EPIC Fail for California SB-1372

In an ever growing search for love and popularity, State Senator Mark Desaulnier recently chaired the founding of the EPIC caucus in the State Legislature. “Ending Poverty in California” is its name and laudable goal. Especially since Democrats have lead the State to the highest poverty rate in the Country, according to data from the Census Bureau. EPIC could be considered a good idea for Democrats to try to help solve the crises they themselves created.

Ending poverty in California would entail, most of us would think, creating a business and jobs friendly environment, reducing regulations on starting and running a business, reducing and simplifying taxes and other actions to stimulate the economy and raise lower income people in the state to higher and higher levels of success and income.

Instead, the Caucus has taken another path to end the “inequity gap” with California Senate Bill SB-1372. In fact their approach could be called Everyone’s Poor In California.

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It appears the way they are going to end the “inequity gap” is by eliminating any business or job in the State, destroying the opportunity, and forcing competitive businesses to leave the State or die.  Eliminating private businesses and the wages they pay would, of course, result in no inequality gap, solving their designated problem. But, of course, then, Everyone’s Poor In California.

An enormously EPIC example of questionable actions took place at the end of April. On the day that Toyota Motors announced it was leaving the State and taking 3000 employees with them to Texas, the State Senate Governance and Finance Committee approved SB-1372, legislation that would impose massive tax increases on publicly held corporations based on the salary paid to their CEOs or highest paid employee.

Yeah, this is a great idea; I can just see every company jumping right on this concept.  It’s a great compliment to a split roll property tax to reform Proposition 13 by raising property taxes on businesses than on residences (yes, they are already working on this too!).

I can just see companies lining up outside California to get their moving vans packed to come and employ lots of people.  And when they realize we have the highest income tax, the highest electricity rates, thanks to AB-32, and the forty-sixth worse education system their mouths will be watering to get themselves some of those California benefits.

SB-1372 EPIC fail for California

Let’s look at SB-1372 more closely.  The law would take today’s high corporate tax and raise it to 7% to 13% of a company’s net income for all businesses, except financial institutions, and 9% to 15% of net income for “financial institutions” based on the “compensation ratio” between a company’s highest paid employee and “an amount equal to the median compensation of all employees employed by the taxpayer (company)”, including all contracted employees…”.

It would also increase the applicable tax by 50% for companies that “have a specified decrease in full-time employees employed in the U.S. as compared to an increase in contracted and foreign full-time employees”.

In other words, in an effort to save jobs in the state and create a more equitable income for workers they have designed legislation that will do just the opposite; you could not design legislation that has more job and business killing potential than this bill.  Even the Governor has been quoted as not supporting the SB-1372 legislation.  Interviewed on KQED, he said he is sympathetic to complaints about the growing inequality gap but “To try to close the gap, which is a global phenomenon, based on technology, return on assets, on global flows of capital, one little state can’t do that.  We can’t equalize everything, or you’d need state control like the old Soviet Union.  And we are not going there.”

The state has already lost Toyota and companies like Occidental Petroleum, Comcast, Waste Connections, Campbell Soup in Sacramento, and Vision Service Plan.  Companies like Chevron  are moving hundreds of employees to cities such as  Houston; Facebook, eBay and LegalZoom have opened offices in Texas and Oregon. Apple, while keeping its headquarters here is moving most other functions out of the state and, in some cases, out of the country.  Paypal, Yelp and Maxwell Technologies are opening facilities in Arizona and Tesla is considering building the world’s largest battery factory, their “giga-factory” in either Texas or Arizona.  The rush is on to leave California, meanwhile according to EDD, more than one million California workers are “marginally employed” in part-time jobs while they look for/dream about full-time employment.

SB-1372 — Stupendously stupid, smart or sinister

But, wait a minute.  Is SB-1372 stupendously stupid OR stupendously smart, sinister even?  Is it an attempt to close the inequality gap or is it the party of the Progressive and low information voter telling their base that they “have their back”, that their GOOD INTENSIONS, regardless or outcomes, is what they are about.  “I would pass this legislation for you”, they are saying, “punish the rich, the 1%, redistribute California’s wealth, spend billions, even meaningless billions, because it is “the right thing to do” (and what their base wants to hear) if only those nasty Republicans wouldn’t stop us.  Classic, brilliant class warfare; purposeful hatred in an election year; Obama on speed.

Are California’s Democrats concerned about jobs?  Or votes?  They appear clueless or callous when it comes to creating a world where people work, produce products and services that people want, and create successful lives for themselves and their families. We live in a California where success is despised; rebuilding run-down neighborhoods is “gentrification”.  An imposed “living wage” is the substitute for an income based on education, knowledge and work ethic. Entitlement and dependency are the watchwords of today’s legislature’s leaders.

In other words, with SB-1372, the future of California will be: Everyone’s Poor In California

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