Not Enough Time for Spending Reforms

As you know by now, the Legislature has begun to roll out its tax proposals to fill the $800+ billion hole it has created by adding a lot of spending back into the Governor’s budget.

The tax show began on Thursday afternoon, when the Assembly and Senate Taxation Committees met in a joint meeting to discuss Speaker Buckley’s proposal to “protect” small businesses by cutting the Modified Business (payroll) Tax from 0.63% to 0.5% of payroll under $250,000/year.

That equals out to about a $325 tax cut. Of course, a business with $250,000 in payroll could have as few as three people or as many as 13 or so. Everybody has a different description of a small business, but this proposal seems to define it as exceptionally small.

Now, the MBT rate described above applies to the first $250,000 of payroll of EVERY business. But, on any payroll above that $250,000 magic number, the rate is set to increase to an undetermined amount. That new rate could double to 1.25%, or even triple to 2%, which is the rate that our bank members currently pay.

You want to know what the most disheartening thing about this is? I was one of the only lobbyists that stepped up to the table to say that we could not support any tax increases because long-term spending reforms had not yet been implemented! The Retail Association stepped up to the plate to offer an alternative solution, and the NFIB representative opposed the plan as well.

I reiterated the Chamber’s support of the list of long-term spending reform that you are familiar with. I stated that, at this point in time, the Chamber could not support ANY tax increases because very little progress had been made on these reforms.

While I can respect a position of “our tax rates should be higher,” I have a hard time fathoming how anyone can claim that there is “no where left to cut.”

A system that allows public employees to retire at age 50 with 75% pay for the rest of their life is not “bare bones.”

A system that forces local governments to beg public employee unions to take only a 1% COLA instead of the 4% they were promised is not “bare bones.”

A prevailing wage survey system that calculates the prevailing wage by including prevailing wages in the formula is not “bare bones.”

I have been told by a few legislators that “we do not have enough time to deal with all of these reforms in 120 days.” I respectfully disagree. We seem to always have time to spend tax dollars, but then run out of time to save tax dollars.

For those of you who are not familiar with the legislative process, it usually works as follows: bill is heard in committee on one day, it is decided upon in a work session on another day, it goes to the floor, then goes through the same process in the other chamber. In other words, one bill could get through the entire process in about two weeks if there was strong legislative will to do so. 120 days is plenty of time!

While I have not seen the results of whatever reform package is going to come out of the “core group,” I have a feeling that it won’t be comprehensive enough and that the Chamber will not be able to support the final budget package.

While some may call this unreasonable or unrealistic, it is the position of this Chamber that every last dime must be spent as efficiently as possible before taking almost $1 billion out of the economy.

More on the rest of the tax package soon…