Policy Pick: Commission Releases Recommendations on California's Tax Code

The commission was asked to achieve goals that would:

• Establish 21st century tax structure that fits with the state's 21st century economy.

• Stabilize state revenues and reduce volatility.
• Promote the long-term economic prosperity of the state and its citizens.
• Improve California's ability to successfully compete with other states and nations for jobs and investments.
• Reflect principles of sound tax policy including simplicity, competitiveness, efficiency, predictability, stability, and ease of compliance and administration.
• Ensure that tax structure is fair and equitable.

Released on Sept. 29, the commission's recommendations seek ways to prevent the boom and bust revenue cycles California has struggled with when balancing the state budget. Click here to link to the report. These recommendations include lessening the state's reliance on personal income tax and create a business net receipts tax on the service industry. Schwarzenegger has embraced the commission recommendations despite opposition from advocates for low-income Californians as well as business and labor groups.

The commission recommendations, if implemented, would have significant fiscal impacts upon young children and families. These impacts include:

• Eliminating tax deductions for child care.

• Imposing a new tax on goods and services such as food, prescription drugs, dry cleaning, child care and haircuts.
• Shifting the tax burden from the most wealthy in California, onto low- and middle-income residents.

The Assembly Tax and Revenue committee met earlier this month to review the recommendations of the commission. In addition, Schwarzenegger has issued a proclamation ordering a special session of the legislature to review the commission's recommendations as well. 

Please contact Howard Jacobs at hjacobs@first5la.org for more information on the recommendations made by the Commission on the 21st Century Economy.

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