Coalition Proposes Revamping California Tax System
SACRAMENTO (CBS / AP) -- California would revamp its tax structure to bring in about $10 billion more annually under a bipartisan government reform proposal put forward Monday by some of the state's most prominent political and business leaders and backed by a billionaire investor.
The plan by the bipartisan Think Long Committee for California includes asking Californians to pay sales taxes on all services except medical care and education, in addition to the sales taxes already paid on products. Many personal income tax deductions would also disappear, and the corporate income tax rate would fall.
The group's proposal, which they hope to put before voters in November 2012, comes as the state struggles with persistent multibillion dollar deficits that have sharply cut state services. State revenues have come in about $3.7 billion below estimates in the state budget, making deeper cuts to education and other programs likely this year.
Californians of every income level would pay more taxes under the plan that would simplify personal income taxes.
Households with adjusted gross incomes of less than $20,000 would pay an average of $71 more annually in all state taxes, while those earning more than $1 million would pay an extra $11,478 on average.
Joint filers earning up to $45,000 would pay no income tax. They would pay 2 percent on income under $95,000, and 7.5 percent on income above $95,000.
The sales tax on products would also decrease by a half-percentage point.
Some conservatives immediately panned the proposal.
"It's first and foremost a $10 billion tax increase for a state that already has one of the highest tax burdens in America," said Howard Jarvis Taxpayers Association President Jon Coupal. "So we think right off the bat it's a nonstarter."
The group making the proposal is backed by billionaire investor Nicolas Berggruen, who has promised to use part of his fortune to put the plan before voters.
His Think Long Committee includes Republican former U.S. secretaries of state George Shultz and Condoleezza Rice, former Gov. Gray Davis, a Democrat, and former state Assembly speakers Willie Brown and Robert Hertzberg. Former California Supreme Court Chief Justice Ronald George is also on the committee.
The group spent a year developing its recommendations to "update and modernize the state's broken system of governance," according to an introduction by Berggruen posted online with the 24-page report. The group did not hold a press conference to announce its plan.
Berggruen said as political leaders in Sacramento and Washington, D.C., remain mired in gridlock, the committee proved that bipartisan compromise is possible when people set politics aside in favor of public interest.
Most of the additional revenues would go toward education, from kindergarten through university, and cities and counties would get about $2.5 billion in total to help pay for the additional costs they are incurring from the transfer of lower level criminals out of state prisons.
The state would pay down some of its long-term debt and create a "rainy day fund" for future recessions.
(Copyright 2011 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
