What Citizen Taxpayers Should Know about the Single Sales Factor Dispute
Last week, Governor Brown made a big splash pushing a business tax reform proposal. This issue involves how national and international corporations are taxed under California law. As the result of the budget deal crafted two years ago (a deal that hit citizen taxpayers hard) corporations were given a choice over how they were taxed. The details aren’t that important for normal people and the issue is a bit complicated. (There was a humorous moment when Darrell Steinberg said “this is simple” and, moments later, Jerry Brown said this is a “complicated issue” and he wasn’t even sure he understood it.)
Whether corporations should be given the opportunity to elect how they are taxed might very well be a legitimate discussion to have. (But Joel Fox makes the valid point that the absence of predictability due to these radical changes in tax policy every few months is a contributing factor to the perception that California is anti-business, if not outright weird).
What is clear is that the elimination of the right to elect would be a tax increase. Pure and simple. Moreover, any such proposal requires a two-thirds vote of each house. The good news is that compliance with Prop 13’s requirement on this issue appears to be a given – even among the Democrats.
Taxation Principles Sacrificed for Mandatory Single Sales Factor
This piece was co-authored by Teresa Casazza, President of the California Taxpayers Association
The effort to raise more than a billion dollars in new taxes
by forcing some corporations to use the single sales factor apportionment formula –
even though the formula may not accurately determine how much income is taxable
in California – violates a number of
taxation principles, and only serves to enhance California’s reputation as a
bad place to do business.
State legislators and the governor are trying to create a
billion-dollar tax increase on some corporations by passing SB 116, which will
end corporations’ ability to choose between paying their state taxes through a
single sales factor or through a formula that includes property, payroll, and
sales factors.
Just two years ago, the Legislature agreed to change to the
optional tax plan to encourage business growth in the state. When an effort to
repeal the new law was placed on the ballot by initiative last year, the people
rejected the repeal effort, agreeing with taxpayer groups that said the
initiative would reduce job opportunities for Californians.
Saving State Parks and Creating a New Way for Government
Seventy
state parks are scheduled for closure because of budget cuts, which has
promoted a couple of bills now before the governor to find alternative ways to
keep the parks open. In a larger sense, this move to save the parks might be a
roadmap on delivering government services and saving taxpayer money.
AB 42
by Assembly member Jared Huffman would allow non-profit organizations to take
over the operation of parks that are threatened to close. Currently, the
Department of Parks and Recreation are in charge of the parks. AB 42 would
allow the Department to enter into an operating agreement for an entire unit in
the state park system or a portion of the park, with the non-profit having the
ability to develop, maintain and improve the park.
SB
386 by Senator Tom Harman goes a step further. The measure allows for an
individual or other party to enter into negotiations with the Department to
operate and maintain a park that is scheduled to close.
Both
bills open the door for increased use of public-private partnerships to run
functions of the state that previously were the purview of state authorities
and state workers. In fact, the latter issue is one of concern for public
unions who have raised opposition to the bills.
Tax or Fee? Voter-Approved Tax Test Provides the Answer
Stop hidden taxes! That was the clear and compelling message
that California voters sent to lawmakers with passage of Proposition 26 in
November. This measure was designed to halt the practice of governments imposing
new taxes without the constitutionally required vote, by falsely labeling them
as "fees," "surcharges," and with other deceptive names.
Under Proposition 26, all proposed new charges by state and
local governments must undergo a tax test to determine if they are legitimate fees
that require only a majority vote of the Legislature or approval of a local
government body for implementation, or are actually taxes that require a
two-thirds vote of the Legislature or a vote of the people at the local level.
Proposition 26 establishes five criteria for this tax test.
For example, if a charge benefits those who don’t pay for it, it is a tax.
Legislature should heed President’s example on overregulation
President Obama deserves credit for shutting down an ill-advised regulatory effort by
his Environmental Protection Agency, one that would have ratcheted down the
national ozone standard for new emissions. The EPA had estimated the tighter standard would
save 12,000 lives each year but could cost the economy as much as $90 billion
annually.
The President cited the
struggling national economy to justify withdrawing the proposed rule, and faced
withering criticism from environmental advocates. His action is a belated but
welcome recognition that government overregulation threatens economic recovery
and damages our national competitiveness.
A Lesson for CA? Economist Mag Calls for British Govt. to Cancel High Speed Rail
Cross-posted at NewGeography.
The Economist magazine has called on the British government to cancel plans for the HS-2 high-speed rail line that would run from London to Birmingham and Manchester. The Economist said:
…these days politicians across the developed world hope new rapid trains, which barrel along at over 250mph (400kph), can do the same. But high-speed rail rarely delivers the widespread economic benefits its boosters predict. The British government—the latest to be beguiled by this vision of modernity—should think again
The government claims the line will cost £32 billion line, however the international experiences suggests a figure more on the order of £32 and the experience in this corridor itself suggests costs could rise even more (see The High Speed Rail Battle of Britain).