An evergreen rule for California politics is… tax increases are always in play.
During hard economic times taxes were increased twice—and debated almost constantly. Now, even as an economic recovery has taken hold, talk of more and higher taxes has only accelerated:
- Government employee unions and some Democrats propose to extend permanently the top income tax rates enacted by Proposition 30, originally set to expire at the end of 2018.
- Unions and local activists are laying the groundwork for a voter initiative to create a split roll property tax.
- Health care advocates and doctors are proposing a $2 increase in the tobacco tax.
- Climate activists continue to press for a new excise tax on oil and gas produced only in California.
- The Legislature will debate a proposal (implicitly backstopped by a citizens’ organization for a ballot initiative effort) to restructure the California tax system and impose a sales tax on services.
Monitor legislation and regulatory activity to ensure that California tax laws are fair and can be administered easily.
Review state spending plans to make certain that economy and efficiency are the primary goals of government.
Preventing Tax Increases in 2015:
- Giving local governments new authority to enact special taxes, including parcel taxes, by lowering from
two-thirds to 55% the vote required for approving new taxes (ACA 4).
- Targeted tax on certain beverages (AB 1357).
- Increased tax rate for certain companies (SB 684).
- Split roll property tax (SCA 5).
Stopping Hidden Taxes. Sponsored the 2010 winning campaign for Proposition 26, clearly defining fees and taxes at the state and local levels so that governments can’t pass real taxes with a simple majority vote.
Stopping Multiple Tax Proposals
- Stopped economic development barriers in 2014, such as a split roll parcel tax for school districts (SB 1021); increasing corporate tax rate by up to 15%, with another 50% increase thereafter (SB 1372);
- Lower vote requirement for tax increases stopped: Seven constitutional amendments in 2014 proposed giving local governments new authority to enact special taxes, including parcel taxes, by lowering from two-thirds to 55% the vote required for approving new taxes (SCA 4, SCA 7, SCA 8, SCA 9, SCA 11, ACA 3, ACA 8).
- Stopped a plan in 2014 to levy an oil severance tax (SB 1017) and to place a carbon tax on gasoline at the pump (SB 1156).
- Blocked barriers to economic recovery in 2013, such as a split roll parcel tax that would have permitted school districts to assess commercial property at a higher rate than residential property (AB 59); and a split roll change of ownership bill that would have led to more frequent reassessment of commercial property (AB 188); and in 2012, a proposal creating inappropriate wage liens (AB 2517), and a plan to repeal the net operating loss (NOL) carry back deduction (AB 2408).
- Blocking new barriers to economic development in 2011, such as a proposal requiring tax credits to sunset (SB 508); a “split roll” property tax (AB 448); and a multitude of hidden and specific tax hike proposals (AB 832, AB 1130, AB 1239, SB 237, SB 535, SB 653, SBX1 23); and 2010 proposals such as tax hikes on companies that invest in property and jobs (AB 1935, SBX6 18), targeted tax increases (AB 2100, SB 1210, ACA 22), and proposals creating uncertainty about the future availability of investment-encouraging tax credits (AB 2171, AB 2641, ACA 6, SB 1272, SB 1391, SBX6 20).
- Aggressive campaigning and advocacy by CalChamber-led coalitions in 2009 dampened enthusiasm for tax increases and new taxes, including targeted tax increases that would have exacerbated state budget problems and hurt the targeted industries; a “split roll” proposal to tax business properties at a higher rate; an energy tax that raises the price of gasoline and California-produced crude oil; and an onerous new requirement for business and government to withhold taxes on payments to independent contractors.
- Block legislation levying a climate change tax increase in 2009 (AB 231, AB 1405, SB 31)
Improving Tax Process
- Won approval of five job creator proposals in 2014 that help keep California in the competition for high-value jobs
in aerospace manufacturing (AB 2389, SB 718); film and television productions (AB 1839); spaceflight transportation (AB 777); and employer
investment in general—restoring full funding to the California Competes Tax Credit Program (AB 1560).
- Supported voter-approved Proposition 2 in 2014,
forcing the state to put money in a constitutionally protected reserve fund that can be used to pay down debt and protect schools, public
safety and other vital services from severe cutbacks during economic downturns.
- Won approval in 2013 of two job creator bills that help resolve critical problems for small business and small business investors: protecting small businesses from drive-by Proposition 65 lawsuits by providing a 14-day right to cure for allegations of failure to post required warnings (AB 227); and created a dependable tax environment by repealing the Franchise Tax Board decision to retroactively tax small business investors who relied in good faith on the law when investing in California and using a tax incentive that subsequently was found unconstitutional (AB 1412).
- Supported proposal in 2010, reducing complexity and waste in tax reporting and administration by conforming many California tax provisions to recent changes in federal tax law, including a conformity provision giving financial relief to troubled borrowers by excluding debt forgiven by a lender from a borrower’s taxable income (SB 401).
- Backed urgency legislation in 2009 improving taxpayer confidentiality (AB 192), reducing administrative delays in the reassessment process (SB 816) and simplifying sales tax compliance for non-profits (AB 1486).
- Stalled proposals in 2009 harming California online marketplaces, Web-service providers, and websites of small businesses and nonprofits by changing California’s sales tax law in a way that will encourage out-of-state retailers to instead do business with out-of-state counterparts (AB 178, ABX3 27).
Targeting one taxpayer with higher tax rates in order to generate state revenue is simply unfair. Split roll is just another targeted, discriminatory tax against commercial property owners that will drive up their cost of doing business. Those higher costs ultimately will be passed on to consumers through higher rent, higher prices for goods, and higher unemployment.
Proposition 13 Protections Under Attack
Position: Targeting one taxpayer with higher tax rates in order to generate state revenue is simply unfair. Split roll is just another form of a targeted, discriminatory tax against commercial property owners that will drive up their cost of doing business. Ultimately, those higher costs will be passed on to consumers through higher rent, higher prices for goods, and higher unemployment.
California’s predictable property tax rates due to the protections put into place by Proposition 13 are one competitive tool that California still has to keep businesses as well as the jobs they create in this state. To protect the interests of all Californians, all legislators should defend against attacks to weaken Proposition 13.
Expansion of Sales Tax Base to Services
Position: According to the Legislative Analyst’s Office, California’s 2016–2017 proposed budget provides budget reserves of approximately $8 billion. The need for any additional tax increase at this time is questionable. Additionally, tax proposals that address only one portion of the tax system or target certain industries increase the risk of unintended consequences that will harm the state’s economy and create more financial problems than those that already exist.
The California Chamber of Commerce is willing to engage in tax reform discussions, but will continue to oppose any taxes that are discriminatory, unfair or punitive.
Labor and Employment, Legal, Taxation
Workers’ Compensation, Taxation, Privacy, Transportation and Infrastructure