Why California’s Businesses Are Forced to Collude With Public Sector Unions

I’ve received a number of calls from reporters over the last few weeks seeking my reaction to the fact that many tax hike bills have stalled in the Legislature. Despite the passage of Prop 30 giving California both the highest marginal income tax rate and the highest state sales tax rate in America, the sheer number of legislative proposals seeking even more revenue is staggering. Especially common are proposals to hit unpopular products or industries like cigarettes, soda, and oil extraction. But, for now, it appears that most of these tax hikes have lost traction.

When I was younger and more naïve, I would have shared the reporters’ assumption that the Legislature isn’t as enthusiastic to raise taxes as we originally feared once the Democrats achieved their super-majority status. But I’m older, wiser and far more cynical than I used to be and, more importantly, I’ve worked within two blocks of the Capitol and have observed what really motivates its inhabitants. In a word, it’s money. And the interests targeted by these bills have lots of it.

For example, not long ago soft drink manufacturers rushed to contribute millions to Jerry Brown’s Proposition 30 campaign to increase taxes on everyone else knowing that – as social pariahs who scheme to make children obese – they were being targeted by the tax-and-spend majority in the Legislature. Helping Brown and his legislative allies with a broad-based tax hike was putting a huge deposit in the “favor bank.”

And then there are the “evil” oil companies who are always a popular target for tax raisers. Surely, it is no coincidence that Occidental Petroleum was willing to put in a half-million dollars to help increase the tax burden on others. Most likely the company was seeking to deflect attention from itself and its plans for hydraulic fracturing (fracking) to increase oil production in California.

Sadly, this is how politics really works and it is light-years away from the idealized process that is taught in high school civics classes.

By introducing bills threatening taxes on interests that can afford to defend themselves, and then tabling the measures for reconsideration next year, members of the majority party have another 12 months to run their highly profitable shakedown racket, pressing politically vulnerable industries for campaign contributions.

These business interests get the message and they pay. Back in 2009, when then-Gov. Schwarzenegger was promoting his Proposition 1A, a $16 billion tax increase on regular folks, a spokesman for the Los Angeles Chamber of Commerce admitted that it was important to support the governor’s measure, because the alternative would likely be higher taxes on business.

Those who look at compliant business interests as the problem, would only be part right. California continues to be rated as one of the worst states in the nation to do business. The American Legislative Exchange Council (ALEC) has released its annual economic rankings of all U.S. states, and California ranks 47th for economic outlook and CEO Magazine has rated California ranks 47th for economic outlook. California businesses are struggling under high taxes and suffocating regulations.

Interestingly, the reaction among various businesses and industries to the shakedowns is not uniform. Some are more than happy to play the game as a cost of doing business and, besides, it gets them into some pretty fancy parties. Other quietly seethe as they reluctantly write the checks because they know how wrong it is. Either way, businesses have adopted a “go along to get along” approach in a desperate effort to survive.

But in the end, to see who is really responsible for our pay-for-play culture in the state capitol, we voters must look in the mirror. As long as we continue to elect ego-driven, money-grasping politicians who put themselves above the interests of average Californians, we will continue to suffer under dysfunctional governance.

Jon Coupal is president of the Howard Jarvis Taxpayers Association  –  California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

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