Saturday, June 5, 2010
Rebuttal to Cynthia Kaufman
I was strongly opposed to Cynthia Kaufman as a candidate for the Pacifica School Board in 2008, and her recent letter to the editor merely confirms why I felt she was an inadequate educator and politician.
“In praise of taxes” is nothing more than someone living off the public dole (like a school board official) telling the private sector they need to sacrifice more for her benefit. In fact, the original Boston Tea Party wasn’t about people’s unwillingness to pay taxes, but rather how those taxes were spent. If higher taxes truly equaled more services AND a functioning economy with a bounty of jobs, California would not be the poster child of a bloated state sinking under the morass of its financial ineptitude.
The problem with Ms Kaufman’s premise is she assumes businesses (and employees) exist to pay taxes to the state. Free market competition, however, mandates that states compete against each other to provide incentives for businesses and their employees to remain located in their state. And with the personal income tax providing nearly half of California’s state revenue, it seems ridiculous to suggest that raising taxes - especially during a recession, extended global financial meltdown, and unemployment levels not seen since the Great Depression – will stimulate businesses and their employees to continue paying those higher taxes.
Quite the contrary, raising taxes will cause more businesses and their employees to move to less burdensome states, causing a deeper cut to state revenues, which would apparently lead Ms Kaufman to say “all hail the new higher taxes!” In fact raising taxes “progressively” on businesses and the wealthy has the opposite effect of raising revenues: they tend to relocate to states that are more business friendly and less burdensome.
Also consider a company’s need to make sound financial decisions to sustain its bottom line. Raising taxes affects hiring and retaining employees (and thus their contribution to the tax base), the cost of products (higher taxes on companies tends to pass that expense to the consumer with higher prices, so in essence what appears to be a “progressive” tax eventually impacts the consumer on a “regressive” level), and the availability of benefits for the employees. Some large businesses do suffer from “VPitis” where the upper echelon pocket large bonuses at the expense of their lower wage earners, but consider how these higher taxes will affect the small businesses that form the backbone of an economy.
California already ranks #48 on the 2009 State Business Tax Climate Index (in fact a recent article in CEO Magazine put the state’s business climate below even Puerto Rico!). Joseph Vranich, on his blog The Business Relocation Coach, cites 129 companies that have recently “disinvested” in California’s hostile business environment since July 2009. "It's no mystery what causes companies to leave California – high taxes, undue regulation, workers' comp costs, a legal environment stacked against businesses, and lengthy and costly construction permitting requirements," Mr. Vranich says.
A recent article in the Orange County Register about the relocation of 2 companies to Colorado is equally as blunt: Kyjen Company (maker of toys and other products for dogs) founder Kyle Hansen says, "I realized we were paying more in taxes in California. I would rather invest that money to hire more people." Kyjen has increased their company from 9 employees to 21 since the move, and guess who is reaping the tax benefits from this expansion? NOT California.
I don’t expect Ms Kaufman to understand any of this. Where would she fall in a discussion on Pacifica’s woeful economy, where 3 of the top 4 employers are government entities (her own school district, the city government, and JUHSD)? Where the city has reaped a sum total of ZERO dollars in permit fees for New Commercial and New Industrial permits from 2004 through 2008? Ms Kaufman opposed Measure L (development of the quarry) but supported Measure D (the sales tax increase), so it seems in essence she favors higher taxation without the appropriate expansion of growth and business. With Pacifica constantly teetering on the brink of bankruptcy, would these be sensible solutions?
Here’s some raw numbers perhaps Ms Kaufman can digest: California’s state spending was $51.4 billion in 1991. It is currently $144.5 billion and growing, with the ever onerous unfunded pension liabilities of state and municipal employees anywhere between $63 billion and $500 billion. (Pacifica’s share is $20 million, and even if those bonds DO sell, how does Ms Kaufman propose to pay them back? Even more taxes!). Spending has doubled in under 20 years so why is this not enough for California to provide for its infrastructure, its schools, its social programs, and its most adversely affected citizens? Ms Kaufman’s argument is that the state, while doubling its spending in the last 20 years, has deteriorated in quality. Has the private sector spending doubled in the last 20 years? Or more to the point, have private sector salaries and benefits doubled in the last 20 years in California, compared to public sector salaries and benefits?
Well, my advice is not to listen to someone on a California school board for reasonable answers to that question.
Here's a link to her My Turn in Wednesday's Tribune:
Jeffrey W Simons