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Friday, Mar 29, 2024

Capitol Punishment: “California Dollars”

Capitol Punishment: ‘California Dollars’ Guest Column Gregory N. Lippe In 1961 when Lynn Townsend was appointed to the presidency of Chrysler Corp., his main task and goal was to stop the erosion of profits by reducing costs. A former partner of Touche, Ross, Bailey & Smart (a predecessor of Deloitte & Touche), Townsend was well equipped to analyze the company’s cost structure and create operational efficiencies. He accomplished his goal and Chrysler’s profits grew. Ultimately, the cost cutting and operational efficiencies instituted by Townsend were not enough to keep Chrysler in the black, increased revenues were needed. In 1978, when Lee Iacocca joined Chrysler, he realized that the company’s market share was diminishing due to the public’s lack of enthusiasm with the tired designs of the company’s product lines. Since Iacocca was a design engineer, he was a natural to correct the problem. His new designs created new markets (including the ever-increasing youth market) and Chrysler, once again, enjoyed years of prosperity. In recent years, we have been deluged with information about the high costs of doing business in California and the resulting loss of businesses and jobs. So far however, we haven’t heard many suggestions as to how we can create markets for the products manufactured in California. As indicated in the above example of Chrysler, a company’s bottom line profits depend, not only on keeping costs to a minimum, they also depend on increased revenues. If a manufacturer can generate higher bottom line profits resulting from higher revenues, it won’t matter as much if the costs are also higher. Thus, although it is not prudent to continually burden California businesses with increased costs resulting from runaway spending and regulation created by our legislators, a program that would provide greater revenues to these businesses could offset the current high costs and help California to retain existing businesses and attract new businesses. I call my proposed program “California Dollars.” The concept is as follows: The state would print certificates or “California Dollars” that can be used only toward the purchase of products manufactured or assembled in California and subject to sales tax. Employees would be able to opt-in to a plan where a portion of their salaries, say $3,000 to $5,000 annually could be received in “California Dollars” instead of regular dollars (similar to a “Cafeteria Plan” concept). The payment of the “California Dollars” would be deductible by the employer, while their receipt by the employee would be exempt from California income taxes, thus the employee would have increased purchasing power and an incentive to participate in the program. The loss of income tax to the state would be partially or perhaps fully offset by the sales tax generated from the use of the dollars. Another potential utilization of “California Dollars” would include their purchase by retailers for giveaways in connection with their marketing programs (similar to the old “Blue Chip Stamps” or “S & H; Green Stamps” promotions and the current credit card companies’ points and mileage programs). In conclusion, the “California Dollars” program would create a market for products manufactured or assembled in California and therefore help to retain existing manufacturers and attract new manufacturers by providing higher revenues and therefore higher profits. Additionally, the potential increase in jobs would be an incentive for unions to promote the program and encourage their members to opt-in to the program. This would result in a “win” for business, a “win” for labor and a “win” for the economy of California. I recognize that the program as presented may require some fine-tuning due to possible constitutional or other legal issues. I have submitted the “California Dollars” idea to Gov. Schwarzenegger’s office for consideration. Should I receive a response, I will report on it. In the meantime, I am interested in your feedback. Please forward your thoughts to me in care of the San Fernando Valley Business Journal. The following are the anti-business bills that I have chosen to profile this month: -AB 1032: Requires businesses bidding on state contracts to report any violations over the past five years of state federal or local laws or regulations that resulted in either injunctions or fines even when the violations are unrelated to the services to be provided. Failure to report a violation, even if unintended, would result in barring the bidder from state contracting for five years. The bill is unduly burdensome, poorly focused and could discourage reputable and responsible companies from bidding. Status: Passed Assembly June 5, 2003, currently in Senate. Valley Assemblymembers voting for bill: Frommer, Koretz, Levine, Montanez, Pavley. Valley Assemblymembers voting against bill: Richman, Strickland. -SB 1397: Allows the South Coast Air Quality Management District (SCQAMD) to retrofit locomotives and other engines to reduce diesel emissions and to impose fees on these companies to fund projects that mitigate impacts to air quality associated with railroad activities in the south coast air basin. This bill is opposed by the Air Resources Board (ARB) because the board believes that enhanced SCQAMD regulation is contrary to federal and state law and would jeopardize an existing legally enforceable emission reduction agreement between the state and the railroad industry. Additionally, it will increase the cost of goods movement and discourages job creation. Status: Passed Senate May 26, 2004, currently in Assembly. Valley Senators voting for bill: Alarcon, Kuehl. Valley Senators voting against bill: Margett, McClintock. Valley Senators absent, abstaining or not voting: Scott Gregory N. Lippe, CPA, is managing partner of the Woodland Hills-based CPA firm of Lever, Lippe, Hellie & Russell LLP (LLHR) and a director of the Valley Industry and Commerce Association (VICA).

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