The failure of the budget rescue package has business interests in Los Angeles and throughout the state bracing for an onslaught of proposals for tax and fee increases aimed straight at them.
Their concern began immediately after voters soundly rejected a series of ballot measures last week that the governor and Legislature had crafted to address a colossal budget deficit.
?e?e already seen some targeted tax bills proposed in the Legislature and for the 2010 ballot and we?e likely to see many more,?said Michael Shaw, legislative director for the California chapter of the National Federation of Independent Business, which represents small businesses.
Taxes on cigarettes and on oil extracted from California grounds have already been proposed. The California Chamber of Commerce has placed them on its annual list of ?ob-killer?bills (see Page 8).
Business has long been ?he No. 1 target of all elected officials when it comes to shaking the trees for money,?said David Fleming, founding chairman of the Los Angeles County Business Federation.
But current economic conditions make that situation untenable.
?usinesses are just struggling to get by and given the economy, they can? simply pass these added costs to consumers,?said Greg Lippe, board chair of the Valley Industry and Commerce Association and managing partner of a Woodland Hills accounting firm. ?onsumers just don? have the money to absorb these cost increases.?p>The measures came as part of February? compromise among Gov. Arnold Schwarzenegger and the Legislature on a state budget. In trying to close a $41 billion deficit, they enacted $21 billion in cuts and financing and $13 billion in tax hikes, leaving $6 billion that would depend on the measures.
Since February, the state? fiscal condition deteriorated rapidly as revenue fell far short of even conservative estimates. As a result, the state went an additional $15 billion into the red. When the funding measures failed last week, the total rose to $21 billion.
Schwarzenegger is first focused on major spending cuts, but business leaders believe tax and fee proposals are now inevitable.
Direct taxes on business aren? likely to win the two-thirds majority needed for passage due to Republican opposition. As a result, business leaders predict the Legislature will instead pass fees, which require only a majority.
?he question is: Will there be some gimmick or scheme that allows this to be done by majority vote, such as reclassifying a tax as a fee??said Allan Zaremberg, president of the California Chamber of Commerce. ?hat would clearly result in litigation?from business groups.
The state will need at least $15 billion in short-term financing to get through the rest of the year. Zaremberg said that cash crunch will affect thousands of companies that do business with California. Meanwhile, state officials are seeking an aid package from the Obama administration to cover much of the cash shortfall.
The ballot measures would have eased the budget crisis in several ways. The lottery could have been sold to a private company, raising about $5 billion. Voter-approved funds for mental health and children? services could have been diverted for two years. In addition, increases in sales tax and vehicle fees would have been extended.
On the local front, business interests largely steered clear of the bitter contest for Los Angeles city attorney between Westside Councilman Jack Weiss and defense attorney Carmen Trutanich, which the latter won by a 56 percent to 44 percent margin. Local business groups last week said they hoped that Trutanich? experience as a defense attorney and the fact that he? a business owner would make him less likely to launch crackdowns on businesses.
The other key local race, for the Fifth District City Council seat held by Weiss, was too close to call as of late last week. Former state Assemblyman Paul Koretz held a narrow 335-vote lead over neighborhood activist David Vahedi, with more than 3,000 ballots yet to be counted.
Business groups were not enthusiastic about either candidate: Koretz has frequently sided with labor on key votes and has strong union backing, while Vahedi has said he would give much more scrutiny to major development proposals.
Meanwhile, in Palmdale, voters approved an increase in that city? hotel bed tax from 7 percent to 10 percent, though that? still far below the 14 percent hotel bed tax rate in Los Angeles, Santa Monica and several other local cities.
For reprint and licensing requests for this article, CLICK HERE.