Tax Reform For Billionaires

The Commission on the 21st Century Economy, tasked with crafting
proposals to modernize California’s tax policy and ease the volatility
of its revenues, released its final report today. Leona Helmsley would be proud.

Helmsley
– a billionaire New York City hotel operator and real estate developer
sentenced to prison for tax evasion – famously said, “Only the little
people pay taxes.” With all the tax cuts being proposed by the
Commission for big business and the wealthy, her observation will be
true in California.

If adopted, the report’s recommendations – available here
– would dramatically reshape tax policy in California and place the
burden squarely on our already over-burdened, underpaid, and
under-employed working families. These recommendations include:
•
Reducing the number of tax brackets from six to two. The new tax rate
would be 2.75 percent for taxable income up to $56,000 for joint filers
($28,000 for single) and 6.5 percent for taxable income above that
amount;
• Eliminating the 8.84 percent corporate tax and the $800 minimum franchise tax;
•
Eliminating the current 5 percent state sales tax, with the exception
of the sales tax on gas and diesel fuels which would continue to be
dedicated to transportation;
• Establishing a new tax, not to exceed
4 percent, applied to the net receipts of businesses. Small businesses
with less than $500,000 in gross annual receipts would be exempt from
this tax;
• Creating an independent tax dispute forum – This forum
would provide taxpayers with a forum for resolving disputes with the
state; and
• Increasing the state’s Rainy Day Reserve Fund from 5
percent of revenues to 12.5 percent and restricting the government’s
ability to use the reserves.

By flattening
our tax policy, these recommendations coddle CEOs and billionaires
while kicking California families to the curb. No wonder the Commission
shut the public out of the process to complete its work in secret.

It
is equally important to note what is not recommended by the report, but
would have contributed to increasing and stabilizing the state’s tax
base: a new carbon tax, an oil severance tax, extending the sales tax
to certain services, and requiring corporate-owned real estate to be
reassessed at market value on a regular basis.

California
families are struggling to make ends meet. This recession has produced
record unemployment, fueled massive wage reductions, and resulted in
huge sales declines. Increasing the tax burden on hard-working families
cannot fairly and reliably fill the huge revenue gap created by
reducing income taxes on the wealthy and eliminating corporate taxes.

Tax
reform decisions are too important for experimental guesswork. But this
is exactly what the Commission’s report is urging. While the Commission
asserts that its proposals will create a tax structure that will more
reliably support state services, that assertion is unsupported by the
available evidence. In fact, the Commission has thus far refused to
make available to the public studies and information that form the
basis of its proposals. Adopting the Commission’s proposals would be
playing Russian roulette with California’s future.

Originally posted at Assemblymember Noreen Evans’ Budget Blog