CORPORATE WELFARE IN CALIFORNIA - by Robert Reich

Found here. Reproduced here for fair use and discussion purposes. My comments in bold.

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Dr. Reich can't seem to get past his leftist rose-colored glasses. Dr. Reich notes that in California there was a property tax freeze years ago, which benefited existing companies who already owned property. Apparently, companies which purchase property later are not treated the same, and thus do not enjoy this freeze, instead paying current tax rates.

But rather than make it easier for new companies by lowering their taxes to the same level, he wants the existing companies to pay more! This can only be the conclusion if you're a leftist, because to them more tax on business is always good.

But it's not. Higher taxes on business means higher prices on the products we buy, less hiring, less innovation, and less business expansion. When government decides it is entitled to bigger and bigger portions of the revenue of a company, it has in effect decided that it can spend the company's money better than the company can.

And we note once again, as we have explained many times before, that companies really doesn't pay any tax, no matter how much money the government takes from them. We, the end consumer, pay all business taxes in the form of the price of the products we purchase. Taxes are a business expense that gets passed down to us.

Read on:

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Corporate welfare is often camouflaged in taxes that seem neutral on their face but give windfalls to big entrenched corporations at the expense of average people and small businesses.

Take a look at commercial property taxes in California, for example.

In 1978 California voters passed Proposition 13 – which began to assess property for tax purposes at its price when it was bought, rather than its current market price.

This has protected homeowners and renters. But it’s also given a quiet windfall to entrenched corporate owners of commercial property.

Corporations don’t need this protection. They’re in the real economy. They’re supposed to compete on a level playing field with new companies whose property taxes are based on current market prices.

This corporate windfall has caused three big problems.

First, it’s shifted more of the property tax on to California homeowners.

Back in 1978, corporations paid 44 percent of all property taxes and homeowners paid 56 percent. Now, after exploiting this loophole for years, corporations pay only 28 percent of property taxes, while homeowners pick up 72 percent of the tab.

Second, it’s robbed California of billions of dollars to support schools and local services. If all corporations were paying the property taxes they should be paying, schools and local services would have $9 billion dollars more in revenues this year.

Third, it penalizes new and expanding businesses that don’t get this windfall because their commercial property is assessed at the current market price – but they compete for customers with companies whose property is assessed at the price they purchased it years ago.

That’s unfair and it’s bad for the economy because California needs new and expanding businesses.

Today, almost half of all commercial properties in California pay their fair share of property taxes, but they’re hobbled by those that don’t.

This loophole must be closed. All corporations should be paying commercial property taxes based on current market prices.

The giant corporations that are currently exploiting the loophole for their own profits obviously don’t want it closed, so they’re trying to scare people by saying closing it will cause businesses to leave California.

That’s baloney. Leveling the playing field for all businesses will make the California economy more efficient, and help new and expanding businesses.

Besides, California’s property taxes are already much lower than the national average. So even if corporations pay their full share, they’re still getting a great deal.

Right now, a grassroots movement is growing of Californians determined to reform this broken commercial property tax system, and who know California needs more stable funding for its schools, libraries, roads, and communities.