Proposed Fixes for California Taxes
Modify Proposition 13 to exclude corporate landowners and high income homeowners from its limits, and also remove the 2/3 voter requirement for special taxes.
California Tax Reform Association
A California Tax Reform Association paper identifies five significant flaws in the California tax structure:
1. The Loophole-Ridden and Irrational Non-Residential Property Tax.
2. The State's Narrow Sales and Use Tax Base.
3. The Tax System's Failure to Capture Pollution and Natural Resource Depletion Costs.
4. Weaknesses in Personal Income Tax Base and Rate Structure
5. Erosion of Corporate Tax Base.
Among the points made are the following:
"Failure to tax land appropriately is a major contributor to speculation and sprawl, just as an under-performing property tax is the major reason local governments over-rely on the sales tax in their land use decisions." (p. 10)
New investment is taxed heavily. "For example, IBM Silicon Valley Laboratory is paying $0.004 per square foot of land in property taxes compared to many other companies in the area which are paying roughly $0.60 a square foot - a disparity of 150 times." (p. 10).
Corporations report high earnings to their shareholders, then report a lower amount (more than 20% lower to the state for tax purposes. They propose using book income reported to shareholders for tax purposes.
They propose limiting excessive use of corporate tax credits, so that they are limited to offsetting 50% of income.
The sales tax base has not kept pace with the changing economy. Many services are not taxed, such as amusement parks, theaters, sporting events, bowling alleys, golf courses, ski resorts, gyms, telecommunications (cable, telephone), etc. They say there is an irrational distinction between in store and online purchases, causing lost sales tax revenues as sales move to the Internet.
They propose reinstating California's top income tax rates of 10 and 11 percent (California had these rates temporarily in the early 1990's).
California Forward suggests a number of solutions:
- creation of a reserve fund to deal with cycles in revenue
- extending the sales tax, which primarily covers retail goods, to more services taxes, and reduce it to 7.25 percent.
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