Governor Schwarzenegger is floating around an idea to tax services such as hair cuts, chiropractic adjustments, taxi rides, concerts, bowling – you name it. If it’s a service, it could become subjected to taxation.
The governor’s reasoning is that service-oriented business owners don’t pay their fair share of taxes.
“… We know that the economy now is a service-oriented economy, but we really don’t tax anyone that is in this new economy,” the governor said in his Aug. 24 speech to the Goleta Valley Chamber of Commerce.
The fact is anyone who operates a legitimate business in California is paying some of the highest taxes in the nation not to mention obeying a dizzying array of regulations, which has made California the most hostile state in which to conduct business.
The reality of taxing services is that “mom and pop” business owners would feel the pinch with the addition of one more onerous expense, driving some owners to throw in the towel and close shop. Larger companies would go around the law by outsourcing to service providers in places like Nevada and Arizona, whose state leaders regularly and deliberately woo California businesses and entrepreneurs.
Both of these scenarios share the same result: job loss. At a time when our state unemployment rate is hovering in the Depression-like rate of 13 percent, the idea to tax services would continue California’s joblessness free fall.
As for the citizenry, history shows they react negatively to excessive taxation. For proof, look no further than the Boston Tea Party of 1773, California’s Proposition 13 in 1978, and in more recent times the results of California’s record-breaking $14 billion tax increase laws of 2009: Californians spent less and the state’s budget deficit grew bigger.
Thus, if the governor’s idea to tax services becomes law, watch households retreat from spending discretionary dollars on things like bowling on Saturday night and pedicures before the prom. This too will lead to further job loss.
That’s no way to stimulate the economy.