We would all laugh at a man who, sinking in millions of dollars in house payments, car loans, and credit card bills, decided to fix his problem by looking for spare quarters lurking behind the cushions of his sofas.
Likewise, we should shake our heads at the way the state of California—with a budget deficit approaching $16 billion and hundreds of billions of dollars in unfunded pension and retiree medical benefits—is stepping up tax collection to help plug a hole caused by its chronic overspending.
On Tuesday, I met in Santa Ana with about 12 owners of catering trucks—those mobile restaurants that sell mostly Mexican food—and they told a disturbing tale of how the state’s Orwellian-named tax agency, the Board of Equalization, is targeting and mistreating them. The people assembled in the room blamed state tax authorities more than the economy for their tough times.
The truck owners say the state is handing them tax bills for tens of thousands of dollars based on unrealistic estimates of their taxable sales. When you buy food at the trucks, the burrito and Mexican Coca-Cola (the kind with the real sugar, rather than the icky corn syrup) may cost, say, six bucks. That’s what you pay, as opposed to a restaurant where state tax would be added onto the transaction. The trucks don’t collect per-item tax, but owners later estimate their sales and send their money to the tax man.
The BOE, truck owners say, used to tax them based on realistic sales estimates and used to account for the fact that many of the items they sell are not taxable items. They say the BOE also used to work with them to make their tax bills and treat them respectfully. No more. Desperate for cash, state officials now make unrealistic estimates of their sales and employ heavy-handed tactics, they explain.
To make matters worse, the truck owners say that local police harass them—thanks in part to city officials that don’t like having the trucks around. Every city has different rules for placement of permits on the truck, and most of the owners report getting multiple citations for minor infractions. Each citation can cost $700, which can eat up days worth of taco sales.
The people in attendance spoke mostly Spanish, which was translated for me by Lou Correa, the Santa Ana state senator who organized the group at my request. I promised to quote only the first names of the attendees because of their fear of retribution from the authorities.
“It reaches the point where you have to think about your health,” said Vernonica. “They filed lawsuits against me. They said they would charge me as a criminal in court. I’m out of business. I sold my truck. There are people out there who get government aid who are driving brand new cars. They come after a person like me who is not asking for anything. As long as I have two feet and two hands, I want to work.”
Officials suggested to one truck owner that he go down to the welfare office for benefits. That’s just like California these days—hard-working people are ill treated, but there are plenty of benefits available for those who prefer to live on the dole.
Many told stories of long waits, complicated audits, confusing instructions, unhelpful officials, of bureaucratic indifference. Then BOE reports them to the IRS, they say, which triggers a federal audit. Those who work other jobs have their wages garnished to pay the state.
“We were paying an acceptable amount, and then the state needed more money,” said Gilberto. He told me that this is a group of mom-and-pop business owners that cannot afford attorneys and accountants.
I talked to the Board of Equalization’s Michelle Steel, the elected official who represents Orange County, and she promised to pull the records of the taco truck owners and see what can be done to help them.
At the gathering in Santa Ana, one man blurted out the word “pensions.” Everyone laughed. In English or Spanish, these business owners understood that the state is shaking them down to come up with money to pay for its lavish overspending, on programs including six-figure pensions for government employees.
The state Capitol is controlled by liberal Democrats, who frequently invoke the poor, working-class people and immigrants to justify their latest government spending ideas. Yet here is the latest example of how these officials put the demands of the well-paid and powerful unions over the needs of hard-strapped immigrants and working people.
State officials refuse to tackle the pension debt or rein in public spending. Indeed, they are busy spending more on fanciful projects such as high-speed rail. Yet the state has no money. This is the end result of an infantile progressive movement that refuses to make hard choices, always blames the private sector and figures that higher taxes will solve every problem.
Sen. Correa also had a meeting planned with the owners of nail salons who say they are being targeted by state regulators for large fines based on picayune regulatory violations. I’m not arguing that small businesses shouldn’t pay their fair share of taxes or comply with reasonable rules, but it’s a sad day when the state government treats them like criminals or like a piggy bank.
Read those surveys of business owners, such as the one that ranks California last in the nation in terms of business friendliness. The owners don’t complain so much about the state’s high tax rates, but about the prevalent attitude in which they are treated with hostility by the authorities.
I love California. But if I depended on a catering truck for my living, I’d fill it up with my belongings and drive to Nevada.
Steven Greenhut is vice president of journalism at the Franklin Center for Government and Public Integrity.