The Commission on the 21st Century Economy decided to ask the governor to move forward the due date of their final report 45 days to September 15th. The move was made to allow time to study the complex proposals before the commission as well as consider a number of alternatives. The complexity of what is being considered, a major overhaul of the tax code, was first intended to be completed April 15; then moved to July 31; now perhaps to September 15. That may not be the final date.
One of the reasons more time is needed to consider proposals before the commission is because the commission is considering a new kind of tax – a Business Net Receipts Tax, which is a type of value added tax.
The intricacies of the proposal raised many questions and lots of explanation from commission and government agency staff members at the meeting in San Francisco yesterday. It will be hard for the layman to get their hands around the tax proposals that tax wonks and experts grappled with during the course of the commission hearing.
If the Business Net Receipts Tax is part of the package accepted by the commission, that makes the selling job of the proposal to the public that much harder.
There was also much discussion about the Personal Income Tax; whether it should be flat, or how many rates should be applied to income, and how much changes to the current income tax structure shifts the tax burden from the rich to the middle class. In the end, any changes to the income tax will also need explanation to the public on exactly what the changes mean to them.
The commission was working toward a goal of unanimous or near unanimous support for a proposal (no certain thing) and then the proposal to be delivered to the legislature for an up or down vote.
The missing link in that plan is how the voters will learn about and understand the proposal. If taxpayers do not understand the changes to the tax structure their natural response would be one of skepticism – and ultimately opposition.
Business, especially small business will have to understand how the system works and how it affects them. As Commissioner George Halvorson argued to his colleagues, small business owners “can’t spend much time doing bookkeeping,” which may be required under the newly created tax proposal.
Sure, there will be hearings before legislative committees and the public will be allowed to testify along with policy wonks from across the political spectrum. However, a complex change to the law that was kicked around in San Francisco yesterday will require a major sales job to the public. And that will take time.
Once the plan comes forward there should be a publicity campaign usually reserved for a Hollywood blockbuster – the governor will get this concept — to make people aware of the plan; to understand the complications, and give the people an opportunity to express themselves. Discussions should be held around the state. These efforts should run a course of several months building up to the hearings and vote in the legislature.
If the voters are going to buy into major changes to the tax system they are going to have to be comfortable with the changes, so don’t rush it.