On Apr 27, 7:05=A0pm, Ablang <ron...@[EMAIL PROTECTED]
> wrote:
> Wider, not higher, sales tax seen as budget fix
> By Judy Lin - jlin at sacbee.com
>
> Published 12:00 am PDT Sunday, April 27, 2008
> Story appeared in MAIN NEWS section, Page A1
>
> http://www.sacbee.com/capolitics/story/892911.html
>
> Californians are used to paying as much as 8.75 percent sales tax on
> automobiles, athletic shoes and widescreen televisions.
>
> But what about applying the same rate to carwashes, pedicures and
> movie tickets?
>
> As the state budget gap widens, talk again has turned to the sales tax
> =96 not raising the rate, but the possibility of applying it to a range
> of services that other states tax routinely.
>
> Last week, the Democratic chair of the Board of Equalization, Judy
> Chu, sent a letter to legislative leaders suggesting that broadening
> the sales tax to some services often taxed outside California could
> net $2.7 billion for the ailing state budget.
>
> California could practically wipe out next year's projected deficit of
> $10 billion if it adopted policies similar to those in New York, Texas
> and Florida, Chu wrote.
>
> "I think everything has to be on the table," said Assemblyman John
> Laird, D-Santa Cruz, chair of the Assembly Budget Committee. "And we
> hope everybody looks at every conceivable option."
>
> Senate President Pro Tem Don Perata has suggested imposing the sales
> tax on services for things such as consultants, dry cleaners, lawyers
> and technology sup****t.
>
> But while Perata and Assembly Speaker Fabian N=FA=F1ez push for new
> revenues, they continue to face resistance from Republican lawmakers
> and taxpayer advocates.
>
> "We're opposing all tax increases as unnecessary," said Jon Coupal,
> president of the Howard Jarvis Taxpayers Association. "Businesses and
> families live within their means. It's time to have the state do the
> same."
>
> Some Republicans, including Gov. Arnold Schwarzenegger, are open to
> the idea, but as a way to make the tax system more fair, not
> necessarily to raise more money.
>
> Harley Duncan, executive director of the Federation of Tax
> Administrators, said over time, many states have expanded their sales
> tax to include admissions for concerts, s****ting events and movies.
> Others have turned to taxing services on tangible goods, such as auto
> repair, plumbing, and painting.
>
> New York taxes baseball tickets to Yankees games, Pennsylvania taxes
> car repair services, and Texas taxes member****p fees at health clubs.
>
> According to Duncan's group, 37 states tax professional s****ting
> events, 22 states tax repair services on motor vehicles, and 21 states
> tax health club dues.
>
> Other popular services taxed by other states include landscaping,
> diaper services and taxidermy.
>
> In fact, three states =96 South Dakota, Hawaii and New Mexico =96 have
> moved to a broad system that taxes all goods and services.
>
> California hasn't tinkered with its tax code since the sales and use
> taxes were created in the 1930s to offset declining property tax
> revenues as a result of the Depression. Today, the tax continues to
> focus on the sale of physical goods, such as clothing, furniture and
> automobiles.
>
> Chu said broadening the sales tax makes the most sense because it's a
> more stable source of revenue than the income tax, which varies widely
> with the stock earnings of the state's high-income earners.
>
> She suggested change would also bring consistency to existing tax
> policies.
>
> "We tax exercise equipment, but we don't tax health club services. We
> tax movie rentals, but we don't tax movie admissions," Chu said.
>
> The idea of a broader sales tax isn't popular just with Democrats. It
> also appeals to some conservative thinkers.
>
> In general, items or services bought by a household should be taxed,
> with some exceptions like doctor's office visits, said Charles McLure,
> an economist who worked in the Treasury Department under the Reagan
> administration and now is a senior fellow at the Hoover Institute at
> Stanford University.
>
> "Obviously as the economy has evolved, the ****tion of what people buy
> and consume has changed. The tax base has shrunk," McLure said. "To
> restore sanity to the tax base, it should be expanded to everything
> the consumer consumes."
>
> Assemblyman Roger Niello, R-Fair Oaks, agreed the state should review
> its tax structure as a way of stabilizing revenues =96 but he said any
> policy change to the sales tax should be accompanied by a lower rate
> to make it revenue-neutral.
>
> "The principle of taxing at the lowest rate to the broadest base
> accomplishes two things: it minimizes volatility and imposes the least
> burden," Niello said.
>
> Schwarzenegger, too, has called for overhauling the state's tax system
> in an effort to reflect the 21st-century economy.
>
> That doesn't necessarily mean more revenue for the state,
> Schwarzenegger has said: "Just maybe make it revenue-neutral =85 just a
> better way of taxing."
>
> But while the governor and some lawmakers endorse the concept of a
> broad sales tax, some policy analysts question if it can be
> implemented fairly.
>
> Loren Kaye, president of the California Foundation for Commerce and
> Education, a think tank funded by the California Chamber of Commerce,
> said politically powerful professions such as lawyers would likely
> seek exemptions.
>
> "It gets really dicey when you're looking at specific businesses,"
> Kaye said. "For the amount of trouble you have to go through, you wind
> up with hairdressers and lawn services. It just seems hardly
> worthwhile."
>
> Lawmakers may also face public backlash.
>
> In Michigan, a sales tax on service business was repealed after
> businesses complained. Elected officials replaced the tax with a
> surcharge on a new business tax. Now both the surcharge and business
> tax are coming under fire.
>
> Customers would cry and groan, particularly in a tight economy, said
> Eric Mead, owner of Japanese Im****ts in Sacramento, which has been in
> business for 35 years.
>
> "I would have a hard time handing that to a customer," Mead said. "I
> don't think they'd care for it too much."
>
> J.C. Allen, owner of midtown's Mosaic Salon, said she opposes
> broadening the sales tax to haircuts, spa treatments and waxing
> because business is already down.
>
> "Instead of getting their hair cuts every four to six weeks, they go
> for six to eight weeks," Allen said.
>
> One of Mosaic's clients, Bernadette Barnes, a 35-year-old marketing
> specialist, said she would accept taxes on her $20 brow waxes, but
> she'd want a spending cap so lawmakers don't overspend in the future.
>
> "It would not change my salon habits," she said. "But I'd be very
> frustrated in doing it if the deficit didn't start going down."
It makes sense to me to tax more broadly. The fact that so many
things aren't included makes it unfair. But, first I want an
accounting as to what the state is doing with increased tax on
gasoline. If we charge a percentage of the amount, then both the
state and federal government should be drawing in more money.
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