Report Says Balanced Budget May Require Overhaul Of California Tax System
SACRAMENTO (KCBS) - Immunizing the California budget against revenue fluctuations means moving away from the state's heavy reliance on income taxes, according to a prominent UC Berkeley economist.
A recent report by Alan Auerbach, director of UC Berkeley's Burch Center for Tax Policy and Public Finance, focuses on finding other more stable sources of revenue.
KCBS' Anna Duckworth Reports:
"There are really a couple of problems with California's current tax structure," Auerbach said.
The plan he presented Thursday during a series of meetings with private sector and government employees hinges on widening the breadth of what gets taxed rather than raising the sales tax rate.
That would mean taxing services as well as goods purchased since consumption tends to remain steady even in a slow economy.
"Our sales taxes were designed before World War 2 in a period when consumption of services were very minor, and they're not minor now. They're a huge part of household budgets," Auerbach said.
The dire state of the economy does mean the state cannot afford to change its income tax structure just yet, Auerbach said.
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