The newly formed state tax commission – formally, the Commission on the 21st Century Economy – got off to a lively start at its first meeting on the UC San Diego campus yesterday. Commissioners couldn’t agree on the commission’s mandate.
The chief disagreement occurred over whether the commissioners are supposed to recommend a tax system that is revenue neutral or not.
Former Assembly member Fred Keeley, referring to the governor’s executive order creating the commission, said the commission was not charged with bringing in a program that was revenue neutral. Commission Chairman Gerald Parsky agreed that the text of the order did not speak of revenue neutrality but he insisted that the governor, Assembly Speaker and Senate President Pro Tem indicated at the press conference announcing the formation of the commission that revenue neutrality was a clear objective.
Keeley responded that the governor had an opportunity to call for revenue neutrality in his order and didn’t do it so that need not be a guiding principle of the commission.
Commissioner Edward De La Rosa argued not to mix up the issues of raising taxes with bringing in more revenue. He said by encouraging entrepreneurship and risk taking to stimulate the economy revenue would grow without tax increases.
Stanford economist Michael Boskin emphasized that the commission was charged to deal with California’s tax system’s volatility, created by the state’s heavy reliance on a highly progressive income tax, and that could be done within the scope of revenue neutrality.
But, Anaheim Mayor Curt Pringle insisted that, “Volatility is not a bad thing at all.” Pringle argued tax volatility cannot be avoided in any tax system.
And so it went, the commission trying to find its legs and narrow its focus with the commissioners differing on a number of issues. Do taxes influence business decisions? Some commissioners thought they did, others said not so much. Should tax rates be flatter or should we be sure not to lose progressivity in the tax system? Should services be taxed and to what extent? Should carbon taxes be considered? And what will this future 21st century economy look like anyway? Not bad entertainment for the tax wonks in the room.
Can the commission come together in time to present a unified front by the April 15 deadline? Stanford professor John Cogan declared that the commission would need unanimity to achieve legislative support for the commission recommendations.
Both Speaker Bass and Senate Pro Tem Steinberg have promised an up or down vote on the commission’s recommendation.
Unanimity was far down the road yesterday, but, to be fair, it was just the first get together and a number of commissioners were meeting for the first time. Time will tell if they can narrow their focus and are able to work together. The next meeting is at UCLA on February 12.