The issue: What’s behind California’s high unemployment rate?
Our economy is showing signs of recovery — that’s good. Unfortunately, the pace of the recovery is so slow that unemployment remains extremely high. In California, our unemployment rate has been near or above 10 percent for more than four years.
Let me put that into perspective. It’s been nearly four years since the Great Recession officially ended, however, California’s unemployment rate is still as high as unemployment during the peak of the 1990s recession.
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The economy is showing mixed signs — a soaring stock market, but anemic fourth quarter GDP growth of 0.4 percent. As a result, millions of people are out of work and many are simply giving up looking for work.
California’s economy used to lead the nation, but now we are at the back of the pack with the second highest unemployment rate. I want to be optimistic about our economy, but Sacramento’s appetite for higher taxes, more spending and regulation is antithetical to a growing free market economy.
Californians willfully voted for another sales tax increase with the passage of Proposition 30 in November, but leave it to Sacramento politicians to come up with new ways to get more money out of California taxpayers. Proposition 13, the landmark initiative that limited property tax rates and increases, is once again under attack, threatening business property owners and tenants with higher property tax rates as California’s economy continues to recover.
The proposal on the table is a “split roll” property tax that would increase property taxes on businesses by an estimated $6 billion. Projected over a five-year span, the cost to California’s economy would total $71.8 billion of lost output and 396,345 lost jobs.
Here’s how a split roll tax hurts business: businesses usually lease properties, in which the cost of property taxes is passed through the tenant. Higher property taxes would result in tenants seeing an increase in rent. Business owners must remedy that by increasing prices on the goods and services they sell (which gets passed onto the consumer), cutting jobs and/or wages, or moving their businesses out of state. A split roll scheme would also be disproportionately concentrated in small businesses; especially those owned by women and minorities.
California’s reputation for being unfriendly toward business continues to make headlines. Stories of layoffs and businesses closing their doors have been all too familiar in recent months. Passage of a split roll tax would further exacerbate an already enormous problem for California’s economic recovery. In addition to job loss, higher property taxes would also lead to fewer business expansions and investments and reduced operations in California.
Proposition 13 was approved by two-thirds of California voters in 1978 and after 30 years, it continues to have majority approval among Californians. Proposition 13 protects homeowners from runaway property tax increases, allowing them to budget for the future and keep them from having to sell their homes because they can no longer afford it. Proposition 13 helps local government by stabilizing property tax revenue and protects it from year to year swings in revenue.
Unemployment will remain high in California so long as Sacramento politicians continue placing their spending agendas on the backs of business. Changing Proposition 13 does nothing to help California other than giving the government more money to misspend and waste. Help protect businesses and homeowners, as well as job seekers, by protecting Proposition 13 and saying no to increased property taxes.
John Allan Peschong served in President Ronald Reagan’s administration and later as a senior strategist for the campaigns of President George W. Bush. He is a founding partner of Meridian Pacific Inc., a public relations and public affairs company, and serves as chairman of the San Luis Obispo County Republican Party.