Jobs, Not Taxes, Will Raise Revenue for State

By Sherry Hodges

"Jobs, Not Taxes, Will Raise Revenue for State," by Sherry Hodges, was published in the San Diego Business Journal on February 20, 2012.

This vote will be a reality check for the governor, for the Democratic majority in the state Legislature and for the public employee unions who are the biggest backers of the tax increases.

I'm confident California voters will overwhelmingly reject these tax increases, and here's why:

Smoke and Mirrors

The state budget approved by the Legislature last summer was, once again, an exercise in smoke and mirrors by legislative Democrats that was only "balanced" by using unrealistic revenue projections. Now those projections have been exposed as fantasies, and the budget problem has gotten worse because state spending has increased beyond what was projected in the approved budget. Voters are getting wise to these shell games, and they want them to stop.

Voters are also getting wise to the unsustainable cost of public employee pensions, and they aren't going to approve tax increases to bail out the state pension systems to pay for benefits that far exceed those received by the taxpayers who are left holding the bag.

Finally, voters are beginning to understand the underlying reason for the state's boom-and-bust revenue cycles. Everyone from the Legislative Analyst to the California Chamber of Commerce have pointed out that state government has become over-reliant on state capital gains and income taxes on California's highest income earners. These revenues fluctuate dramatically based on how well these top earners are doing. This volatility has contributed to the huge deficits our state has faced in recent years.

When voters discover that the governor's plan makes this volatility even worse and threatens to drive high-income earners and jobs out of state, they are going to tell the governor and Legislature to go back to the drawing board and try again.

What Works

As job producers leave California, our unemployment goes up, state revenues decline and our budget deficit increases. A two percent drop in unemployment would give California an addition $1.2 billion in tax revenues. Jobs and government reform are the solution to the state's budget problems, not more tax increases.

That's where the opportunity presents itself. We need articulate, experienced taxpayer advocates in the Legislature who are able to take advantage of the "reality check" delivered if voters reject the tax increases in November 2012.

We need to be prepared with comprehensive plans to reduce job-killing regulations and create a tax system that is stable and equitably distributes revenues between state and local government, enabling California to grow its revenues by growing its businesses instead of driving them out of state or killing them.

We need politicians who are willing to draft such plans, explain them to the voters, and return our state to prosperity.

Sherry Hodges is chief of staff for Assemblywoman Diane Harkey and a candidate for State Assembly, 76th District.