California tax panel set to recommend sweeping, controversial changes

[Newsjock]

Source: Sacramento Bee

A state tax panel plans to recommend this week that California reduce the income tax, eliminate the state sales tax and install a new form of value-added tax on businesses, but it remains uncertain how many commissioners will support the plan and how far it will go in the Legislature.

... The tax proposal's linchpin is a "business net receipts tax," or BNRT, for which the closest comparisons are the value-added taxes used in Europe and a variant used in Michigan. When fully implemented, all businesses operating in California would pay a tax of roughly 4 percent on all their revenue minus deductions for capital investments, contractors and possibly health expenditures for employees.

The commission envisions that the BNRT would supplant the existing corporation tax and state sales tax of 5 percent. It theoretically would provide enough revenue to allow the state to reduce its income tax levels as well, with a top bracket of 6.5 percent rather than 9.55 percent.

... The commission decided against including an additional 18-cent-per-gallon gas tax to pay for transportation. It will recommend to the Legislature that lawmakers pursue another rainy-day fund at the ballot. And it will suggest that the Legislature may wish to consider allowing more offshore oil drilling in exchange for royalties, as well as consider charging even the poorest California earner $50 in income taxes.

... Some Democrats have criticized the plan because those earning more than $200,000 a year receive half of the $15 billion income tax reduction. Backers say it makes the state's income tax structure more stable.

Read more: http://www.sacbee.com/topstories/story/2183065.html

[truedelphi]

1. K & R for reading later.

[CaliforniaPeggy]

2. Interesting...

I'll be watching for the expert opinions on this one.

[DBoon]

3. They are overt in wanting to reduce taxes on the wealthiest 1%

class warfare at its finest

[DJ13]

4. Amazing

When Dems mention increasing business taxes the GOP goes ape shit with excuses like "it makes businesses uncompetitive..bla bla bla".

But the same GOP is all for it if it lowers the taxes on the wealthy.

[vinylsolution]

5. Because Republicans hadn't gutted California enough already.

They keep on increasing the dose, when they know their medicine has never, ever worked.

[krkaufman]

10. It's a matter of opinion.

The tax cuts have "worked," in the eyes of Republicans, if they are stripping the government of funds, thus forcing cutbacks in spending on domestic issues. The effect on the public isn't the measure, the only relevant measure is how much money the wealthiest are paying in taxes.

[FiveGoodMen]

6. Eat the rich.

Before they eat you.

That's really all there is to this.

[Odin2005]

7. WTF?

:grr:

[No Elephants]

8. Did anyone bother to explain why or how regressive taxes make a tax policy more stable?

Who was on this "state" panel anyway? Publish the names. In big letters.

[Xithras]

9. I can answer that.

California's tax system is currently heavily weighted toward the wealthy. Half of our income tax receipts come from the top fwe percent.

The problem is that the incomes of these top few percent tend to swing much more wildly than those brought in by regular wage earners. The richest Californians make their money by investing it, so their income is directly tied to the performance of the stock market and real estate markets. When the stock market bombs, California's net tax receipts tank...even if the real impact of that drop is negligible on the economy. This was demostrated beautifully by the dotcom burst a decade ago...even thouugh the net impact of that implosion on the overall state economy was fairly small, the resulting stock market crash devastated state revenues.

John Chiang, our Democratic State Controller, has been calling for a diversification of our tax base for some time now to combat this problem. California is almost unique in the nation in that our budget is dependent on the performance of a market that isn't even located in our state. A bad year on Wall Street in New York means another year of cuts for K-12 teachers in California. Even if our state economy is doing fine!

[No Elephants]

17. Ah, now I get it. Thank you so much. Too bad the reporter who wrote the article didn't bother

about the explanation.

I would diversify, but I would still not weight such a large perdentage of the tax breaks to the rich.

[Newsjock]

13. Here are the commission members

http://www.cotce.ca.gov/commissioners

An interesting list weighted, quite unsurprisingly, toward corporatist interests including Big Health.

[No Elephants]

18. Thank you. I am ashamed that I asked instead of googling myself. (You were very gracious

not to mention that and I thank you for that, too.)

[alarimer]

11. Way to shoot yourself in the foot, California.

What you need to do is RAISE property taxes and raise taxes on the wealthy.

[sansf]

12. CA has no feet, or shoes, or safety net

I live here. CA is ungovernable.

[ProgressiveProfessor]

15. Problem is clearly stated in the article, income is taxed, not wealth

Property Taxes are the 3rd rail of CA politics. Prop 13 is untouchable as a practical matter

[Merlot]

14. The also want to tax services which are currently not taxed

Services are usually provided by small-businesses, hairstylists, vets, designers, writers, etc. So it's another creative way to pass the burden of taxes onto the individual, middle class and off the wealthiest. Once again.

[defendandprotect]

16. k i c k