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Tuesday, July 14, 2009
7:53 AM EDT
Patrick Gleason

California Tax Commission Nears Final Plan

The 14 member blue ribbon tax commission tasked with reforming California's tax code is set to release its final recommendations at the end of the month. In recent weeks it appeared that the commission was leaning toward a plan that would call for a flat personal income tax and a reduction in, or even elimination of, the state's corporate and highest in the nation sales tax. 

California's budget is heavily reliant on income taxes. And it is no secret that this fact combined with the progressivity of the state's income tax has resulted in an extremely volatile revenue stream for the state. Faced with a $26.3 billion deficit, even some Democrat legislators who would normally be loathe to the idea of a flat income tax have expressed an open mind. Assembly Speaker Karen Bass has even promised an up or down vote on the commission's recommendations, however unappealing they may be to her Democrat colleagues and the public employees unions that control them.
 
However just when it seemed that there might be a chance for pro-growth tax reform that would fix the unmitigated disaster that is the California budget, things appear to be taking a turn for the worst. This past weekend the commission’s liberal faction, which was appointed by legislative leadership, put forth a plan that will actually make matters worse. The key provisions, all of which entail little more than raising taxes or making it easier to raise taxes, were reported in yesterday's Sacramento Bee: 
• Create a "split roll" so that property taxes on commercial property are based on current values, removing it from Proposition 13's limits, a longtime goal of liberal tax reformers.
• Allow cities and counties to raise local sales taxes by up to 1 1/2 cents per $1 of sales with simple majority voter approval rather than the two-thirds now required.
• Impose a new tax on carbon-based fuels such as gasoline to reduce their use.
• The progressive state income tax structure remains untouched.
Those pushing such recomendations are not the only ones who didn't get the memo about the need to move away from volatile revenue sources. Anti-smoking groups are commencing a campaign to push for a $1.50/pack tobacco tax hike - a 172% increase. A tip for lawmakers: you might not want to take advice from a group that claims you should fund spending programs by raising taxes on an activity which that group openly seeks to eradicate. For more reasons why a tobacco tax increase will not help California, Click Here.
Posted by Patrick Gleason on Tuesday, July 14, 2009 7:53 AM EDT

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