An old adage is that business wants certainty. That reality was certainly on display at the workshop set up by the Commission on the 21st Century yesterday in San Francisco. Witnesses and commissioners tried to determine the effects of the newly hatched Business Nets Receipts Tax (BNRT) cooked up by the commission as a major cog in their plan to re-do California’s tax system.
Fear is not a word promoters of a tax plan want associated with that plan. But, concern of what affect the BNRT would have on small business permeated the testimony. The BNRT is a form of a value-added tax, which is a general tax applied at each point of the exchange of goods and services from the primary production to final consumption.
To be fair, the commission has not set forth its final plan, yet, and that led to the uncertainty that many business people feel. Experts and laymen alike are trying to calculate the impact of the brand new tax program.
Certified Public Accountant Joe Greenstreet argued that he saw an “accountants retirement plan” if the proposal moved forward for all the complexities business would have to deal with. Greenstreet brought along an analysis of a client’s restaurant business. He said in the last taxable year, the business would face $17,000 in new taxes under the BNRT that the business did not have to pay under current tax law.
Greenstreet said his analysis determined that the BNRT would cost the small business community “tons of money” and be a compliance nightmare.
Commissioners were quick to point out that all the rules for the BNRT have not been written and that the overall plan under discussion had other benefits including a lowering of the personal income tax and elimination of the state sales tax, which in the end could benefit California business.
Michael Shaw of the National Federation of Independent Business said that eliminating the corporation tax, part of the plan being considered, would not help small business. Even if the Personal Income Tax is reduced, as the commission is considering, Shaw argued that the tax burden would shift more toward small business because many small business people pay their taxes through the Personal Income Tax and their businesses would still be required to pay the new BNRT.
Shaw was asked if businesses couldn’t pass the BNRT on to customers, which is, of course, the whole point of the BNRT tax. Create a new tax that will capture services as well as retail sales and roll it into the cost for the consumer. Like the sales tax, businesses merely become the tax collector for the state.
Questions were raised about whether the initial lower rates for income tax or sales tax incorporated in the larger tax plan would rise again once the plan was in place. The commissioners had the less than reassuring response that they could not speak for what the legislature might do.
More probing the effects of the BNRT tax will go on at another commission workshop at UCLA tomorrow.