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Republican Legislators Speak Out On Tax Increases

The website features exclusive editorials by Senate Republican leader Dick Ackerman and Assembly Republican Leader Michael Villines both articulating the case against raising taxes to solve the budget problem.

Of special interest to EZ Policy Blog readers, however, is an Op-Ed written by Senator George Runner and published on his website:

Abolishing tax credits is raising taxes

As a member of the Senate Revenue and Tax Committee, I participated in a hearing last week that explored the possibility of including “tax expenditures” in the budget debate.

(In this venue, tax expenditures were synonymous with tax credits. For example, the average California parents receive a tax credit for dependent children and businesses receive tax credits – or incentives – for various actions).

Rev and Tax Committee Chairwoman Jenny Oropeza, a Democrat Senator from Long Beach, said in an op-ed that she was conducting the hearing to determine if tax expenditures deserved “extra scrutiny,” and to find out if the state might be able to measure the effectiveness of tax expenditures.

While the hearing was for exploratory purposes, one can’t help but remember that hearings usually lay the groundwork for action.

In this case, the hearing is the first step to eliminate tax credits for hard-working Californians and businesses – businesses which, by the way, might choose to head east to Nevada or Arizona’s waiting arms.

While I applaud Chairwoman Oropeza for attempting to better understand tax credits, I firmly oppose abolishing them, because it is simply raising taxes on Californians.

For example, the Legislative Analysts Office has suggested reducing the dependent tax credit to offset the budget by $1 billion. But here’s how most people will look at that “offset”: It is a $1 billion tax that will be lifted from the wallets of California families.

There is also talk of eliminating the mortgage tax deductible, which would result in an approximately $5 billion increase in taxes paid by California home owners, many of whom are already struggling to make their mortgage payments.

A few proponents of tax increases have suggested we do away with “enterprise zones” tax credits, which for business taxpayers is a financial incentive to conduct business in an economically depressed or undeveloped area.

When businesses operate in enterprise zones they hire employees in that area, which in turns means restaurants and retailers follow. Some of the larger businesses build modern facilities and fund roads, street lights and other infrastructure through mitigation fees, making enterprise zones a win-win proposition that brings pride and prosperity to the area while also reducing crime and blight.

Without enterprise zone tax credits, underserved areas would simply remain underserved and some entrepreneurs would just not go into business at all or they would head to another state.

The LAO has also called for limiting the Research and Development (R&D) tax credit (also known as a tax incentive) that California has on the books. This is a meager tax credit compared to others, but a boon for companies with a heavy R&D component. R&D companies are important in that they have a far-reaching effect on the communities in which they do business. They generally provide many high paying jobs and they generate like-minded businesses to also set up shop in the same area (Silicon Valley is a good example), which in turns has a positive economic effect on the community.

California’s tax code includes many other credits that were created to put more money in the hands of Californians and business entrepreneurs with an end goal of making the state more prosperous – And they exist because of California’s extraordinary high cost of living and doing business.

Without key tax incentives, like the R&D, California will merely push more business sectors out of state along with those businesses associated with them.

Senate Republicans strongly believe these tax credits should remain in place. They are essential to lessening the burdens of taxpayers, attracting businesses to our communities and promoting a robust economy.

We learned in the early 1990s that when changes to tax policies are made consumers and businesses change their spending behavior resulting in a loss of jobs and loss of money to the state.

The California Legislature ought to be seeking ways to stimulate the economy like Congress; not cripple it.

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