Sunday, February 15, 2009

On being corporate in California

In California, the budget crisis continues to be as near as the new stimulus package passage. This state expects to get something like $26 billion which it then hopes to spread like economic butter across the state's own budgetary needs. The California legislature, torn along partisan lines, keeps telling us through its actions that it really can't just decide. Yesterday's LA Times reported that in order to get some agreement both sides got major concessions for their positions that will cost you and I more out of pocket but will play into our future budgets before the whole state becomes toast. Democrats and the Governor agree that since gas prices appear to be leveling out at around $2.50, it makes sense to take advantage of our recent $4.00 a gallon mind set to raise the tax there. And since people are consuming less finally, it makes sense to encourage this trend by raising sales taxes there. Even though I am sure retailers don't necessarily like the idea. But the rest of the proposed tax hikes "will force most California adults to pay hundreds, if not thousands, of dollars more each year in a combination of higher vehicle license fees, sales taxes, and ... income taxes."

From my point of view, this only works if the state can show that the benefits of sacrificing in the long term will out weigh the short term drag on Californians who are already dealing with job losses, foreclosures, education cutbacks, and the high cost of living here.

Meanwhile, Republicans and some Democrats have another plan they want to put into play. In what is called an incentive strategy, they have added a corporate tax break to the budget that will give up about a $1 billion a year from the budget supposedly to keep those said corporations from moving out of state, and to encourage them to hire more workers, too. The only thing is, "the cost of the tax break has far outweighted the job-creation benfits in states where it has been instituted." according the Center on Budget Policy Priorities. Not to be cynical but Corporations are famous for stock piling cash and are already laying off workers across the board. A $3,000 incentive doesn't seem like enough to convince a corportation to hire someone it may cost $40 to $50 an hour or $40,000 a year to employ. And the kicker is that around 65% of the break they will get will become permanent law. Meaning once it is in place they can take the money and go on about their business as usual.

So as of tonight, Sunday, no deal is final. Personally, I don't see giving the corporations a break if the rest of us have to take on more fiscal responsibility. The news media reports however make me very aware that this all is still much more about making deals behind closed doors than thinking about what is right for all of us.

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