By Senator Mike Morrell, 23rd State Senate District
While in recent years our state government has seen record-setting budgets, the same cannot be said, unfortunately, for working Californians and small businesses. Their hard-earned money does not go as far as it should, meaning that families and entrepreneurs have less to invest in their futures.
High taxes and extensive regulations discourage businesses from opening or investing here. It is the reason that for 12 years straight, California has been named the worst state for business in CEO surveys taken by Chief Executive Magazine.
However, attempts to increase taxes are well underway. Despite the fact that California drivers already pay some of the highest gas taxes in the country for deteriorating roads, legislative Democrats have started pushing for additional gas taxes and vehicle fees.
Among the tax and fee increases included in the current proposal:
- Gasoline excise tax: 12 cents per gallon, phased in over three years
- Price-based excise tax: 7.5 cents per gallon
- Diesel excise tax: 20 cents per gallon
- Diesel sales tax: 4% per gallon
- Vehicle Registration Fee: $38 per vehicle annually
Californians already pay enough for the services and programs they expect. Reforms and efficiencies should first be made with existing resources.
Along with pinching household budgets, these proposed increases will also drive up the cost of doing business here. With the threat of another recession always looming, the focus rather needs to be on effectively growing our economy and fostering a business environment that inspires confidence in job creators.
To this end I have authored legislation aimed at making California more business-friendly. Senate Bill 248 would lower the minimum franchise tax paid by new small businesses from $800 to $400. Senate Bill 555 would require that any regulation adopted by a state agency be reviewed five years after implementation.
Both measures are important steps in strengthening our state’s economy.
At the same time, any progress we make on this front can only be sustained if we continue paying down the hundreds of billions of dollars the state owes in public pensions and other obligations.
Absent major reforms, the debt situation is only going to get worse. Groups like the American Legislative Exchange Council peg our statewide unfunded liabilities at almost a trillion dollars.
Consider that for the 2015-16 fiscal year, the California Public Employees Retirement System (CalPERS) planned for a 7.5% rate of return on its investments. However, it only managed to achieve a 0.6% rate of return. 7% of a $400 billion liability means a shortfall of $28 billion.
Weak investment returns are forcing CalPERS to re-evaluate the soundness of their assumptions. The department will at some point in the future have to admit that investments alone may not be enough to cover pension costs.
The dual realities of a fragile economic recovery and a public pension fund that is financially unstable put our state in a perpetually precarious situation.
As budget talks get further underway and the legislative year moves forward, the governor and his Democrat colleagues need to recognize that additional taxes would magnify these challenges facing California.
Senator Morrell represents the 23rd State Senate District, which covers portions of Riverside, San Bernardino and Los Angeles counties, including Phelan and Piñon Hills.