Sales Tax Hike Backed

The Los Angeles Area Chamber of Commerce announced Sunday that its members support a temporary sales tax increase as part of an overall plan to end the state’s budget impasse.

The chamber’s support for a hike in the sales tax comes as lawmakers in Sacramento remain locked in a stalemate over how to address the state’s fiscal woes, with Democrats insisting that spending cuts be coupled with tax increases and Republicans adamant that no taxes be raised.

Although business groups generally are associated with the Republican Party, the chamber’s endorsement of a tax hike places it more closely in line with the Democrats’ position on the budget.

“The crisis we face with respect to the state budget is largely because the political leadership of this state seems incapable -- or unwilling -- to make the tough decisions and the hard compromises that are necessary,” chamber Chairman George Kieffer and President Rusty Hammer wrote in a letter being sent to the governor and several high-ranking legislators today. “The consequences of this inaction will soon reach every part of our state.”

Chamber officials said they were concerned by recent statements from lawmakers who seemed willing to pass a budget that relies on borrowing money to plug the state’s multibillion-dollar budget gap and thereby delaying difficult financial decisions until next year.

“From a business perspective, the best way to confront a problem like this is to adopt a package that reduces costs, increases revenues, puts the state in a positive financial position, and puts our problems behind us so that we can meet the challenges of the future,” Kieffer and Hammer wrote.

The Los Angeles chamber is the first such business organization to advocate a sales tax increase. The California Chamber of Commerce, the state’s largest such group, has not taken a position.

This is not the first time the Los Angeles chamber has staked out a position that has put it in the center of a significant political debate. Several years ago, the group backed a nearly $2-billion water bond for the state. Last year, the chamber came out against the San Fernando Valley secession movement, and more recently it became the only chamber in California to oppose using the recall to oust Gov. Gray Davis.

The chamber’s support of a sales tax hike was embraced Sunday by Democrats and dismissed by Republicans and anti-tax groups.

“In our view, the Los Angeles Chamber of Commerce represents solely a handful of elite corporations and does not reflect the interests of either the taxpayers or small businesses,” said Jon Coupal, president of the Howard Jarvis Taxpayers Assn. “In fact, their reputation over the last few years has become increasingly liberal in favor of the spending interests.”

Steven Maviglio, a spokesman for the governor, countered that having “a mainstream organization like the chamber throw its weight” behind a sales tax increase “shows the extremism of the Republicans” in Sacramento who refuse to consider any such proposals to address the budget shortfall.

Although it is not specified in the letter, chamber officials said the sales tax increase supported by the organization is a half-cent hike or less for three to five years. They noted that more than 10 years ago, Republican Gov. Pete Wilson temporarily raised the sales tax when he was faced with a financial crisis.

In addition to the sales tax increase, chamber officials said legislators needed to approve an overall “stimulus package” that would eliminate burdensome regulations on businesses and encourage economic growth. Among the proposals chamber officials said needed to be adopted were reforms to the state’s workers’ compensation system; energy cost reductions; protections for small businesses from frivolous lawsuits; and a moratorium on new laws increasing the cost of doing business in California.

Chamber officials called on legislators to remain in session, including weekends and holidays, and to cancel political fund-raisers until a budget is passed. The chamber also recommended that independent studies be done to “explore remedies to the structural problems related to the budget process and allocation formulas to local governments” and to “examine the necessity of and expenditures for all state commissions.”

In interviews Sunday, Kieffer and Hammer acknowledged that members of the chamber debated the sales tax position, but that most believed it was necessary to extricate the state from its financial woes. They said they expected the chamber’s stance on the sales tax increase to be criticized.

The chamber has about 70 members on its board of directors. The position on the sales tax increase was reached by a majority vote.

“The liberals think we’re too conservative and the conservatives think we’re too liberal,” Kieffer said. “We’re probably better served if we drop the labels and address the problem.”

Hammer said the two-page letter reflected the “nearly unanimous” view of the chamber’s board of directors and would be sent today to Davis, Senate President Pro Tem John Burton (D-San Francisco), Republican Senate Leader Jim Brulte (R-Rancho Cucamonga), Assembly Speaker Herb Wesson (D-Culver City) and Assembly Republican Leader Dave Cox (R-Fair Oaks).

“A half-cent sales tax hike is not going to do anything to help the economic situation for business owners and working families trying to make ends meet,” said Peter DeMarco, a spokesman for Cox, who had yet to see the letter. “It’s not going to improve the job climate or create new jobs.”

Kieffer and Hammer said the organization’s support for an increase in the sales tax was not made lightly.

“We do not like the idea of new taxes either,” Hammer and Kieffer concluded in their letter to lawmakers. “But the simple fact is that we cannot solve this crisis based on what we want, but rather only based on what we need -- which is a hard dose of budget cuts, economic stimulus and a temporary sales tax increase.”