Business organizations are beginning to line up against Proposition 55, the income tax extension, but is it a matter of showing the flag or engaging in full force? Long term strategy on business related tax issues is part of business’s calculation.
No question business is opposing the effort to extend for 12 years what was promised by Gov. Jerry Brown to be a temporary tax when initially placed before voters as Prop 30. The California Chamber of Commerce and the National Federation of Independent Business/California have already come out in opposition to Prop 55. Particularly significant is the case of CalChamber since it was neutral during the Prop 30 campaign.
The important question: will members of the business community raise big money to oppose the tax extension?
The California Teachers Association, prime mover behind the tax extension, recently kicked in $10 million to the Yes campaign. With allies from other public unions and the hospital association, the pro-Prop 55 side can be assured of having a healthy campaign chest.
There is reason for business to be concerned about continuing the tax that applies to upper income taxpayers. Many business owners pay their business taxes through their personal income taxes. In a recent survey done by the Los Angeles Business Federation, the personal income tax was ranked first among concerns of the organization’s members. In addition, business opponents of the tax cite a negative effect on the economy.
Yet, business’s full engagement in the campaign may be determined by another business tax measure that will not be on the ballot but lurks on the horizon–a split roll property tax. The plan would separate commercial property from residential property and raise taxes on commercial property.
When a split roll tax was being considered for the 2016 ballot, business lined up pledges of millions of dollars to oppose such an effort. Supporters of raising commercial property taxes have promised to pursue the effort in a near future election and business will be ready.
But, when considering a possible split roll battle there is an interesting consideration when also fighting Prop 55. Both the income tax extension and a split roll will direct significant dollars toward education. If Proposition 55 passes arguing that education needs that money, can the education establishment come back in two or four years and argue they need the additional dollars that a split roll would provide? Would the voters buy such an argument in light of a successful Prop 55?
How much will business consider this long-term possibility? One campaign would pit business against a new increased property tax, which business is already arming to confront, the other campaign would fight a tax that is already on the books.
While business is weighing its strategy on Proposition 55 there is one more point for business leaders to consider. Even if Prop 55 passes, the unions and tax raising advocates still may go after the split roll. Not only would it mean more money that they can access, it also means ripping apart Proposition 13 and for tax raisers that is the holy grail.