Like so many commissions created to deal with intractable state problems, the new tax commission may be on a road to nowhere. Ideological divides have undermined the hope of Commission Chairman Gerald Parsky to present to the legislature a new state tax structure proposal with unanimous support from the commission.
Working toward a plan that included a flat income tax, a reduction in the sales tax and an end to the corporation tax, offset by a new value added tax called a Business Receipts Tax, the commission will now consider a second plan built on a different chassis. The proposal fathered by Commissioners Fred Keeley and Christopher Edley includes a tiered income tax, an increase in the property tax on commercial property and a carbon tax, to name a few elements of the plan.
Ironically, both plans aim for similar results: a less volatile tax system that will produce more revenue for government as years go by. But each would take diametrically opposed routes to get to that goal. The original plan, apparently backed by Parsky, expects to grow the economy throwing off new tax revenues as it goes, using the flat tax to reduce volatility. The Keeley/Edley plan wants to raise taxes or make it easier to raise taxes to gain revenue, arguing that property tax increases on business are a stabilizing influence on tax revenues.
Treating business differently is the key to each plan. Both plans count on business filling government coffers. However, one plan counts on using incentives of lower income, corporate and sales taxes to spur economic growth, while the other sees increasing taxes on business as the solution.
It is counterproductive to think you build up revenues by weighing business down.
We are witnessing is the same old philosophical divide that has sunk commissions in the past.
Is compromise possible? Keeley suggests it is, but that’s hard to see from here. We’ll find out shortly. The tax commission starts hashing out the proposals tomorrow in San Francisco.