in the nation in terms of burdensome licensing laws. As described in my column of Feb. 15, a number of large and small businesses are fleeing California and establishing themselves in states which offer a much more business-friendly environment. And who can blame them?
So instead of spending his valuable time concocting schemes for legislation that will drive even more families and businesses out of California, on Jan. 24, Assemblyman Vince Fong (R-Bakersfield) introduced Assembly Bill 1922, referred to as the California Competitiveness and Innovation Act, a proposal which would provide tax relief to middle class families and small businesses. The three main components of this proposal are to lower the state personal income tax rate for middle class individuals and families, eliminate the franchise tax on small businesses, and double the renter's credit and the homeowner's property tax exemption.
In introducing this bill, Assemblyman Fong stated "We don't need gimmicks — California taxpayers deserve relief from the tax burden imposed on them by Sacramento year after year. We have to make California more competitive with other states and help ordinary Californians afford to live and work in this state."
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Assemblyman Fong's bill is supported by the Howard Jarvis Taxpayers Association because, as their president, Jon Coupal, states, "this proposal, in a significant way, makes California more affordable by finally providing real relief for taxpayers and homeowners." AB 1922 would double the renter's tax credit, which would provide meaningful relief for renters, especially those trying to afford their first homes. The bill would double the homeowners' property tax exemption from $7,000 to $14,000, the first increase in this exemption since 1972. Forty six years ago the median home price was approximately $25,000, while today it is over $500,000 and this homeowners' tax exemption has simply not kept pace with rising home prices.
Tax relief may also be able to help address California's housing shortage. According to Coupal, the state needs to build 180,000 new units of housing a year for the next 10 years simply to keep pace with current demand. Right now, only about half that amount is actually being built. Since 1990 there have only been four years in which at least 180,000 new units of housing were built, and none since 2005. Housing prices and rents continue to be driven up by these shortages, which reflect the high, and often prohibitive cost to builders of permits, licenses, taxes, new regulations and requirements imposed by the state.
Assembly Bill 1922 would eliminate the $800 franchise tax currently imposed on small businesses. To charge an $800 tax on a business that might earn under $10,000 a year is unreasonable, and no other state in the nation discourages businesses by imposing this type of tax. The National Federation of Independent Business/California "supports this much-needed tax cut proposal because small businesses are being strangled by the unreasonably high cost of doing business in California," according the NFIB Policy Director Shawn Lewis. "California is the only state in the nation that imposes a punitive franchise tax on businesses, which puts our small businesses at a competitive disadvantage and contributes to the closing down of these businesses and exodus of good-paying jobs to other states."
It is refreshing to see an elected official directly address the issue of tax relief for California's citizens and small business owners, rather than spending his time and effort trying to find schemes to circumvent the federal government.
Assemblyman Fong's bill will be referred to a policy committee in the California State Assembly in the coming weeks. If passed, this bill could provide meaningful tax relief to California's families and small businesses, and it just might help keep Californians in California instead of moving to Texas, Nevada, Georgia, Florida, or other states where businesses are welcomed and taxpayers are respected.
Terry McLaughlin, who lives in Nevada City, writes a twice monthly column for The Union. Write to her at firstname.lastname@example.org.
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