Opinions

Another California Tax Grab



California Gov. Gavin Newsom let his 2-year-old son run on stage to display his soft side as he delivered his inaugural address Jan. 7. Then he showed his command-and-control side by making clear he wants more spending and new taxes.

California took in record tax revenue in 2018, beating estimates by $1 billion according to the Los Angeles Times. But Mr. Newsom demanded even more: “I want to see the [companies in Silicon] Valley step up and match our contributions,” he said, referring to his proposed $500 million workforce-housing budget. It’s a classic big-government non sequitur: Overtaxed workers—including those who earn $100,000—are struggling to make mortgage payments, so Mr. Newsom’s solution is more taxes. He proposes to extract an extra $500 million so the state can subsidize the workers’ housing.

Could Mr. Newsom force companies to “match” the state’s “contributions”? In a state where the Franchise Tax Board legally revokes driver’s licenses without a trial—quite possibly.

In Newsom-speak, “The workforce housing issues have been accelerated by the success of a lot of these companies.” But private-sector success isn’t to blame for the state’s affordability problem. The real problem is government failure.

Consider this:

Apple

is investing $1 billion to create 5,000 jobs in Austin, Texas, where a $40,816 salary pays for the same lifestyle that costs $75,000 in the San Francisco Bay Area, according to Bankrate’s cost-of-living calculator. Housing is a big part of that: The median housing price (and mortgage payment) in Silicon Valley is 3.8 times as high as in Austin. That’s what happens when the government jacks up taxes, wastes money, and smothers the construction of new housing in bureaucracy.

The median house price in the San Francisco Peninsula’s San Mateo County exceeds $1.4 million, or about $900 a square foot. And California’s very high income and sales taxes leave little room for monthly mortgage payments that can easily exceed $6,000.

When I was CEO of Cypress Semiconductor, I chose Round Rock, Texas, over San Jose, Calif., for Cypress’s second wafer-fabrication plant, and I chose to locate our third plant in Bloomington, Minn. Other CEOs made similar decisions. Silicon Valley barely has any silicon left; there are now zero state-of-the-art wafer-fabrication plants here. We had to move because government has made Silicon Valley uncompetitive for manufacturing.

Despite boasting the second-highest gasoline tax in the U.S., California’s roads are so potholed it actually pays to buy tire insurance. California power costs around 15.7 cents a kilowatt-hour, compared with 11.2 cents in Oregon and 9.7 cents in Washington state. But even those state-regulated windfall rates aren’t enough:

Pacific Gas & Electric

is about to go bankrupt again.

The affordability problem helped create California’s disproportionately high homeless population of 114,000, which the state subsidizes heavily but treats poorly. During a cold and rainy spell in December 2014, the city of San Jose flattened a 300-person homeless encampment and threw away many of the inhabitants’ belongings, including survival items such as tents, clothing and cooking utensils. If it had been done to a Third World village, it would have been labeled a human-rights violation.

After the homeless-encampment debacle, I offered personally to design, fund and build 500 state-of-the-art, solar-powered, internet-connected “small houses” for the homeless. All I asked from San Jose was to put them on city-owned parcels and to help me navigate the hostile building-permit process, a very real cause of the housing shortage. The city, under intense pressure to drive the homeless elsewhere, never formally accepted or rejected my offer.

The politicians who have misgoverned this wealthy state like to preen over their compassion, but look how they treat the homeless. California’s private citizens and companies, both for-profit and nonprofit, can efficiently build every additional house and apartment the state needs. The state would need only get out of their way.

Businesses like Cypress want to help. Silicon Valley’s Second Harvest food bank, which has a sterling 97.7% rating on Charity Navigator, presented us with 20 consecutive yearly awards for highest per capita employee cash and food donations to the hungry. We also received the STEM Champion of Diversity Award in 2016 from the Alliance of Black Educators for providing them with meeting space, a computer room and funding to help mentor 150 African-American students, ranging from fourth to 12th grade.

The Alliance has a perfect record of sending its seniors to college. It would be a disaster if new taxes imposed to fund another wasteful government program gobbled up Cypress’s funding for these amazingly efficient charities.

It comes down to politics: Mr. Newsom owes his election as governor to a collection of radical environmentalists, Nimbys and unionized public employees whose demands leave almost no room for the flow of free-market capital to new housing projects. Since Mr. Newsom can’t punish his own supporters, he wants to extort another blank check from business, even though Californians already approved Proposition 1 in 2018, which authorized $4 billion for affordable housing. That funding remains unused more than a year later because California politicians prioritize polishing their images over truly solving problems.

Mr. Rodgers was founding CEO of Cypress Semiconductor.



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