California commission lists tax policy options
Conklin, Fred
The California Commission on Tax Policy in the New Economy has released an interim report listing tax policy options that will be discussed and analyzed in public hearings prior to the Commission’s final report, due in December 2003. The Commission is charged by S.B. 1933, Laws 2000, to study and make recommendations regarding specific elements of California’s state and local tax system, including, but not limited to, sales and use taxes, telecommunications taxes, income taxes, and property taxes. A summary of the Commission’s stated options for each tax follows.
Sales Tax
* Encourage legislation making California a voting member of the Streamlined Sales Tax Implementing States.
* Improve collection of the use tax on remote sales.
* Broaden the sales tax base to include selected services and reduce the sales tax rate to maintain revenue neutrality.
* Eliminate selected sales tax exemptions or exclusions. Possibilities include residential energy, food products, agricultural feed and seed, drugs and medicines, custom computer programs, aircraft parts, shipping containers, periodicals, and new mobile homes.
Telecommunications Taxes
* Combine all state and local taxes and fees on telephone companies, cellular companies, cable television providers, and satellite systems into a single, statewide communications simplification tax that would appear on customers’ bills.
* Adopt a direct broadcast satellite tax at an 8% rate.
Property Tax
* Reduce the amount of sales tax revenue retained by local government by 1/2%, and simultaneously increase the amount of property tax revenues such governments may retain for local uses.
* Conduct periodic reassessments of nonresidential property to market value. Alternatives include splitting the property tax rolls between residential and nonresidential property, revising “change of ownership” rules to eliminate “loopholes,” and reassessing nonresidential property on a regular cycle rather than on change of ownership.
Local Taxes
* Provide local governments with a constitutionally guaranteed minimum of property tax revenues.
* Reduce the vote threshold for local tax measures from 2/3 to 55%.
Other Tax Options
* Establish a single tax court to resolve all tax disputes.
* Eliminate all state taxes except those on cigarettes and alcohol, and replace them with a 6% personal income tax and a 6% value added tax (VAT) on business.
Framework for Analysis of Options
The Commission will analyze the options using principles taken from a tax policy statement of the American Institute of Certified Public Accountants, and grouped by the Commission as follows.
* Fairness: (a) Equity: similarly situated taxpayers should be treated similarly; (b) transparency and visibility: taxpayers should know that a tax exists and how and when it is imposed upon them and others; (c) minimum tax gap: a tax should be structured to minimize noncompliance; and (d) neutrality: the effect of the tax law on a taxpayer’s decisionmaking should be minimal.
* Simplicity: (a) Certainty: tax rules should be specific about time, method, and amount of payment; (b) convenience: a tax should be due at a time or in a manner that is convenient to the taxpayer; (c) economy in collection: costs of collection should be kept to a minimum; and (d) simplicity: tax law should be simple so taxpayers can understand and comply, correctly and cost-efficiently.
* Efficiency: (a) Government revenues: the tax system should enable the government to determine the timing and amount of tax revenue collections, and (b) economic growth: the tax system should not impede or reduce the productive capacity of the economy.
Additional Information
Details of the various tax policy options and the framework for analysis may be found on the Commission’s website at www.caneweconomy.ca.gov, along with information on the dates and subjects for discussion at upcoming public hearings. (Options for Revising the California Tax System, California Commission on Tax Policy in the New Economy, released July 1, 2003.)
Copyright CCH Incorporated: Federal and State Tax Jul 15, 2003
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