In Light of Election Results is Tax Reform Possible?

Joel Fox
Editor of Fox & Hounds and President of the Small Business Action Committee

Reforming California’s tax system would be an important step to lessen Californian’s tax burden and revitalize the economy while bringing in adequate revenue, but Tuesday’s election results could stand as a roadblock to reform.

With the success of both Proposition 30 and Proposition 39, new tax revenue is coming into the General Fund. There may be little desire from either the governor or the legislature to try to change the tax system in light of the new taxes.

Governor Brown said at his press conference that seeking a broad based tax reform is a “very tall mountain” to climb when you create a new tax on people. The idea of a broad based tax reform often considers the possibility of lowering rates and broadening the tax base by applying a tax on services.

However, Senate President Pro Tem, Darrell Steinberg, said yesterday that with a two-thirds supermajority, such a tax reform might be pursued.

Given that a number of communities around the state raised sales taxes yesterday, the sales tax rate is getting pretty high and lowering the rate and broadening the base should come in for close scrutiny.

There is also the possibility that outside groups would mount a tax reform effort. The Think Long Committee is still in place with its set of tax reform ideas. However, the “outsider” reform movement did not fare well with the easy defeat of Proposition 31, the set of budget and governance reforms placed on the ballot by the California Forward reform group. The prime financial sponsor of Prop 31 was Nicolas Breggruen, who is also the power behind the Think Long Committee.

Of course, some in the majority have a different idea about tax reform. One example: Advocates of a split roll property tax, which would raise property taxes on business, were elected to the legislature yesterday. With the Democrats securing a two-thirds vote in both houses, the legislature won’t need the governor’s signature to put a constitutional amendment on the ballot to advance a split roll and alter Proposition 13.

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