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December 4, 2023

Guest View: Raising taxes on corporations could chase businesses out of state

The governor just released his revised spending plan for the California budget, and while he did not admit that we are headed towards a recession, he did acknowledge the state faces economic uncertainty. 

His assessment of the state’s growing fiscal challenges brings a greater focus on the necessity to set priorities that address the needs of the state.

While I have significant concerns with his budget proposal, I do agree with his immediate dismissal of the Senate Democrats’ corporate tax hike proposed in their “Protect Our Progress” budget plan. At a time when other states are offering tax incentives to entice businesses to relocate to their state, the Senate Democrats’ proposal ostensibly shows them the door. 

Clearly this proposal is oblivious to the cumbersome business climate here in California.

Senate Democrats continue to assert their agenda of unsustainable spending and advocate for tax hikes as budget resiliency tools. They even claim that businesses have been successful in California largely due to the size of our economy, as if businesses owe it to the state to solve the budget deficit. Senate Democrats would submit that businesses should bear the fiscal burden rather than admit that the Legislature’s unrestrained spending and inability to prioritize core issues are the reasons this state is now financially struggling.

My proposal to the Legislature? Evaluate our progress, and prioritize better. In times of economic uncertainty, tough decisions have to be made. Even the governor agreed that there are many great ideas generated, but everybody’s good idea cannot be a priority in a difficult budget year.

Senate Republicans suggest that the state narrow its focus to addressing the areas of genuine need.

An increase in mental health and substance abuse treatment capacity was a key component of legislative Republicans’ budget plan last year. And while the budget did include some expenditures in this area, it fell far short of the need to permanently end the psychiatric treatment bed deficit.  

A sustainable Medi-Cal program is necessary to keep hospitals with a significant number of Medi-Cal patients from closing their doors. Legislative Democrats have continued to expand enrollment but have neglected to increase reimbursement rates to ensure Medi-Cal enrollees can find doctors and keep hospitals open to serve communities in need. 

California is “home” to the nation’s largest homeless population despite spending more than $20 billion in the last five years. There needs to be a realistic assessment that our growing homelessness crisis cannot be solved solely by a “housing first” approach that has left people languishing on the streets in need of care and shelter. 

Timely forest management to reduce our wildfire risk could be financed by use of “cap-and-trade” funds. Utilizing this revenue stream to reduce greenhouse gas emissions from wildfires is consistent with the environmental goals of the cap and trade program.  

California needs adequate water infrastructure that takes the necessary steps to prepare for future water demands. Unfortunately, the lack of progress in the last decade has left the state ill-prepared to manage the historic precipitation, imminent flooding and water needs of the state. 

We do not yet have a clear picture of the state’s full revenue for this coming budget year due to the delayed income tax filing deadline for many Californians. In addition, the growing deficit and economic uncertainty should serve as strong cues for the need to curtail spending. 

Senate Democrats’ “Protect Our Progress” budget plan is not a sustainable strategy, and may very well set us back in the future.

Republican state Sen. Roger Niello of Roseville is the vice chair of the Senate Budget Committee. He wrote this column for CalMatters.org.

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