SAN DIEGO UNION-TRIBUNE: Will needed state tax reform plan be hijacked?

By U-T San Diego Editorial Board

January 22, 2015

In 2009, a blue-ribbon commission appointed by then-Gov. Arnold Schwarzenegger and chaired by Rancho Santa Fe businessman Gerald Parsky proposed reforms that would have given California the world’s first tax code specifically designed to encourage job creation and business expansion. The proposal sought to broaden and simplify state taxes. It would have shifted the state’s revenue model away from an emphasis on individual income, corporate and capital gains taxes by extending sales taxes to previously untaxed services — but a modified version of the sales levy crafted to give businesses federal tax relief.

It was a shrewd, thoughtful plan, but it proved too far-reaching for Sacramento. Conservatives knocked it for expanding taxes. Liberals didn’t like that many tax rates were reduced.

Now state Sen. Bob Hertzberg, D-Los Angeles, is proposing a fairly similar tax reform, and it’s gotten a friendlier reception. It may be lawmakers are figuring out that reshaping the tax code so it helps the economy makes more sense than perceiving of the code as a way to mete out what they see as economic justice to the undeserving wealthy. Or it may just be that, unlike Parsky’s plan, Hertzberg’s scheme isn’t initially revenue-neutral. Instead, it’s designed to generate an extra $10 billion in annual state revenue.

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