Still Awaiting Results from Billions in New Taxes for Homelessness, Lawmakers Want Businesses to Pay More

It was only a year ago that Governor Gavin Newsom devoted his entire State-of-the-State address to the dual challenges of housing and homelessness, calling the latter “the most pernicious crisis in our midst, the ultimate manifestation of poverty.”

What a difference a year makes. The COVID-19 pandemic scrambled the policy agenda and created urgency to stop the spread of the disease among unhoused Californians. But even this massive public health and economic crisis has left unchanged the underlying concern that homelessness in the state is disgraceful.

Even in the teeth of the pandemic, homelessness remains an issue of great concern to voters, according to the 2020 CalChamber poll. Fully two-thirds of voters believe homelessness in California has gotten worse since the start of COVID-19, with voters in Los Angeles and inland California reporting severe worsening in their regions.

Not surprisingly, the Governor recently restated his ambition to tackle homelessness. Since 2018, $1.45 billion has been provided to local governments for the Homeless Emergency Aid Program and the Homeless Housing, Assistance and Prevention Program to support regional coordination and immediate homelessness challenges.

In addition to the $1.45 billion of state funding provided to local governments since 2018, the Governor has proposed in his new Budget a one-time allocation of $1.75 billion for continued acquisition and creation of new housing units for homeless individuals, in addition to several hundred million dollars for ongoing support of state and local homelessness mitigation programs.

The state of California’s financial commitment to reducing homelessness is substantial, but pales compared with how local residents throughout California have voted to tax themselves to address this issue.

Over the past five years, four of largest and most impacted counties in the state – Los Angeles, Santa Clara, Alameda and San Francisco – have approved billions in new taxes to address homelessness. In addition, the cities of Los Angeles, San Jose, Oakland, Richmond and Sonoma County have each passed billions in tax increases for homelessness and housing programs.

In addition, California voters approved a $2 billion bond issue in 2018 to provide housing for mentally ill homeless.

If there’s one thing that California’s state and local political leaders and voters have accomplished on homelessness, it’s raising taxes and creating spending programs to address this confounding problem.

So naturally at the top of the Assembly agenda in the second year of the pandemic crisis is a proposed multi-billion dollar tax increase “to make homelessness rare, brief, and nonrecurrent.”

The legislation would accomplish this by creating sixty-four pages of prescriptive rules for spending more than $2 billion a year on a hodgepodge of local programs to serve, house and treat homeless individuals.

The measure would increase the corporate tax rate by almost 9%, making it at 9.6% the 5th highest corporate tax rate in the land. It would also subject corporations to an additional tax penalty depending on their level of exposure in countries with certain low tax rates.

The bulk of the funds raised by these new taxes would be allocated to the very jurisdictions that only a couple years ago asked their own taxpayers to reach into their wallets to address homelessness. But more troubling is that the latest entry in the tax sweepstakes evinces no learning from the experience of earlier tax increases. How have Los Angeles/San Francisco/San Jose/Oakland and the others used the billions in new spending authority to make homelessness rare, brief and nonrecurrent?

California lawmakers should recognize this massive disconnect between their zeal to increase taxes and the hard work necessary to demonstrate results. The sponsors of the so-called Bring California Home Act should honor taxpayers with some evidence of on-the-ground success before subjecting them to more taxes and providing residents more reasons to make another state their home.

Contact: Loren Kaye

Loren Kaye
Loren Kaye was appointed president of the California Foundation for Commerce and Education in January 2006. He has devoted his career to developing, analyzing and implementing public policy issues in California, with a special emphasis on improving the state's business and economic climate. He also was a gubernatorial appointee to the state's Little Hoover Commission, charged with evaluating the efficiency and effectiveness of state agencies and programs. Kaye served in senior policy positions for Governors Pete Wilson and George Deukmejian, including Cabinet Secretary to the Governor and Undersecretary of the California Trade and Commerce Agency. See full bio.