Posted on 05/07/2008 5:52:40 PM PDT by NormsRevenge
From a new iTax to higher income taxes, state lawmakers have introduced a slew of new taxes to solve California’s $20 billion budget deficit. Thanks to legislative Republicans (and even a few moderate Democrats), most of these bad ideas have been defeated. While taxpayers can celebrate these victories, the worst tax increase of all still lives: a $45 billion sales tax on services.
Late last month, the Board of Equalization Chair reported to legislative leaders that a new sales tax on services could single-handedly eliminate California’s budget deficit. “At the state General Fund rate of 5 percent, a tax levy on a broad base of services in California could generate in the neighborhood of $45 billion annually,” the state’s top sales tax official wrote. That’s no misprint; $45 billion in new taxes!
Modeled after New York, New Jersey and Connecticut (the only states with a tax burden worse than California’s), this sales tax on services would make it more expensive to wash your car, go to a ballgame, see a movie, balance your company books, and even call your attorney when you get into tax trouble. Its size, abstract form and the Democrats’ ability to spin the issue make the sales tax expansion this year’s biggest threat to taxpayers.
1. Democrats will use the size of this tax increase to appear “moderate” and “compromising”
By starting with such a big number, Democrats have ample room to work both politically and rhetorically. Politically, Democrats can whittle the plan down during the legislative process as organized opposition arises. If the legal lobby cries foul, legislators can exempt attorneys and still have plenty of revenue to close the budget gap.
Rhetorically, the plan’s size gives Democrats just one tax increase to sell to the public. Instead of defending a dozen small tax increases on income and car registrations, legislators can start spinning one idea to the press and public. Moreover, starting big allows Democrats to appear “moderate” and “compromising” as they whittle the plan down.
2. Democrats will wait until the last minute to introduce a specific plan
Secondly, Republicans must start fighting this plan because no specific legislative proposal has been introduced. How could something be a threat when no legislator has introduced the plan? Although counter-intuitive, a specific proposal would allow opponents to mobilize opposition. Every accounting, legal and advertising business would be calling their legislators in opposition to a specific bill. Even your babysitter would be protesting the bill. Without a bill, opponents are unable to marshal meaningful opposition to a new service sales tax.
Just look back to 2005 when Assemblyman Joe Coto (D- San Jose) introduced AB 9, which would have expanded the sales tax to service-based businesses. Groups like Cal-Tax and the California Chamber of Commerce successfully sounded the alarm and prevented the bill from even getting to the Assembly floor for a vote.
Don’t expect the Democrats to make the same mistake twice. They have learned their lesson and will wait until last-minute budget sessions to introduce, debate, and approve this billion dollar tax increase in one fell swoop.
3. Democrats will sell this plan as tax fairness, not a tax increase
Finally, Republicans must start fighting this sales tax on services because Democrats are already framing the issue as tax fairness and the modernization of the tax code. Proponents ask, “Shouldn’t we tax health clubs in the same way that we tax a home exercise bike?”
We shouldn’t because it means a double tax for the health club. Current tax law delineates between products and services in order to prevent the double taxation of services. Sales taxes apply to products; income taxes apply to services. Taxpayers shouldn’t pay both on the same transaction.
Legislative Republicans and the Governor may publicly oppose this sales tax on services, but tacit opposition isn’t enough. Budgets are not static events, a fact Democrats understand. That’s why Democrats are always on point, on message, and on top of the budget story. Democrats will use the playbook presented above to win the budget debate. If we have any chance of defeating this tax increase, Republicans must start treating this threat with the seriousness it deserves.
Modeled after New York, New Jersey and Connecticut (the only states with a tax burden worse than California’s), this sales tax on services would make it more expensive to wash your car, go to a ballgame, see a movie, balance your company books, and even call your attorney when you get into tax trouble. Its size, abstract form and the Democrats’ ability to spin the issue make the sales tax expansion this year’s biggest threat to taxpayers.
I wonder how many attorneys this will force out of California?
Reason number 463 why I fled the land of fruits and nuts 15 yeas ago.
the golden get goosed
The services tax must be stopped in the Assembly. Don't trust our Republican governor or senators. The Austrian will sign any budget passed by the legislature.
I still say their best bet is to increase the existing sales tax by a quarter percent.
In an era of ricing prices most people won’t even notice it.
How about cutting back on their bloated spending instead ... does that work for you?
Mexicans hire me and almost always pay in cash. Up until now, I have always claimed my income and paid taxes. This just might be where I join the Mexicans and just not claim any income.
For those living in countries or areas where we already have extra added sales tax of a quarter to half per cent, not so ... but rather than nickle and diming everyone to death on anything and everything, who knows, it may end up being more palateable in the end, even tho it is detestable.
It’s gonna be a helluve squabble, and I agree, the Senate is more likely to give up a vote or two than the
Assembly. We already know what the Gub will do.
I live in L.A. and the Invaders cost us over $1 billion a year. I’m tired of paying for someone I don’t even want here.
As we converse Nunez is less prominent in this tango since he returned home this week to recruit relatives to come north and enjoy the benefits of the new tax base. While Nunez is in Mexico securing a better future for his aunts and uncles, Perata is playing hardball. In this case, backing off Denham to round up the final two Republican votes from the Senate.
The only thing that stands between Perata/Nunez/Schwarzenegger and a signed budget w/ a tax hike is a handful of Republican Assemblyman.
Same for Mrs. Dearolddad and I. We left when we could no longer speak the language.
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