Voters may face as many as seven ballot measures damaging to California’s business and political climate in November. Any one of these measures should motivate millions in opposition spending by affected industries. More than a few are likely to qualify for the ballot.
Conventional wisdom teaches that gubernatorial elections deliver older and more conservative voters to the polls, which normally drives liberal and anti-business initiative entrepreneurs to aim their measures for presidential election years, like 2016 or 2020. But this formerly reliable rule has crumbled in the face of a low qualification threshold, interest group imperatives, and impatient wealthy donors. It’s open season on the deep pockets!
In 2016, California voters extended top income tax rates (already the highest in the nation) through 2030, increased tobacco taxes by $2 a pack, and imposed new taxes on marijuana use and production. Elsewhere, voters in hundreds of local jurisdictions raised sales, property and excise taxes for a variety of municipal or school services.
For certain unions and special interest groups, this isn’t enough. Two proposed ballot measures would impose multibillion-dollar tax increases on businesses and upper income earners.
• The United Healthcare Workers union has proposed a 1% income tax surcharge on all income over $1 million, which would raise up to $2.5 billion annually for various health care programs. Wealthy taxpayers would pay a top rate of 14.3%, well above the highest income tax rate of any other state.
• A coalition of liberal interest groups is circulating a split roll property tax proposal, requiring that nearly all commercial and industrial properties, except production agriculture, be assessed to full market value, and then reassessed every three years thereafter. Tax bills for business would increase by $10.5 billion a year.
Worsen Housing Crisis
California’s notorious housing shortage contributes to many social ills, including poverty, long commutes, air pollution, and flight of middle class jobs and job seekers.
Tenant advocates, backed by the head of the Los Angeles AIDS Healthcare Foundation, are circulating a proposal that would exacerbate this shortage by repealing long-standing limitations on rent control.
Far from alleviating the housing shortage, this proposal would simply allow local politicians to benefit some existing renters at the expense of future renters and homeowners.
• A measure purporting to improve consumer control over personal internet privacy promises to be among the hardest fought and most expensive ballot battles.
A San Francisco investor proposes requiring businesses to provide to consumers upon request a copy of any personal information it has accumulated and allows consumers to opt out of any or all collection of their personal information—even if not personally identifiable. This measure undermines widespread business models in the industry and likely will reduce many services now available to internet users.
• United Healthcare Workers is also soliciting signatures for a measure to establish price controls for privately operated kidney dialysis treatment. Intended to create leverage on dialysis clinics to increase unionized staff, passage of the measure would increase overall costs by shifting dialysis treatments from clinics to more expensive venues like emergency rooms or hospitals.
Stall Economic Development
For more than two decades, excise taxes on California gasoline and diesel remained flat, contributing to the erosion of purchasing power of those tax revenues and creating a backlog of maintenance and operational improvements for roads and highways. In 2017, the Legislature and Governor agreed on a $5 billion annual boost in transportation revenues to repair roads and bridges and add capacity in some of the most congested corridors.
A San Diego politician has proposed repealing the excise tax increases and subjecting future increases to statewide voter approval, which would freeze in place hundreds of planned transportation improvements throughout California, without a plausible replacement revenue stream.
Disrupt State Governance
A Silicon Valley millionaire is again attempting to qualify a measure to break apart California, this time into three separate states, centered on the Bay Area, Greater Los Angeles and San Diego/Orange County, with the rural area divided among the new states.
The new states would obviously create new and unpredictable winners and losers—economically, socially and politically. Rather than working to knit the fabric of our state more tightly together, this proposal would tear it apart.
Initiative proponents will begin submitting petitions to counties in May for signature verification. It is not too soon to begin educating affected business and industry leaders about the consequences of these proposals.