Hertzberg commented on the study results, “California’s economy has changed from one that had been dominated by making goods to today where 80 percent is producing services.”

Hertzberg’s plan, Senate Bill 8, would tax services as part of a restructuring plan and raise an additional $10 billion in tax revenue.

In response to the study, Board of Equalization Vice-Chair George Runner said,  “I’d consider a broader sales tax only if it’s part of revenue neutral tax reform, such as abolishing California’s income tax and the Franchise Tax Board, along with other taxes that destroy jobs. … The last thing overtaxed Californians need is another tax.”

Runner opposes Hertzberg’s proposal.

There will be plenty of time to get into the debate over service taxes. However, it should be noted that the $122.6 billion the service tax could supposedly raise is not only larger than the current General Fund budget of $113 billion, but almost $10 billion larger. In other words, a tax on services as outlined in the study could replace the General Fund revenues and get the additional $10 billion that Hertzberg is looking for while eliminating the income tax, state sales tax and corporate tax.

Hertzberg’s proposal would not attach a service tax to all the items delineated in the BOE study, pointing out education and health care as tax-free services.

If not all services are taxed the door would be open for other services and industries to seek exemptions from the tax — a potential field day for the state’s lobbyists.

Adding to the complications, Gov. Jerry Brown’s 2014-15 budget would pay for a five-year study on the building, rather than remodel the known problems, or move the BOE out. Some say the governor doesn’t want to incur any new debt, which is understandable. But this problem is not getting any better by sitting… and molding.

In October, the DGS sent out a “request for information” for a study on where BOE employees could move. The BOE said it needs between and 750,000 and 800,000 square feet of office space to house all of its employees. BOE employees are currently in five different locations.

There is no telling when this will be resolved. It’s a mess, and a perfect example of an unnecessarily complicated government bureaucracy, which cannot even figure out how to fix the existing BOE building, or move employees elsewhere. Dickinson’s office said he will keep on trying.

Katy Grimes: Californians already know that the thousands of laws and regulations passed every year by the Legislature rarely apply to government.

Now we have more evidence of this.

The Board of Equalization, the huge state agency charged with tax collection and administration, wants full reimbursement for the cost of implementing the new Lumber Tax, which goes into effect Jan. 1, 2013. But California’s retailers and businesses will only get a flat $250 from the state for their setup costs to add the new tax to retail computer systems.

Many retailers estimate thousands of dollars in extra costs for the initial setup.

Yet according to bill analysis, the new law said that retailers were entitled to reimbursement for the cost to update computer systems adding in the new tax. At a recent BOE board meeting, the agency decided against total reimbursement for retailers, but voted instead to give itself full reimbursement.

The BOE will probably hire new employees to write and implement the tax changes into their computer system, but retailers will have to make due with existing employees and budgets, or contract out for this, at their own expense.

Here’s what BOE board member George Runner had to say about the agency making sure that they received state reimbursement of all of their setup expenses, while showing little or no concern to businesses:

Lumber Tax

The legislation, which created the lumber tax on consumers, mandates a new state tax of 1 percent on all lumber sales in California, ostensibly to pay for “oversight of the timber industry.”

Agriculture and the construction industry will be especially hard hit by the tax, as will consumers looking to remodel, make repairs or home improvements.

But Gov. Jerry Brown, who pushed the Legislature to pass AB 1492, insisted that the new tax “evens the playing field to protect California’s timber industry jobs.”

By Katy Grimes

While nearly every politician in America publicly decries the high cost of gasoline and fuel costs, most are also strangely silent about the soaring gas tax revenues that states are currently enjoying.

Californians always seem to pay the highest gas prices in the country. On top of record fuel prices, the state should be reporting how enriched it is by record gas tax collections.

Yet even with this record gas tax collection, Gov. Jerry Brown and state Democrats continue to claim that the state doesn’t have enough money and needs even more tax increases.

Having and eating your cake

Californians paid $8.3 billion to the state government in gas taxes last year. That’s the bad news.

The worse news is that the Tax Foundation just came out with a new report finding that Californians are not only overtaxed, we shoulder one of the highest tax burdens in the country. Should Brown’s Proposition 30 pass, increasing sales and income taxes, we easily slide into the number one spot for the highest taxed state in the nation.

“At a time when Californians could least afford it, our state and local tax burden was among the highest in the nation,” said former state Sen. George Runner, now an elected member of the state Board of Equalization. “This new report provides further proof that by every measure Californians are overtaxed.”

The Board of Equalization administers the motor vehicle fuel tax, diesel tax and 32 other tax and fee programs.

Adding to Californians’ overall tax burden, “Our latest numbers show that high gas prices resulted in a record windfall for government at the expense of California consumers,” Runner said. “It’s bad enough that California’s gas tax is among the highest in the nation. It’s even worse that gas taxes goes up whenever gas prices rise.”

California’s high taxes

California’s 2009 state and local tax burden of 11.8 percent of income is well above the national average of 9.8 percent. California’s top individual income tax rate is 10.3 percent. The corporate tax rate is an 8.84 percent flat rate. The state sales tax is 7.25 percent, with many counties adding onto that rate. And California collected $1,465 per capita in state and local property taxes in fiscal year 2009, according to the Tax Foundation.

The once-Golden State of opportunity and innovation now ranks 48th in the Tax Foundation’s State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property.

Gas tax for gasbags

From July 1, 2011 through June 30, 2012, the Board of Equalization reported that it collected $6.9 billion in motor vehicle fuel taxes, up from $6.7 billion the prior year. Excise tax revenues accounted for $5.2 billion, while sales tax revenues accounted for $1.7 billion, Runner explained.

Over the same time period, the state collected $1.4 billion in diesel fuel taxes, up from $1.2 billion the prior year. Excise tax revenues accounted for $343 million, while sales tax revenues accounted for $1.1 billion.

California’s gasoline tax is 68.8 cents on every gallon of gasoline, and 77.1 cents on every gallon of diesel fuel, according to the American Petroleum Institute.

“What’s particularly concerning about these numbers is that they would have been even higher had the governor been successful in extending the higher sales tax,” said Runner.

Runner said that had Gov. Arnold Schwarzenegger’s 1 percent temporary sales tax increase from 2009 not expired on July 1, 2011, Californians would have paid an additional $96 million in diesel taxes last fiscal year.

Runner also explained that California’s 2010 fuel tax swap law would have required a larger motor vehicle fuel excise tax rate increase, costing Californians more than half a billion dollars extra in the 2012-13 fiscal year.

According to the BOE, these taxes and fees include:

* A federal excise tax of 18.4 cents per gallon;

* A state excise tax of 36.0 cents per gallon, up from 35.7 cents effective July 1;

* A sales tax averaging 3.12 percent when local taxes are included.

Runner said that it is important to note that the sales tax is calculated on the total price of the fuel sale including excise taxes, resulting in double taxation.

The breakdown for diesel is similar:

* The federal excise tax is 24.4 cents per gallon;

* The state excise tax is 10 cents per gallon, down from 13 cents effective July 1;

* The sales tax is 9.42 percent, up from 9.12 percent, plus applicable local taxes.

Race to the top tax bracket

“This is a race to the top, not in education, but in taxing. It shouldn’t take a genius to see how other states are doing it,” Runner said. “California’s economy is now full of man-made obstacles; that’s what caused the absolute devastation of this economic machine.”

The controversial internet tax, the recent law passed which imposes “use” taxes on out-of-state retailers and small affiliate businesses, already has a referendum for repeal in the works, authored by internet retailer, Amazon.com.

Debate over the 90-day interim period during which Amazon gathers signatures for the voter referendum to repeal the law was a hot issue today between board members. Because the office of legislative counsel issued a recent opinion which said the law would be suspended the minute Amazon qualifies the issue for the ballot, Republican board members George Runner and Michelle Steele 
said the BOE should not implement the tax yet.

At issue was whether the new law would or should even take effect.

However, board members Betty Yee and Jerome Horton, Democrats, insisted that because ABx1 28 was already signed into law, it needs to be upheld by the board unless and until it is repealed either by the voters, or in a court of law.

But Runner disagreed. “Do we have a history of doing rule-making before a bill is law?” Runner asked.

Yee said she wanted to abandon discussion of the interim period, and instead pushed ahead for implementation of the tax, beginning with an “interested parties” process discussing the need for rule making to implement and clarify the provisions of the bill.

“Is there any appropriation to begin the implementation?” Runner asked. tThe audience laughed when a staff member said there was $1,000. “And how far will that go?” Runner asked.  “We will have to reach into other parts of the budget.”

“The bill has been signed Mr. Runner,” Yee said.

The Board voted 3-2, siding with Yee and Horton to have obtain an opinion from the Attorney General explaining how the referendum process will affect the tax, and to begin the meetings to discuss implementation. But I suspect that this is just the beginning of the discussion.

One of Runner’s biggest concerns with the Qualified Purchaser Program has been the requirement that companies with at least $100,000 in gross receipts, must file use tax returns. “I am still concerned by the income threshold of $100,000. It’s not a lot of revenue for some of those business people, Runner said.

JULY 26, 2011