The Commission on the 21st Century Economy debates and perhaps votes on the new tax plan it has shaped over the past nine months at a Los Angeles meeting today. I say “perhaps” because I suspect the final product won’t be agreed upon so quickly. There’s a lot to discuss in the proposal. Since a back-up meeting is set up for Monday just in case, the betting here is the Monday meeting will be called.
The plan’s ingredients have been bantered about for some time: A new Business Net Receipts Tax (BNRT), a form of a value added tax; elimination of the state corporation and franchise tax; elimination of the state sales tax; and reducing the number of personal income tax brackets to two at 6.5% and 2.75%.
You can read the outline of the plan here.
Many hurdles exist for the plan to become a reality, not the least of which is the reaction of taxpayers. Business taxpayers are not certain what the effects of the new business net receipts tax will be. One thing they do know, the BNRT started out with a tax rate of 2.77% when it was first drawn up, increased in later discussions to over 3%, and is presented in the committee documents at 4.2%.
You can’t blame business people if they think the tax rate will climb even higher.
And, if the BNRT doesn’t bring in anticipated revenue – and who can know for sure what this new tax will produce if adopted — then the sales tax cut promised in the plan will not cut as deep to make up for lost revenue. More uncertainty.
Even before the final plan is put forward and the final vote of the commission taken, I can already hear the drumbeat of opposition from across the political spectrum. We’ll see what commissioners say to try and mute those drums.