Earlier this month, speculation grew about the state’s either being in recession or on the brink of it. The housing market free-fall, rising unemployment and a slowdown in the growth of state government revenues were all mentioned as worrisome signals about California’s economy. Around the same time, the Small Business & Entrepreneurship Council released its 12th annual “Small Business Survival Index,” which I author. It ranks the 50 states and District of Columbia according to their respective climates for entrepreneurship based on 31 government-imposed or government-related costs. On the 2007 Index, California ranked a dismal 49th. Only New Jersey and the District of Columbia were worse. California inflicts the highest tax rates on personal income and individual capital gains among the states, while tax rates on corporate income and capital gains are pretty weighty as well. But what are elected officials up to now? AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREPettersson scores another winner, Canucks beat KingsWell, rather than looking to get the costs of government under control and to provide much-needed tax and regulatory relief that will allow investment, business, the economy and jobs to grow, Democrats in the California Legislature and Republican Gov. Arnold Schwarzenegger are conspiring to make matters even worse with a costly, big-government health-care scheme. At first glance, the health-care plan being hammered out might seem nice. After all, isn’t it a good idea for elected officials to work to expand health-insurance coverage? Unfortunately, what looks nice does not always turn out that way in the end. More government involvement in health care merely assures that costs will continue to accelerate at breakneck speed. When the government – i.e., the taxpayer – picks up the tab for health care, consumers, health-care providers, politicians and government bureaucrats have few, if any, incentives to care about costs. Eventually, rationing of care takes hold in the face of rising costs. Health-care consumers and the taxpayers both get a bad deal. But just how bad would the deal be for taxpayers, including small businesses? California lawmakers are considering some major tax increases. Businesses would have to provide health insurance or pay a payroll tax. The level of that tax is in dispute, with Democratic legislators pushing for a tax rate as high as 6.5 percent and Schwarzenegger looking to cap it at 4 percent. Hospitals would get hit with a 4 percent tax on revenue, and Democrats in the Legislature are pushing to jack up the state’s cigarette tax from 87 cents per pack to $2.87 – a 230 percent increase. Labor costs for businesses would rise due to the payroll tax. Health-care costs would take a double hit through increased government spending and a tax on hospitals. And many businesses – primarily small retailers – would lose sales due to a higher cigarette tax. Lost business would include purchases heading across borders, onto the Internet or underground. Also keep in mind that government spending programs usually run well ahead of the original estimates, and actual revenues from tax hikes often fail to meet projections, particularly higher tobacco taxes as smoking continues to decline. This, of course, means that other tax revenues will have to be tapped to fund this misguided governmental intrusion into health care. In the end, this health-care escapade seems specifically designed to further damage California’s competitive position and economy. Teetering on recession. A rotten policy climate. And now looming tax increases for government-run health care. Three strikes and California’s economy could be out. Let’s hope policymakers or the voters come to their senses. Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. Write to him by e-mail at [email protected] local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!