Tax Increase Proposal Would Not Make Housing More Affordable

California lawmakers, some of whom long ago demonstrated that they don’t understand why housing is so expensive across the state, continue to show that they have no idea how to fix the problem.

Consider, for instance, the plan being moved ahead by Assemblyman Marc Levine, a Marin Democrat. He wants to raise the state’s corporate tax rate a full percentage point, from 8.84 percent to 9.84 percent, on companies that employ at least 500 workers. The tax hike is projected to increase revenues about $500 million a year. Those dollars would be dedicated to “building affordable housing.”

So, the magic thinking is that higher taxes will somehow increase the state’s housing stock.

For the record, at least four of the 10 largest homebuilding companies in the country are headquartered in California, including KB Home, TRI Pointe Homes, William Lyon Homes, and Shea Homes, and will be subject to Levine’s higher tax because they have more than 500 employees. Hiking taxes on the businesses that build homes doesn’t seem like a smart move.

Neither does creating a half-billion-dollar government-controlled fund to boost affordable housing. It’s just another government intervention that will have the opposite of its intended effect.

Lawmakers need to understand that decades of well-intended yet ill-thought-out public policy has caused the housing crisis. The only way to reverse the damage is to allow the market to work. Let free-market forces produce the incentives to build. It should be clear by now that more government is what brought this on.

This isn’t Levine’s first attempt to improve the housing crisis with legislation that will make it worse. He was also the force behind a special exemption that will allow limits on homebuilding to continue in Marin County. In other words, the sort of housing that’s needed most to make up the state’s shortage will be restricted in Marin.

Of course, that’s what the moneyed residents of Marin want. They’re comfortable in their exclusive enclave where the median price of a home is $1.27 million. Building affordable, high-rise apartments would only draw those they see as undesirables inside their swanky borders. They wouldn’t want the low- and modest-income folks who work for them living among them, too.

Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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