FOX & HOUNDS: Voters Skeptical of Major Tax System Overhaul

By Joel Fox

December 3, 2014
Editor of Fox & Hounds and President of the Small Business Action Committee
Wednesday, December 3rd, 2014

While much attention has been paid to potential tax measures on the 2016 ballot, working in the background is an effort to overhaul the state’s tax system. The recently released Public Policy Institute of California poll shows how difficult a task that could be.

Presenting a proposal for overall tax reform is the Think Long Committee for California, part of the Berggruen Institute on Governance. A central change considered by the Think Long Committee is a tax on services. California has become a much more service-oriented economy in recent decades. Sales taxes on goods, once the main portion of state revenue, has dropped dramatically in the last half-century.

Newly installed senator, Bob Hertzberg, a Think Long Committee member, will be driving the discussion on tax reform in the legislature. He has introduced SB 8 that proposes to look at a number of changes to the tax system. His bill discusses broadening the tax base by providing a tax on services, evaluating the corporate income tax, and examining the impact of lowering the personal income tax.

The Think Long Committee is also talking to the governor hoping he will tackle tax reform as he puts together his “legacy” agenda.

The idea to broaden the tax base by including services and lowering the sales tax rate was tested in the PPIC poll. A tax on services was rejected by 63% of likely voters (25% favored) although that number fell to 49% opposed (39% favored) if a drop in sales tax rates accompanied the service tax.

PPIC reported that the share of voters who think the state and local tax system is in need of major change is at its lowest point since PPIC started asking the question in January 2010. If fewer voters see flaws with the current tax structure the more difficult it will be to propose radical changes.

Let’s point out, however, that a plurality still thinks major changes are in order. When asked if the state and local tax system was in need of either major changes, minor changes or is just fine, 44% chose major changes; 38% said minor changes were in order, and 16% opted for leaving things be.

However, as the poll indicates, any changes along the lines of major tax reform will require a massive education effort to convince the public, who has the final say.

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