Solana Beach voters will vote on a business tax, Proposition L, on June 8, 2010. The proposed tax is supported by the Mayor, every council member, and a few established business owners. In opposition are various tax advocacy groups and many owners of smaller, growing businesses.
The argument the City Council makes for the tax is that it has cut services to the bone, has had problems receiving its share of property tax revenues from the State, and can't make ends meet. The established business owners, supporting this bill argue that business must pay "its fair share" for basic city services.
I oppose this tax for three reasons and so should you:
1- Taxes are not absorbed by business. Businesses either (a) pass through taxes in the form of higher prices or (b) eliminate employment. The unintended consequences of local business taxes are suffered by the poorest members of our community in the form of higher prices for staple goods or lost employment. Additionally, the residential rental tax provision will be passed through to tenants, by landlords. Residents choose to rent in more affordable communities resulting in higher vacancies.
2- The tax is anti-growth. One argument supporters use is that Solana Beach is one of the few cities in the County that doesn't have a business tax. This should be celebrated rather than disdained. Real wealth comes from entrepreneurs rather than government. Attracting upstart businesses to Solana Beach should be a priority because they grow into to big businesses. Growing businesses hire more people, who purchase goods and services in our city, and potentially relocate here. This practice expands our city's tax base.
Moreover, the support from established businesses smacks of Rotarian Socialism. Transferring the burden on new businesses reduces competition for the established ones. It is a tacit barrier to entry designed to limit consumer choice and sustain higher consumer prices. When businesses use the hand of government, to limit its competition, it is a a moral outrage.
3- It won't work. Mayor Campbell admitted that the projected deficit will be substantially more than the current one. The Council will be forced to raise business tax rates more to meet that deficit. We will create a never-ending cycle of taxing business to the point of relocation, which reduces future tax receipts. Investment property owners will face a larger vacancy rate and property prices will decline.
The solution is austerity. If we learned anything from the collapse of Greece, and the impending collapse of the State of California, it' is that we have entered an age of a "new normal". That "new normal" points to the unfortunate but obvious fact that we can't spend more money than we earn. Citizens slash family budgets, businesses cut expenses , and now government must face this unpleasant but natural fact as well.
I'm not convinced the Council has truly implemented an austerity program. In the past four years, the City of Solana Beach has:
- increased salaries and benefits some 8% in the General Government Department ($100,000)
- increased salaries and benefits some 15% in the Public Safety Department ($500,000)
- increased salaries and benefits some 20% in the Public Works Department ($200,000)
- added a full-time position in the Community Development Department
City of Solana Beach employees average over $100,000, in salaries and benefits, while those in the private sector earn far less. When the private sector exists to enrich the public sector, we regress to a system not unlike our country's colonial period.
The Solana Beach Council, unlike its counterparts at the State of California, should be commended for its initial attempts at austerity. We should encourage more of the same rather than to empower them with a vehicle that allows it to stifle the one hope we have at a prosperous city.
Proposition L is insufficient bandage on a gaping wound. Let's cauterize that wound.