The Governator in California plans to help resolve the state’s $11 billion deficit by imposing a broad spectrum of new taxes, including an increase in the sales tax, a tax on oil production (a particularly dumb idea given the need to increase domestic sources), and new taxes on appliance, furniture and vehicle repair, veterinary services and golf. This plan apparently would raise $4 billion.
It sounds like a good way to damage an industry that’s worth an estimated $6.9 billion to the state’s economy. Even someone with a basic understanding of economics can predict what will happen. Since golf is played with discretionary income, an increase in price will necessarily result in fewer rounds played. That will impact course revenues, and in turn will reduce business taxes collected from the courses. Thus, it’s entirely possible that increasing taxes will result in fewer net taxes collected from golf. Further, if people are playing fewer rounds, course construction will slow, eliminating construction jobs and the subsequent revenues collected from those.
It’s the same with any industry. As John Marshall once wrote: “The power to tax is the power to destroy.” Even in 1819 they knew that taxes discouraged activity.
If anyone in California wants to see the end result of a tax and spend policy, they should take a look at the mess Michigan is in.