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California’s Crucial Propositions

This year California voters will vote on Propositions that could really begin to put California back on the right track. For those who are looking for some guidance on each initiative, here’s a link to Tom McClintock’s web site and his very thoughtful recommendations on each Proposition.

There are two Propositions that are particularly important if we are to push back on the unsustainable and oppressive environment in California.

Prop 32: YES This is probably the most important Proposition on the ballot. Please vote for it. This measure would prohibit unions, corporations, government contractors, and government employers from deducting money from employees’ paychecks for political purposes without their express written consent. That certainly seems reasonable. It also restricts government contractors from contributing to the political campaigns of candidates with whom they will negotiate if elected. Despite what you may hear from the unions and big corporations, this initiative will cut the ties between special interests and politicians. This may be the only chance we’ll have to get our state back from the special interests.

Prop 30: NO California is facing very serious fiscal problems. The state government needs to balance its books, but raising taxes won’t do it. We already have one of the highest tax rates in the nation and still, we simply can’t pay our bills. Proposition 30 will go a long way towards helping us get our spending in line with reality. Voting against Proposition 30 will improve our business environment which is the only way to truly increase tax revenues.

Our problem as a state is that we have more obligations than we have revenue. Simply, we can’t pay our bills. Percentages (tax rates) do not pay the bills, dollars (tax revenues) do. Economic growth generates higher tax revenue. Higher tax rates on people who are successful (including those small business owners whose businesses are held as sub-chapter S corporations, LLCs and sole proprietorships), while emotionally appealing to those who will not have to pay them, will actually reduce rather than increase the government’s tax revenues by reducing investment and growth. If it were as simple as raising tax rates, the government could increase tax rates to 100%. However, at a 100% tax rate there would be no incentive to earn (or report) income and, as such, no tax revenue (see “The Laffer Curve”). Recently, in an op-ed for Human Events I discussed the reasons this would not work at the national level. My friend Art Laffer has recently published a book for which I wrote the forward entitled “Eureka” which also discusses the folly of tax increases and lays out a plan for how to rescue California (On Amazon).

We can get our financial house in order by encouraging entrepreneurs to create jobs through reduced regulations and a sensible tax policy. Voting Yes on Prop. 32 is a great first step. This will increase the number of tax payers and the amount of our tax revenue. Higher tax rates will simply drive those who are successful out of our state. Raising taxes on the wealthy is just playing politics and will not work.

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