"Excessive taxation starves our economy of innovation and entrepreneurship. We need to build the new California economy with the goal of making it easier to start a new business and create jobs in our state." - Meg Whitman
I had a chance to review some of the proposed economic policies of the noblewoman known as Meg Whitman. Though I like to stray away from political topics in my cyber and real lives, this one was just begging for it for a couple reasons: one, she is claiming that because she ran a company that eventually hired thousands of employees she can run a state that will reverse a trend of unemployment, and two, she is a Harvard MBA, so she should know better. Plus, I have a built-in mistrust for Harvard MBA's from a certain incident not to be discussed for the time being on such a broadly cast media platform as wisslindixie.blogspot.com.
I'm going to take a look at a couple points she makes on megwhitman.com and see if I can take a side on what she calls "Provide Job-Creating Tax Cuts."
Point 1: Eliminate the $800 small business start-up taxSounds great, right? We eliminate the need for entrepreneurs to pay the state a fee upfront for starting a business. As the theory goes, the $800 is the key impediment to a new business being able to open shop and become successful. Problem: that's just not the case. If I had an idea that I knew would make money, I would pay $800,000 in taxes because I would know it was going to pay off. The problem in our economy is demand. Simply allowing entrepreneurs to create businesses for free would be fun for some in the beginning, but we would end up seeing many more failed businesses because:
1) most businesses fail even in good times
2) the economy can't sustain current supply, much less more (unless it's a great idea)
2) those not starting businesses simply because of a lack of an $800 fee probably don't have one of said great ideas
In addition to this, getting $800 is fairly easy these days. The federal reserve has lowered rates to close to zero and banks will lend start-up cash for a great idea. We don't need more entrepreneurship in the classical sense, we need more entrepreneurs to work within their current jobs to create better products and increase demand.
Point 2: Eliminate the factory taxThis proposal is designed to keep manufacturing jobs in California. In that respect I am for it. However, I don't think this will greatly affect unemployment in a state where manufacturing relatively small because of the high cost of labor and land.
Point 3: Increase the research and development tax creditAnother good idea if done right. That's a big IF.
Point 4: Promote investments in the agriculture industryWhitman's proposal is vague, "The agriculture industry is vital to California's economy. Meg believes that by providing a tax credit to encourage investments in water-conservation technology, we can reduce the state's consumption and benefit all Californians."
I don't see the connection between this and economic growth. This reads more like an environmental initiative couched in a tax cut, designed to boost right-wing rhetoric. I am all for water conservation, but the benefit to all Californians? Unclear.
Point 5: Eliminate the state tax on capital gains (with the implication that this will allow investors to start businesses and hire more Californians). After all, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming don't tax capital gains.This is a key point for Meg, who just happens to be worth over a billion dollars and has probably paid millions in capital gains in her life. Capital gains tax taxes extra income made from investments, such as property and stocks. The state provides incentives to avoid paying taxes on capital gains from property by buying another property, but an investor must pay tax on other capital gains. Who actually makes money on investments? People who are very rich. People like Meg and those she hangs out with.
Those living paycheck to paycheck, or even those making decent salaries and some money off investments would barely notice capital gains tax, if at all. The super-rich, those making over $1,000,000 per year let's say, definitely notice this. But why would we give them a tax break? The logic goes that if we save these people money (they already have too much money, so save them MORE money), they will put the money back into their businesses or start new ones.
The problem is, again, that rich people don't work like this. I have personally worked for several entrepreneurs, some with quite a lot of money, and they nickel and dime more than anyone. The super-rich will take savings from this proposed initiative and buy a second, third, fourth, or fifth home (so if this passes it may be a good idea to invest in oceanfront property), or use it on luxury items, or save it to pass on to their next generation. There are surely exceptions to this, but we have to speak for the majority.
Heck, I would love to pay capital gains. If I was making so much money from investments that I had to give the state a cut I would be in the .0001% of most fortunate people in the world. Maybe if the super-rich look at it that way they can stop trying to pass this every 4 years.
And why the hell are we trying to follow the lead of Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming? We are Cali-fucking-fornia. We make awesome things, invent products and processes. People come here to meet, develop great ideas, and make money. Pay the pied piper for the benefits the state affords.
Bottom line: if the super-rich wanted to invest money back into their business they would already be doing so. They don't need savings from capital gains to do it.
Side note: I ran eBay and hired people, so I can run California and create jobs. It doesn't take a whole lot of credentials to run California. Our current governor is a former bodybuilder and philanderer turned actor and pseudo-Kennedy. But just imagine if someone who ran one of the largest businesses in the world at a time of rapid growth must be qualified based on that, right?
Well, no. A business's principal purpose is to make money. A state's purpose if to govern, promote social justice, protect the natural environment, promote economic growth, educate our children, and many other things. Managing a growing business is definitely challenging, but imagine how much harder it is to turn around a sinking business? And what if that business wasn't even a business? Whitman ran eBay when it was unrivaled and simply a great idea by founder Pierre Omidyar. This great idea took off on it's own. Whitman was steering the ship, but she had gale force tailwinds. With that kind of momentum of course they were hiring thousands of employees. They needed those employees to write code and provide customer service so eBay could increase its revenue.
Creating jobs in California will not be so easy. We are a struggling economy with a lack of demand that comes from high unemployment among other thing, as well as close to 0% inflation as a result of the subprime mortgage crisis. When running a business, people come to work and rent our their labor for money. In stimulating an economy, one must consider many more factors outside of just having to pay people for their work and the end goals of creating profits and keeping investors happy.
I don't think I can support Meg. Her ideas on the economy don't seem very strong and I don't think they will be successful if she is elected and they are enacted. I don't know a ton about Jerry Brown, but he seems to be focused on creating jobs the organic way while offering tax breaks for companies the do research and create green jobs. Neither candidate seems like an excellent one to me, but I am hoping the state's electorate doesn't simply look at Meg Whitman's personal net worth and see that as a way to get California out of a recession.
