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FlashReport Weblog on California Politics

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BOE Member George Runner

Revenue Report Dangerous in the Wrong Hands

At the request of the Senate Governance and Finance Committee, the Board of Equalization’s Research and Statistics Section today released a report showing the State of California could reap up to $122.6 billion by imposing sales and use tax on services.

The size and scope of California’s service-related industry is mind-blowingly large, and the last thing overtaxed Californians need is another tax. In fact, these numbers are dangerous in the hands of legislators who want to raise taxes.

However, I hope this report stimulates conversation about how taxes can be simpler, and how we can attract more jobs to our state.

Although I strongly oppose Senate Bill 8 (Hertzberg), which would impose a $10 billion tax increase on service industries, I am open to considering a broader sales tax if it’s part of revenue neutral tax reform, such as abolishing the Franchise Tax Board and California’s income tax, along with other taxes that destroy jobs.

I’ve called for dynamic economic modeling that would show the benefits of such a change and look forward to being able to share those results with you… Read More

BOE Member George Runner

Sales Tax Revenue on Track

It’s too early to know for sure, but so far sales tax revenue this year appears to be largely on track to meet the state’s budget needs.

The latest general fund sales and use tax revenue numbers show that from July through September the State Board of Equalization received $4.64 billion in revenue. That’s just two and a half percent shy of the Department of Finance’s budget projection of $4.76 billion.

Of course, I can’t help but think that if more Californians had jobs, these revenue numbers would be even stronger.

The latest numbers do not reflect the recent spike in gas prices. And those high fuel prices have the potential to create a tax windfall for state and local government.

Earlier this year I proposed legislation capping rising fuel taxes. Unfortunately, it failed to gain traction in the Legislature.

We don’t know yet how much revenue will come in this month. But we do know one thing for sure: Californians will pay plenty in tax.… Read More

BOE Member George Runner

Sales Tax Hike Would Cost 23,000 Jobs

Today I released a dynamic analysis by the Board of Equalization showing that the Governor’s proposed sales tax increase will cost California jobs.

According to the analysis, a higher sales tax rate will take money out of the pockets of working Californians, destroying more than 23,000 jobs and $267 million in business investment.

These projected job losses are equivalent to every worker in a medium-sized California city like Glendora or West Sacramento losing their jobs.

When considering tax increases, policymakers often rely on static analyses that ignore behavioral changes by consumers and business owners. A dynamic analysis estimates the likely behavioral changes that could result from a higher tax rate.

The BOE analysis projects that nearly all of the proposed sales tax increase would be passed along to consumers. The state would receive $222 million less in revenues than projected by a static analysis, an 8% loss in potential revenue.

Since July of last year, lower tax rates have enabled Californians to keep more of their hard-earned dollars, and our economy is… Read More

BOE Member George Runner

California Falls to 50th in New Business Startups

As reported by the Los Angeles Times, a new study provides even more bad news for California’s job creation prospects and overall budget picture. According to Economic Modeling Specialists, Inc., California has fallen from first in the nation for new business formations to a dismal rank of 50th.

According to the report’s authors:

California’s economic woes and instability have been well-documented, and this data makes another case for how bad things have gotten there. California had the most net new business establishments in 2009 (more than 12,500) and 2008 (32,000-plus); in fact, it ranked either first or second from 2001 to 2009. But the Golden State sank all the way to 50th in 2010 with more than 4,600 fewer new establishments than the previous year.

Could it be that California’s business climate has become so hostile that entrepreneurs now feel they mustleave the state in order to successfully launch a new business endeavor? This news should be a wake-up call to Governor Brown and the Legislature.… Read More