The California Tax Commission is coming close to finalizing a package of so-called reforms to the way Californians pay for their government, and to my amazement, a center-piece of the current likely proposal is what is called a Business Net Receipts Tax (BNRT), which is similar to a value added tax. As proposed, it would apply to all businesses in California, expanding the scope of what is currently taxed in the state from just goods now to services.
This particular element of the Commission’s proposal is clearly something that should be excised. It is criticized from the left this morning in a thoughtful piece from Jean Ross of the big-government supporting California Budget Project over at CalBuzz, and right here on the FlashReport conservative Michelle Steel, one of the two Republicans on the State Board of Equalization, takes the BNRT proposal to task in a piece broadly concerned with the pending report of the commission. Joel Fox also pointed out the concerns of the BNRT to small business over at Fox and Hounds Daily.
While they both make some great arguments about why the BNRT proposal is bad, the reason why for me it is a “deal killer” (meaning that if it is in the final proposal, and if it is taken as a package, it must be soundly rejected) is because the BNRT is a “hidden tax” – hidden from the ultimate consumer of services. Income taxes, sales taxes, flat taxes – all of them are very obvious to someone buying a product. They know what they are paying for their government services. But one insidious component of a BNRT is that rather than the consumer paying the taxes, the tax burden is on the businesses providing services. So while the consumer will pay the higher costs created by the BNRT, it is not obvious to them.
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September 14th, 2009 at 12:00 am
California is becoming a warehouse economy. Huge warehouses supply goods to Californians imported from foreign countries and other states in America.
Ten buck ball cap and apron jobs, lots of forklifts, a bunch of cement and roofing tar….wala….your in business in California.
Welcome to globalism by exploiting the masses of helpless and undereducated California workers and the finessing of the current oppressive California tax code.
If this BNRT tax passes you will see a direct pass through to consumers of this whacko tax. Also, you will see less selection and competition, for high margin and high quality products will face price pressures opening doors for cheap throw away merchandise of limited long term value.
Who wins? The socialists in Sacramento.