CA: Governor's review panel mostly ignores messy tax system

Sac Bee ^ | 8/18/04 | Dan Walters

[NormsRevenge]

If someone was performing a top-to-bottom "performance review" of state government with the declared goal of making it more efficient, effective and accountable, a critical examination of its system of levying and collecting taxes would be, one would think, a cornerstone task.

What is, after all, more fundamental to the relationship of government to the governed than taxation? And California's system of state and local taxation, which collects roughly $100 billion a year, is particularly worrisome. It has evolved over decades and has become a monument to arbitrary, often nonsensical, policy-making - the disparate sales-tax treatment of hot and cold food being just one of countless examples - and the law of unintended consequences.

Gov. Arnold Schwarzenegger's California Performance Review, however, pays scant attention to taxation and, to the extent that it does touch the issue, offers very little rational reform.

It ignores local governments' overreliance on sales taxes, for instance, and the state's dangerous dependence on volatile personal income taxes. It makes no mention of the long-term erosion of sales taxes as aging Californians shift their financial priorities from buying taxable goods to buying services and making investments. Tens of billions of dollars in tax loopholes - whose closure might produce more revenue without tax rate increases - receive no attention whatsoever.