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TAXIFORNIA

California is a high-tax state, with some of the steepest sales tax, personal income tax and corporate tax rates in the United States. The state’s notoriously unfriendly business environment—from high taxes to laws that constrict worker freedom through excessive regulation—has compounded in recent years with companies and individuals fleeing the state for lower-tax states.

State Sales Tax: Highest in the Nation

California levies a 7.25 percent general sales and use tax, which is the highest statewide rate in the nation. Local governments are permitted to levy additional sales and use taxes, and the combined rate of the additional local taxes should not exceed 2 percent. However, some local governments have been given special legislative dispensation to go above this cap.

For example, this year Sacramento passed legislation that allows the county of Contra Costa, or a city within the county, to increase sales and use taxes above the 2% cap. With local voter approval this bill could result in the combined tax rate of 9.25%, plus any current city rates.

Gasoline Tax: Highest in the Nation

California’s state excise on gasoline is 50.5 cents per gallon, the highest in the nation, as of July 2020. According to the nonpartisan Legislative Analyst’s Office, California’s cap-and-trade auction increases the price of gasoline an additional 11 cents per gallon. The federal excise tax on gasoline adds another 18.4 cents per gallon to the cost at the pump.

Personal Income Tax: Highest in the Nation

California’s personal income tax has the highest top rate and one of the most highly progressive structures in the nation. California’s top rate is 13.3 percent (including the 1 percent surcharge for mental health programs, for all personal income taxpayers with taxable income over $1 million). Hawaii is second, with a top rate of 11 percent. Most small businesses are S Corporations, partnerships, or sole proprietorships, and pay their business taxes at the rates for individuals, which makes California’s taxes on small businesses some of the most burdensome in the nation. Seven states do not impose a personal income tax.

Corporate Income Tax: Highest in the West

Those looking to expand or establish a business in California may resort to neighboring states, as California has the highest corporate tax rate in the Western U.S. at 8.84 percent. Only seven states have a higher top corporate tax rate than California (Alaska, Illinois, Iowa, Maine, Minnesota, New Jersey, and Pennsylvania). 

Continue Push for Higher Taxes

Despite California imposing some of the highest tax rates in the nation, Sacramento continues to push for higher taxes even in the midst of an economic crisis. This year alone, the legislative sought an additional tax on personal income over $1 million, a $275 per employee tax on certain businesses, and a net worth tax on the wealthy. Many of the individuals who would pay these taxes are business owners who are already struggling to stay afloat during government-imposed stay-at-home orders and the forced shutdown of some businesses during this pandemic. These massive tax increases will only serve to undermine California’s economic recovery, worsen our state’s already challenging business climate, and further diminish California’s ability to compete for investment. According to its 2020 survey of CEOs, Chief Executive magazine ranks California as the worst state for business, and the Tax Foundation ranks California as one of the worst states (48 out of 50) due to its business tax climate in its 2020 State Business Tax Climate Index. Yet, even with these rankings, Sacramento continues to pursue policies that will make it more difficult for businesses to operate in this state. Moreover, these tax proposals are in addition to more than $15 billion in various tax increases that have been enacted in the past few years, some of which take money directly from low-income residents, and all of which raise costs for Californians in some way. On top of this, many legislators also support a statewide ballot measure this November seeking to dismantle the protections of Proposition 13 to increase taxes on California’s business properties. The state should be working to save jobs during this crisis, not hinder economic growth through higher taxes.

HOW TO DESTROY AN ECONOMY 

Regulatory Environment

According to recent research by the National Federation of Independent Business, roughly half of small business owners say regulations are a “very serious” or a “somewhat serious problem.” Twenty-eight percent of small employers cited cost as their biggest regulatory concern. Other problems cited in the study included the volume of regulations, understanding how to comply with regulations, extra paperwork and time delays caused by regulations, and regulations with no relevance to safety or consumer protection.

One example of excessive regulation is California’s occupational licensing laws, which are among the most burdensome in the nation. According to an Institute for Justice study, California licenses a large number of occupations and imposes steep requirements, making it the most widely and onerously licensed state. In fact, California’s Department of Consumer Affairs alone regulates more than 3.9 million licensed professionals or businesses in more than 250 professions and occupations.

As the study points out, licensing has significant effects on the economy as a whole. It reduces access to jobs, limits entrepreneurship, inhibits geographic mobility, and increases the cost of services. Occupational licensing laws are only the tip of the iceberg when it comes to excessive regulations and government mandates in California.

Economic Shutdown

On March 19, 2020, Governor Newsom issued a statewide order for all residents to stay at home amid a coronavirus outbreak, resulting in the closure of non-essential businesses. Over the last several months, the state and its industry sectors have gone through varying degrees of reopening and closure, resulting in economic uncertainty, job losses, and the closure of businesses. 

To demonstrate the economic impact of the stay at home order, some of the most shocking numbers come from the restaurant industry. The California Restaurant Association (CRA) noted that 1.4 million Californians worked in restaurants before the pandemic. Since March, between 900,000 and 1 million of these workers have either been laid off or furloughed – and many continue to wait for their unemployment payment to come through. CRA also found from a recent survey that 30 percent of restaurants say they will either close their restaurant permanently or they will downsize by closing some locations. 

In addition, based on the number of businesses that checked “closed” on their Yelp pages, California followed Hawaii as one of the hardest hit states. Retail businesses suffered some of the largest closures – both temporary and permanent – followed by the beauty and personal care services industry. The tourism industry has also been negatively impacted with Tourism Economics projecting in May that California will lose $72.1 billion in statewide travel-related spending in 2020. 

With all of these business closures, California has an 11.4 percent unemployment rate for August, which is higher than the national average of 8.4 percent and is the fifth highest in the nation. 

Moreover, the effect of the stay at home order and mandated closures goes beyond businesses as these actions also impact places of worship. 
 
Pandemic Shines Light on Consequences of Regulatory Barriers

The pandemic and the Governor’s stay at home order has clearly revealed the consequences of excessive regulations and government mandates that erect barriers to employment and economic growth. 

For instance, the Department of Consumer Affairs had to temporarily waive numerous licensing laws and regulations this year as they imposed barriers that kept Californians from being able to obtain and maintain their state license during the pandemic and/or prevented licensees from practicing their profession. This begs the question: how many of these laws and regulations are really necessary to protect consumers? 

In addition, restrictions on businesses seem to have been arbitrarily applied during this pandemic. For example, hair salons were able to begin operating indoors while nail salons were not. In late September, nail salons were finally able to resume indoor operations. 

Year after year, Sacramento continues to pursue policies that make it more challenging and costly to operate a business or to obtain a state license in California. Efforts to reduce regulations or to streamline licensing requirements often do not make it through the legislative process. With the state’s regulatory environment combined with the state’s mandated closure of businesses or restrictions on their operations, business owners and Californians are struggling. This has shined a light on the consequences of government overreach and the need to provide much needed flexibility for businesses in order to recover from this economic crisis, save and create jobs, and to provide more pathways for upward economic mobility. 

Tying the hands of job creators

In no area are the negative consequences of the past 10 years of the Super Majority in Sacramento more pronounced, clear and obvious than in California employment rules and regulations and their impact on job creation and economic growth. Driven by their union benefactors, legislators have used their 10 year hegemony to advance both a plaintiff’s bar and union driven agenda, which has until COVID 19, only undermined economic growth and job creation. However, post-COVID, it will put a crippling stranglehold on California’s economic recovery and job creation.  

While over the past 10 years, there were a plethora of bills passed and signed into law at the behest of Sacramento union benefactors, AB 5 (Gonzalez-2019), which undermines worker freedom, the mutually beneficial independent contracting business arrangement, the freelance economy, job creation and economic growth highlights the power of unions to protect union interests and advance union influence at the expense of economic growth and job creation. The same can be said of the many bills expanding prevailing wage and forcing project labor agreements on construction projects, which impacts jobs and the economy by driving up the costs of construction projects – often at the expense of other priorities that use taxpayer dollars. What the unions are essentially saying is that a fewer high paying union jobs (higher pay than the market would otherwise bear) and the associated higher union dues is better for their membership than more job opportunities and a growing economy. 

Self-imposed competitive disadvantage

Despite all of its advantages, 10 years of one-party rule in Sacramento have taken a toll on California, as the formerly Golden State has lost its competitive edge. For several years now, business leaders have consistently lamented the fact that California is no longer considered a viable option for businesses looking to start up, expand, or relocate. Instead, California businesses have been looking to other western states -- such as Arizona, Texas and Nevada. This can be mostly attributed to the fact that, by a large margin, California’s regulatory and legal environment is the most costly, complex, and uncertain in the nation. 

For several years running, including in 2019, Chief Executive Magazine's annual survey of the country's top chief executives has ranked California the worst state in which to business. According to one of the CEO’s surveyed, who is described as shying away from doing business in California, "The rules, regulations and taxes for everything in California have been ridiculous. Every time we do a project there, we have some surprise rule or reg that costs both us and our clients a lot of money. Far worse than any other state." 

Sue Your Boss 

Over the past 10 years, there has also been a plethora of bills passed and signed into law at the behest of plaintiffs’ attorneys who are consistently looking to expand opportunities to pad their wallets by suing job creators.  These bills expand private rights of action as well as opportunities to sue job creators under the Labor Code’s Private Attorneys’ General Act (PAGA, also known as “sue your boss”), which allows an aggrieved employee to sue an employer or former employer for alleged violations of the Labor Code. These bills increase the incentive for litigation and employer costs related to defending against the litigation. The stifling costs of this litigation kills economic growth and job opportunities.  

Similarly, the American Tort Reform Association’s “Judicial Hellholes Watch List” for 2019 labeled California, once again, a Judicial Hellhole and ranked it as the worst litigation environment in the country. 

Continued one-party rule in Sacramento will only make it more difficult and expensive to do business in California in the coming years. Obviously, this will do nothing to improve California's business climate or its reputation as being too litigious and extremely anti-business. It would send the wrong message to businesses looking to establish or expand here. It says California will still closed to business and job creation. Instead, voters should be looking for new fresh leadership in Sacramento that will work to create, not stifle, economic opportunities and job creation. 

California’s economic growth is dependent on its ability to create a business climate where job creation can flourish. 

ONE PARTY RULE

Since Jerry Brown became Governor in January 2011 and Gavin Newsom became Governor in January 2019, we have completed 10 legislative sessions (five complete two-year sessions) of one-party rule whereby Democrats control the Senate, Assembly and Executive Branch of California’s government.  The Democrats’ power has been unchecked for legislation and within the regulatory realm of the agencies controlled by Democrat Governors. Although absolute power does not always lead to corruption, it did four times in recent years. In 2014, the Senate saw three Democrat Senators resign in disgrace – two were sent to federal prison and one was convicted of eight felony counts but pardoned by Governor Brown. A fourth Democrat Senator resigned in 2017 as a result of sexual harassment allegations from a staff member. 

This also happens to be the window of time that Democrats have been able to enact budgets without Republican votes via a simple majority, as Proposition 25 was passed in 2010.  When Arnold Schwarzenegger was California’s governor or Republicans had to put up votes for state budgets that previously required a 2/3 vote of the legislature, Republicans had some accountability for how California was being governed.  

While California’s population increased by just 7% between 2011-2020 during the Democrat administrations of Jerry Brown and Gavin Newsom – with the Democrat Legislature’s votes – state spending of taxpayer dollars increased by 54%.  Few would argue that California has become a better place to live over the past decade of One Party Rule. While California Democrats are failing to solve today’s many problems that their policies created, such as homelessness, wildfires, inferior public schools and rising crime, they are using misdirection to divert attention through the cynical tactic of appearing to be “visionary leaders” by banning popular types of automobiles in 15 years in the name of fighting “climate change.” 

DMV/EDD

DMV: Failures and Fraud? Or just business as usual..

 The DMV’s biggest job in the past several years has been implementing the transition to REAL-ID, as required by federal law in 2005.  Despite having 15 years to plan a smooth transition to the new system – the most recent 10 years under Governors Brown and Newsom – the Department of Motor Vehicles’ (DMV) implementation was an unmitigated disaster, with wait times often extended well past three hours at field offices, inundated with people seeking to get the new IDs before the federal deadline.  Despite a host of audits, strike team plans and additional spending, the DMV’s command structure and antiquated technology was simply incapable of doing its job.  Until the federal deadlines were extended for compliance, it was clear the DMV was not going to be able to meet the deadlines, despite massive additional expenditures of public funds.

And if the REAL-ID debacle wasn’t enough, during the same period, DMV was charged with implementing a motor voter system to provide every driver’s license or identification card applicant with voter registration.  Given the fact that there are several requirements for being registered to vote that do not match up with the requirements for receiving a driver license, there was significant concern expressed by Republicans over whether the DMV was equipped to undertake the task.  These concerns were well founded, as repeated stories came to light of non-citizens being unwittingly registered by the DMV.  

EDD:

Sacramento over the past 10 years have also had the hubris to tell job creators how to do their jobs with a plethora of new unnecessary, costly and overly-burdensome laws while at the same time not being able to keep their own house in order. One need look no further than the debacle that is the Employment Development Department (EDD), which has failed miserably at one of its primary jobs, which is providing unemployment insurance (UI) benefits to unemployed workers who have lost their jobs. The issues at EDD are not new, as the same problems occurred during the last recession.  It should be no surprise that EDD would be unable to handle the massive increase in claims.  This begs the question as to what EDD and the legislators running the state have been doing since the last recession. For his part, Governor Newsom has attempted to shift the blame on to his predecessor, but he can’t escape responsibility that easily. In fact, not only was Newsom serving at the Lieutenant Governor during this period, which means he should have known of the problems, he served as Governor for more than a year when he decided to shut down businesses, kill jobs and place huge demands on EDD and the UI claims process. Sure, fixing EDD problems may have not been a sexy issue, but for a leader who is more interested in solving problems than speaking platitudes and chasing headlines, and with his experience and knowledge coming into office, especially being labeled as one of the most “tech-savvy” politicians, a year should have been plenty of time to address EDD’s issues. If it was not, than the Governor should not have proceeded with shuttering businesses causing millions of workers to lose their jobs. 

Congrete Living Health Facilities:

A few weeks ago, I had the opportunity to meet with a group from CECO. They manage Congregate Living Health Facilities (CLHF). If you’re not familiar with these, they are a residential home with a capacity of no more than 6 (six) beds, which provides inpatient care, including the following basic services: medical supervision, 24-hour skilled nursing and supportive care, pharmacy, dietary, social recreational. The care is generally less intense than that provided in general acute care hospitals but more intense than that provided in skilled nursing facilities. Basically, they provide a homelike, rather than institutional, environment with around the clock one on one personal care, the Concierge service for nursing and support.

Congregate living health facilities provide one of the following

services:

CLHF - Services to persons who are mentally alert, physically

disabled, who may be ventilator dependent,

CLHF - Services for persons who have a diagnosis of a terminal

illness, a diagnosis of a life-threatening illness, or both.

CLHF - Services for persons who are catastrophically and severely

disabled.

Very few people are aware of these facilities and the personal services they provide. They provide the quality care, if not better, as Acute Care and Skilled Nursing facilities with often less costs. Typical savings are 1/3 the amount of the other services, yet most of these facilities have 0 (zero) patients, sitting vacant for months if not years.  Why are these facilities not more well-known and utilized? Several reasons can be accounted for, but mostly due to FAILED government legislation, all facilities are licensed by the state, yet they have not created a medical billing code. Without this code, facilities can not be recognized by Insurance Companies, therefore can not be paid for their services (once again at 1/3 the cost of other services). A pilot program, California  Senate Bill 1280, was passed to expand and open more facilities, but to date no Medicare billing code has been created for congregate care. Ask yourself, if you had a loved one in need of subacute level of care for short or long term needs, would you want them in an institutionalized setting or have one on one nurse to resident care in a home like setting? Therefore, my goal is to open up Congregate Living Health Facilities to everyone and establish a Medicare billing code for these facilities within my first 90 (ninety) days of office.


TAYLOR FOR STATE SENATE 2020 - 1426129
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