Currently working its way through Sacramento, California Senate Bill 653 could spell big disaster for businesses and residents in this state already eyeing a move to better economic climates.

What is California Senate Bill 653?

Essentially, what this bill does is allow county and city governments the ability to raise, extend, or create new taxes by having them put on the ballot as propositions for voter approval. 

In that way local governments can raise, what they believe to be necessary, funding to close budget gaps and maintain services while allowing the voter the right to approve of these taxes.  Sounds like a great idea right? Wrong!!

How this will hurt taxpayers 

A well known fact, and one which legislators specifically at the local level rely upon, is that during special elections voter turnout is abysmal.  In the city of Glendale, where this writer resides, turnout for the April 2011 Glendale City Council Elections were less than 20,000 (around 13%)  in a city with over 150,000 likely voters as of 2006 (U.S. Census Bureau).

The reason for such turnouts is twofold.  One reason is that unlike general elections, special elections, especially at the local level, are not well publicized and therefore not well known about. 

The second reason is that people tend to marginalize the issues being presented in special elections out of the sense that local issues don't really affect them personally (see UC Berkeley Special Elections in California). 

Based on the information above, it can be safe to assume that such measures, if placed during special elections, will pass with a small portion of the population voting on them.  It can also be safe to assume that local legislators are well aware of this and may choose to avoid placing measures on general elections in order to stack the odds of passage in their favor.

How this will hurt businesses

Local Income Taxes

Hampered by increased federal and state tax legislation,  local income taxes will have the added benefit of drastically complicating the already soul crushing amount of regulation compliance necessary to run a business of any size in this state. 

Many businesses will have to keep track of, not only state and federal rates, but individual city and county rates.  This could prove especially time consuming in the L.A. County area where many employees live in one city and work in another, and city limits are often times separated by nothing more than a sign.

As well, local income taxes could possibly have an effect on the residential rental market whereby smart renters may choose the location that they rent in by the income tax rates.  This may lead cities that choose to implement higher tax rates to lose a portion of their population who may migrate to a bordering city that has lower rates.

Landlords in areas with higher income tax rates may see increases in the percentage of vacancies, and may need to lower rent prices and/or lower their acceptance standards for renters maximize occupancy levels.  If the latter happens, and there becomes a shift of wealth out of that city or county, then it can be assumed that the city or county will draw lower than expected income tax (and other taxes) revenues thus defeating the purpose of the tax to begin with.

Sales Tax, Excise Tax, Etc.

Having individual sales tax rates per city and county will not have much of an effect on small purchases made.  People will continue to shop at the same grocery stores, and possibly even the same gas stations. 

However, larger purchases would possibly not survive the same effect.  People looking to buy expensive electronics, appliances, cars, boats, and RVs may find a better deal in the next county or city over if their local sales tax rate is too high. 

Take for example what is currently occuring in New York City.  Due to a cigarette sales tax of up to $4.00 attached to each pack bought, many organized crime syndicates are finding it very profitable to purchase large quantities of cigarettes from southern states with low tax rates and ship them into the city. 

Often these "criminals" pocket millions of dollars of revenue from the sales of thousands of cartons per haul.  It has gotten to such degrees that federal and state authorites have stepped up enforcement measures to combat "cigarette smuggling" (See New York Daily News Article "International Cigarette Smugglers Busted in NYC" and N.Y. Times Article "Cigarette Smuggling Crackdown").

Now imagine such an operation on a smaller scale.  Because of the close distance that cities and counties share there would be no need for people to smuggle in goods from other areas illegally.  Instead, local residents could get in their car and legally go the next city or county over to make their purchases. 

Now let's say that L.A. County decides to place a 4 percent sales tax, on top of the already 9.5 percent rate for non-food items, for a total of 13.5 percent.  Then lets assume that neighboring Ventura County does not institute any new sales tax rates.  

No one would doubt that when people decide to make big purchases that the stores in Ventura County would thrive while the Greater Los Angeles area would see more and more retailers leave the county or be forced out of business. Again, although rates were increased, the loss of sales volume could mean lower than expected revenues for the county.

In a roundabout fashion to impose taxes on businesses and individuals alike, this seems to be another attempt by Sacramento to impose its will upon an unsuspecting populace unaware of the consequences that the passage of such a bill int law could mean. 

This bill isn't about rich versus poor.  It's about Sacramento versus California.  It's about legislators versus citizens.  It's about the makers versus the takers.  Because all of us, rich and poor, will be on the hook if their plans come to fruition.