Clinton’s Plans Would Put Bite on Affluent O.C.

Taxpayers in affluent areas such as Orange County are likely to feel the brunt of President Clinton’s unfolding economic package, which calls for higher taxes from not just the rich but the nation’s upper middle class, economists and business leaders said Tuesday.

“Orange County will be hit harder than the rest of the nation for three reasons,” said Esmael Adibi, director of the Center for Economic Research at Chapman University in Orange. “First, we have a higher proportion of people who are making over $30,000. Second, a broad-based energy tax will hit our heavy reliance on automobiles. And of course, we rely heavily on defense spending, which will be cut.”

Despite that gloomy forecast for a region that prospered during the go-go ‘80s, many residents in Orange County seem ready to go along with Clinton’s economic plans in hopes of reducing the mounting federal deficit.

“I honestly believe that as a country and as a county we’re all able to sacrifice,” said Tom Malcolm, an Irvine attorney and finance chairman of the Orange County GOP. “I think basically everyone wants to be fair to our new President and try to give him a chance.”

But, Malcolm added, he and many of his friends in Orange County worry that special interest groups will block spending cuts in the Democrat-controlled Congress and “we’ll be faced with higher taxes but not a reduced budget deficit.”

With Clinton calling for tax hikes on families that make more than $180,000 and individuals earning in excess of $140,000 annually, Orange County stands to be hit hard by the President’s deficit reduction plan. The median family income for the metropolitan area fanning out from Anaheim and Santa Ana is 10th in the nation at $51,269 a year.

Lots of individuals and dual-income families bring home six-figure salaries, but that doesn’t always translate into unbridled prosperity in Orange County, which is beset by a hefty price tag for the basic necessities of life.

“In a place like Orange County, you need that much just to survive,” said Bill Campbell, a Villa Park business executive who spends about $50,000 a year just putting his two sons through Georgetown University. “It may sound like a lot of money, but when you add in house payments and a couple of kids in college, you go through it right away.”

Campbell, who owns 10 Taco Bell franchises in Orange and Los Angeles counties, said the prospect that the federal income tax bracket might be raised to 42% is “sort of devastating.” But what worries him more than any personal economic sacrifice he’ll have to make is the potential impact on business.

“It will affect the people who buy from me, so that would mean sales would be down and my income would be down, so a higher tax for me becomes sort of a moot point,” he said. “I’m more concerned about the effect on business than anything else.”

Meanwhile, some staunch Republicans in the county--the only one in Southern California to back former President Bush in the November election--were taking a certain satisfaction in the course Clinton is steering.

“I think it’s a great day for Orange County to say ‘I told you so.’ ” said Thomas A. Fuentes, Orange County GOP chairman. “I think (Clinton’s proposal) is a mean-spirited attack on those who have accomplished higher wage levels. But the reality is it’s going to destroy the economy at all levels.”

Democrats give it a different spin. “The Reagan legacy has forced Clinton to deal with the budget deficit in a very serious way,” said Howard Adler, county Democratic chairman. “It’s either we do this now or we’ll just keep hiding our heads in the sand. The guy has a lot of guts.”

Adler said he feels that the tax package “spreads the burden more fairly” and suggested that an economic stimulus plan for public works and business “will help Orange County.”

Public works money could prove particularly helpful as Orange County embarks on a major effort during the 1990s to rebuild its antiquated system of freeways.

Stan Oftelie, Orange County Transportation Authority chief executive officer, figures the stimulus package could mean in excess of $50 million to fund new highways and transportation projects in Orange County. Said Oftelie: “We think it’s very significant.”

Roger W. Johnson, Western Digital Corp. chairman who bucked the Republican establishment last year to support Clinton, said he was excited about the President’s proposals. He called the plan for tax increases and spending cuts “exactly the reason I supported him.”

Johnson, who earns more than $500,000 a year as head of the Irvine computer technology company, said he is personally prepared to pay more in taxes under the President’s plan.

“No one is happy to pay more taxes,” he said. “But I am very happy to make the sacrifice now because I have the confidence that it will be used to fundamentally improve our future instead of just frittered away. Our taxes have gone up in the past and we have nothing to show for it.”

Researchers at area universities are less sanguine.

Chapman’s Adibi said he is “saddened” by Clinton’s proposals. “He’s proposing more taxes at a time that Orange County and California are struggling with economic recovery. The worst thing to do at this time is raise taxes and cut spending. It means there will be less money available for households to spend--and spending is already anemic. This plan is contradictory--it will only hurt, it won’t help.”

Adibi said he believes that the President has his economic priorities “backward,” complaining that Clinton’s proposal pays “first priority to the deficit, rather than recovery and expansion.”

Many in the business community share that perspective. Reed Royalty, a San Juan Capistrano business consultant, said it is “inconceivable to me that anyone feels that the way to fix the economy is to tax us more.”

Royalty said that 60% of an individual’s income goes for federal, state and local income taxes, Social Security, sales taxes, property taxes and various fees. “If we had some of that money, we’d all be investing, we’d be spending, the economy would be booming,” he said.

Mark Baldassare, a professor of urban planning at UC Irvine, said the impact of tax increases would be “disproportionately higher” in Orange County than the rest of the country because it is “much more affluent.” But he cautioned that the results of the economic package on the area’s economy cannot be judged quickly.

“We only have general outlines now,” he said. “There’s a big difference between what the President will outline on Wednesday and what the Congress will pass--and those details will be critical to defining the impact in Orange County.”