In the heart of the Santa Cruz Mountains, just off Highway 9, there is a restaurant that has become a community icon. It has a redwood-paneled dining room with exposed roof timbers that was built in 1912 and a historic bar with a wood-burning fireplace. For over a century, the people in this isolated town have treasured this gathering place.
Near downtown Los Angeles, along a busy commercial boulevard, a family-owned Mexican restaurant has thrived since 1925, offering locals and tourists classic dishes in a dining room filled with memorabilia.
Countless independent businesses in California remain prosperous despite a regulatory environment that throws at them rules that are often unreasonable, even in conflict with each other, from agencies at the local, county, regional, and state levels. These agencies are staffed with bureaucrats who are not merely indifferent to the challenges small businesses face while attempting to comply with their edicts; many of them are actively hostile. The culture in California’s public bureaucracies, dominated by leftist unions, is to consider all entrepreneurs to be profiteers.
There is only one reason that thousands of businesses still survive in California. It is the one competitive advantage not available in many other states, and that is Proposition 13. What that citizen initiative, passed in 1978, accomplished was to freeze property taxes at 1 percent of the assessed value of the property at the time of its purchase, with increases limited from that base to only 2 percent per year.
Against the corporate chains that would replace them, Prop. 13 imparts just one big, compensatory advantage to business owners who purchased their land and building decades ago, own their equipment, and are not servicing debt. Thanks to Prop. 13, if a small business in California has low property taxes and a strong balance sheet, it still has a chance to earn a profit even when facing price competition from major corporate chains.
All that is going to change if the avatar of corporate communism, billionaire Tom Steyer, becomes governor of California. Steyer, perhaps the most cynical hypocrite in America, has proposed terminating the “Trump Tax Loophole,” despite the fact that it isn’t a loophole and has nothing to do with Trump. But it would force a reassessment of every commercial property in the state.
Imagine what is going to happen if a restaurant in downtown Los Angeles, or, for that matter, one located in a mountain community that’s a 20-minute drive away from Silicon Valley, has its property reassessed at market value. It isn’t as if these are inherently extravagant assets. These are modest buildings on modest lots that the current owners’ forebears purchased four generations ago. They are places where the descendants have worked with an intensity that is beyond the comprehension of clock-watching public bureaucrats. The struggles they must overcome to survive in California’s hostile business environment have left them exhausted and on the edge. Take away Proposition 13’s protections, and they fall into the abyss.
The deception that Tom Steyer employs to market his scheme is indefensible. There is no “loophole” here allowing the “wealthiest property owners” to avoid taxes. This is an attack on all commercial property owners and the businesses they operate, large and small. The critical element deliberately missing from Steyer’s rhetoric is that the impact will be far more likely to kill small businesses, while the biggest corporate chains will simply adapt their tax strategy and take the opportunity to pick through the carcasses of legacy enterprises.
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Steyer isn’t alone; he’s just a blatant exemplar of the whole progressive agenda. It masquerades as virtuous while the policies it produces enable hedge funds and multinational corporations to roll up all the businesses killed by those policies.
Californians experience this reality in a growing number of business sectors. Remember the veterinarian who shared wisdom and skill to take care of your dog, never providing unrealistic advice or charging unreasonable fees? The building is still there, the office is still there, but the doctors are now employees along with the techs, the treatment advice is from a template, and somehow the fees are two or three times what you remember. The doctors and employees don’t get that money. Every spare dime goes to a hedge fund in New York City.
What about that family-owned plumbing company that would repair your water heater for a few hundred dollars instead of replacing it? Now that same company has a new name, the plumbers are forced to carry tablets where you have to sign five incomprehensible waivers before they start any work, and they will invariably insist you must replace your water heater while reminding you to pull permits and comply with all the latest building codes. And once all the mandated remodels are done, it sets you back $6,000.
Consider a small trucking company, or an independent gardener, or a small manufacturer. How are they going to cope if the property where they’ve based their operations for several generations is suddenly reassessed at 10 times its base value, or more, at the same time as the California Air Resources Board tells them they have to sell every piece of diesel- or gasoline-powered equipment they own and replace it all with electric-powered equipment? It’s a perfect storm, designed to wipe away legacy businesses in California, and Tom Steyer has bought his way into the front of the tempest. They’re all going to go out of business, and then they will get in line to collect scraps in the form of government benefits paid for with the taxes they paid that killed them.
It’s the same story everywhere. California is pioneering this model, and it’s important to recognize what at first glance appears to be an impossible contradiction. The rhetoric of progressives, whose core ideology has steadily drifted from a sort of light version of socialism to cold, hard communism is not hurting the politically favored corporations and hedge funds whose natural aspirations are to acquire more property and wealth. The opposite is the case. The worse the regulatory environment gets, the more that taxes go up and rules increase, the easier it is for the wealthy to consume smaller, weaker competitors.
Does that family whose members work more hours in a year than the average socialist bureaucrat will work in three years have time to comply with more regulations than they can begin to comprehend, much less navigate and submit? Can they afford a human resources department, an environmental consultant, a tax specialist, and an attorney to litigate on their behalf? Do they control multiple corporate entities so they can shift assets around? And after enduring decades of being kicked around by these multiplying rules that waste countless hours and cumulatively add up to millions of dollars, can they withstand a reassessment that bumps their annual property tax bill by an order of magnitude?
Of course not. Tom Steyer knows this. He has sold his soul to the progressives, promising that he will fulfill their insatiable desire for more tax revenue. And in return, the politically connected corporate interests he favors and profits from will not be diminished and forced to pay their “fair share.” They will pass those costs on to California’s beleaguered consumers. And the families that built the restaurants, tended our pets, shipped our food, mowed our lawn, and fixed our pipes will be exterminated.
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