A proposal to raise taxes on a wide range of businesses has already proved to be a money-making idea--at least for lobbyists in the state capital.
For weeks now, dozens of lobbyists hired by industry groups and companies have been roaming the halls of the Capitol, bending the ears of legislators and pleading for a break from the multibillion-dollar tax increase plan.
“You can’t walk down the hall without somebody grabbing your arm and making the pitch that raising the sales taxes is good--except for their client,” said Sen. Frank Hill (R-Whittier), a member of a powerful two-house budget conference committee. “Everyone has the same spin. They say, ‘We know you have to raise taxes, just don’t do it to us.’ ”
In the hope of avoiding new taxes, food manufacturers, newspapers, the entertainment industry, oil companies, realtors, the cable television industry, candy makers, sports teams, telephone companies, grocers, theater owners, insurance companies and wineries have all turned to lobbyists.
Prominent among those hired to carry the anti-tax message to the Capitol are ex-legislators, a former Cabinet secretary, ex-gubernatorial aides and former legislative staff members.
“They are pressuring very hard from a very narrow point of view to not impose any additional burden on them,” said Senate Majority Leader Barry Keene (D-Benicia), who is also a member of the budget conference committee. “It’s that old adage: ‘Don’t tax him or me, tax the man behind the tree.’ ”
Faced with a $14.3-billion deficit, Republican Gov. Pete Wilson has proposed a package of about $7 billion in tax increases, including a 1 1/4-cent increase in the sales tax and a 6% tax on telecommunications services. Wilson also has proposed extending the proposed 7 1/4-cent base sales tax to a variety of products that are now exempt, including candy and snack foods, newspapers and magazines, bottled water, and fuel for ships and jets.
The Legislature’s budget-writing conference committee has embraced most of Wilson’s tax proposals and has added a few of its own. The six-member panel voted to impose the sales tax on admissions to entertainment events, including movies, concerts and sporting events. The committee also called for a 2% tax on all utilities rather than enact Wilson’s proposed 6% tax on phone services.
Wilson and leaders of the Legislature are attempting to work out a compromise on the tax hike plan as well as an agreement on a range of cuts in government services to bring the 1991-92 budget into balance.
Among the cutbacks under consideration are reductions in school funding, health care, welfare grants and aid to the homeless as well as the layoff of at least 10,000 state employees.
Lobbyists for teachers, hospitals, welfare recipients and others affected by the proposed cutbacks have been lobbying legislators relentlessly in an effort to protect their programs from budget reductions.
However, given the enormity of the state’s budget crisis, legislators and the governor may have little choice but to enact most of the cutbacks and tax increases that are on the table.
Few lobbyists are fighting the plan to increase the overall sales tax by 1 1/4 cents, which would raise an estimated $4 billion. Instead, most advocates are trying to find some way to modify the proposal in small ways to protect the narrow interests of a client.
Some lobbyists have even gone so far as to single out others whose taxes could be raised.
One such approach was taken by lobbyist Bob Naylor, a former Republican leader of the Assembly. He now represents Scholastic Inc., publisher of Junior Scholastic and a variety of other magazines for students that would be taxed under the governor’s plan.
In meetings with legislative staffers, Naylor proposed a trade: exempt school publications from the sales tax, but take away a sales tax break now enjoyed by companies that print catalogues and junk mail. The state would come out slightly ahead on the deal, he said.
“It occurred to us that a little fine-tuning would be an exemption for the kids,” Naylor said. “The theory is that if you’re encouraging literacy and you’re already cutting back on schools, it’s sort of adding insult to injury to make them pay the sales tax (on magazines).”
On a larger scale, publishers of the state’s major newspapers, including the Los Angeles Times, hired lobbyist George Steffes to fight the plan to impose the sales tax on newspapers and periodicals.
The proposed tax would raise an estimated $78 million during the 1991-92 budget year. Under the plan, newspapers with a circulation under 25,000 would be exempt, although some budget experts question the constitutionality of such an exception.
Steffes, who was once a legislative lobbyist for Gov. Ronald Reagan, argued that it would be unfair to impose the sales tax on newspapers while leaving a variety of other products exempt, such as animal feed, fertilizers, packing ice and cargo containers. For newspapers, he said, administering the sales tax would be particularly difficult because of the problem of adjusting newsstand prices.
“Basically,” Steffes said, “we would like not to be taxed.”
In addition to Steffes’ lobbying efforts, publishers and editors of some newspapers have been contacting legislators and several papers have published editorials criticizing the tax plan.
Manufacturers of candy and snack foods have hired more than 10 lobbyists to fight the plan to tax their sales, including two former state senators and David Swoap, former secretary of Health and Welfare.
The idea behind the tax proposal is to place a levy on “junk food” that is not as nutritional as other food products. But the industry’s high-powered lobbyists contend that the tax is unfair--in part because some foods that would be taxed are more healthy than some of the foods that would be exempt.
Under the plan, there would be a tax on oatmeal cookies but not on butter, which some argue has less nutritional value.
“It’s not a distinction based on nutrition,” said former Sen. Bob Wilson of San Diego, who is lobbying on behalf of the National Assn. of Cookie and Biscuit Manufacturers.
Wilson also contends that the tax will hit poor people the hardest because a larger share of their income goes for food products, particularly snack foods. Seeking to appeal to legislators’ own interests, he argues that the tax on snack food would be politically unwise.
“I think of all the taxes that are around this one probably politically would be the most harmful,” the former legislator said. “It is blatantly unfair. I think it is hard for the public to accept that caviar is not taxed but cookies are.”
Swoap, who served in the Cabinet of Gov. George Deukmejian, was hired by Frito-Lay Inc. to explain to legislators the nutritional value of such snack foods as potato chips.
Ronnie Volkening, the state government affairs manager for Frito-Lay, said the company brought in Swoap because his former position as the state’s top health official gives him credibility as an expert on health matters.
“He had excellent credentials as former secretary of health and welfare as it ties into this particular issue,” Volkening said. “When he comes into the Legislature and says these foods you’re targeting are just as healthy as other foods, it carries more weight than just any guy.”
Like the food manufacturers and newspaper publishers, the entertainment industry is going all-out to defeat the proposal to impose the sales tax on its business.
Legislators have approved a plan to raise $210 million by imposing a tax on admissions to all types of entertainment events, although Wilson has not agreed to the idea.
Among those who have hired lobbyists to oppose the plan are the Alliance of Motion Picture and Television Producers, theater owners, various professional sports teams and Spectacor, operator of the Los Angeles Memorial Coliseum and other public facilities.
Opponents of the admissions tax argue that their events should not be taxed because an extra charge of 7 1/4% will make the cost of tickets prohibitive for some.
“It’s not easy,” said Robin Coale, a lobbyist for Spectacor. “Obviously the state faces a horrible, horrible deficit and everybody knows the problem has to be addressed. Everyone has to share in the pain.”
Coale proposed sparing her client from the tax by exempting all publicly owned facilities. She argued that putting a tax on tickets could reduce the number of people who attend events, thus cutting revenue for such public facilities as the Los Angeles Coliseum, the Long Beach Arena, the Oakland Coliseum and the Moscone Convention Center in San Francisco.
Her suggestion was greeted with skepticism by Hill. “We won’t tax the Coliseum or the Oakland A’s, but the Dodgers will get taxed and so will the Lakers,” he said. “Everybody’s got their wrinkle.”