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Wednesday, March 20 , 2019, 5:07 am | Partly Cloudy 53º


Ron Fink: Trickle-Down Economics Works Every Time

Wikipedia says “Trickle-down economics is the pejorative term for the theory that providing economic benefits to those with upper-level incomes will ultimately benefit society as a whole, through the extra wealth being invested into the economy and therefore creating jobs that provide wealth for lower-income earners (with that wealth in turn being spent back into the economy).”

Democrats used this term to criticize President Ronald Reagan’s tax policies. 

The Democrat theory at the time was that this philosophy would never work and the only way to benefit lower wage earners was to levy an ever increasing tax burden on those they considered “rich” – that would be anyone running a business.

They didn’t seem to be able to grasp the fact that allowing companies (the rich) to keep some of their money for reinvestment in local economies could reap more tax dollars than if the simply taxed to company out of business or the company passed along the increases in taxes to the very folk’s Democrats thought they were helping.

They didn’t get it in the 1980s, but time has an interesting way of changing minds – or is it because the benefactors of recent legislation are large scale supporters of the democrat party?

Recently Governor Jerry Brown, a hard core Democrat, signed AB 1839, the “Income taxes: qualified motion pictures,” into law at a ceremony in Hollywood.

Keep in mind that the film industries, the unions that provide labor for films and almost all media celebrities strongly support Democrat politicians and policies with large monetary donations.

To make the point of trickle-down economics clearer, all we have to do is look to press reports about the immediate impact of this decision.

An online industry website, Deadline Hollywood, reported that “There were 254 projects submitted for the $55.2 million allocated this round for features films. Of that total, there were 32 for the $48.3 million available for non-independents and 222 for the $6.9 million for independents.”

This action resulted in a dramatic change for the filmmaking landscape in California. Not only did the film industry reap an immediate benefit, but many other businesses large and small were suddenly counting a new cash flow and hiring more employees.

Many businesses supporting the film industry had fallen on hard times prior to this action. Building supply firms, movie prop warehouses, transportation fleets and of course hundreds of craft workers who build the props, provide lighting, operate equipment and generally provide the behind the camera labor.

Direct employment in the movie making industry is about 250,000 workers, and when you add to that all of the outside contractors, mostly small businesses, you can easily see how this tax break has trickled-down to working folks in the community.

In a related matter the Santa Barbara County Board of Supervisors, or at least the three South Coast liberals who rule the board, have a long-standing desire to eradicate the oil industry from our county. Their reasoning is flawed; they believe that oil is the root of all evil and oil production must be stopped at all costs.

Last May, a pipe that transfers oil to a processing facility ruptured, spilling a relatively small amount of oil that was quickly cleaned up without any lasting environmental harm.

The three South Coast supervisors and their enablers used this event as an opportunity to severely restrict any efforts by the oil company to repair the pipe. They also denied permits to transport oil by truck, thereby placing scores of workers in the unemployment line and cutting off cash flow to the General Fund. 

So, why is this related? Well, Governor Brown seems to have warmed up to trickle-down economics, at least for one favored industry, while our local Board of Supervisors trio can’t seem to grasp simple economics.

A couple of weeks ago, Mark Schniepp, director of the California Economic Forecast, painted a grim picture of what the loss of revenue from this pipeline shutdown will do to the county’s budget. He estimated that county would stand to lose up to $74 million in tax revenue over the next three years. Millions more would be lost in royalty taxes.

These are just the direct losses; all those people out of work and the loss to local businesses and contractors who provide support to the oil industry will reduce sales tax revenue.

Meanwhile, our own trio of economic geniuses on the Board of Supervisors should probably request a revised budget because this loss of revenue will undoubtedly impact the bottom line.

I am glad to see that Governor Brown has finally decided to experiment with a policy that Democrats previously scoffed at. Had Republicans proposed such a shift in policy, they would have been strongly opposed by Democrats who would have accused them of crony capitalism, a term meaning “success in business depends on close relationships between business people and government officials”.

Trickle-down economics works every time – our own Board of Supervisors majority should embrace it.

— Ron Fink, a Lompoc resident since 1975, is retired from the aerospace industry and has been active with Lompoc municipal government commissions and committee since 1992, including 12 years on the Lompoc Planning Commission. He is also a voting member of the Santa Barbara County Taxpayers Association. Contact him at [email protected]. Click here to read previous columns. The opinions expressed are his own.

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