Sen. Bob Hertzberg, D-Van Nuys, has introduced SB 604 that would collect sales taxes on services in addition to goods. It’s still in the Senate Government and Finance Committee, which requested a report from the State Board of Equalization on how much money it would raise.
The answer: $122.6 billion in new revenue. That would be split about 50/50 between the state and local agencies.
That’s roughly what the state has budgeted to spend in the current fiscal year.
If the expanded sales tax is used to reduce the state’s excessive personal income tax rate so it becomes revenue neutral, then it is worth considering. During Gov. Schwarzenegger’s term, he commissioned a blue-ribbon task force to examine overhauling the state’s taxation system to make it more stable year to year.
It went nowhere. But, the state remains very dependent upon the top 1 percent of wage earners who pay about half of the total income taxes. When there’s hiccup in their income, the state has suffered mightily. That’s one reason the governor has fought so hard to increase the rainy-day fund to an estimated $6.7 billion by June 30. That’s insurance against the inevitable downturn that will come.
Sadly, the chances of the Democrat-dominated Legislature actually crafting and passing a bill that is nearly revenue neutral is nil. The sales tax expansion would be regressive and hit poorer people hard—just as the gas tax increase did. The bill contains a provision to create a fund with some of the revenue to offset impacts on people with fewer resources.
Incidentally, congrats to Sen. Steve Glazer for voting against the transportation tax increase as did Catharine Baker. Democrat Glazer, who already alienated the public employee unions with his stand against BART strikers, probably now will face construction union opposition. Given that he said two-thirds of his district opposed the tax, he’s probably just fine with the voters.
The governor doled out about $1 billion in last minute deal making to convince skeptical Democrats and one Republican in the Senate to back the measure. Otherwise, Glazer’s opposition could have killed the bill that needed two-thirds approval to pass.