Last week, Governor Brown made a big splash pushing a business tax reform proposal. This issue involves how national and international corporations are taxed under California law. As the result of the budget deal crafted two years ago (a deal that hit citizen taxpayers hard) corporations were given a choice over how they were taxed. The details aren’t that important for normal people and the issue is a bit complicated. (There was a humorous moment when Darrell Steinberg said “this is simple” and, moments later, Jerry Brown said this is a “complicated issue” and he wasn’t even sure he understood it.)
Whether corporations should be given the opportunity to elect how they are taxed might very well be a legitimate discussion to have. (But Joel Fox makes the valid point that the absence of predictability due to these radical changes in tax policy every few months is a contributing factor to the perception that California is anti-business, if not outright weird). What is clear is that the elimination of the right to elect would be a tax increase. Pure and simple. Moreover, any such proposal requires a two-thirds vote of each house. The good news is that compliance with Prop 13’s requirement on this issue appears to be a given – even among the Democrats.
Additionally, the issue has been raised about whether the election could be removed and offset with other tax reductions. Some California based businesses would very much like a sales tax exemption on manufacturing equipment. But a better idea would be to reduce taxes on citizen taxpayers. After all, they’re the ones who ended up carrying the financial burden from 2009 until 2011 when those taxes expired. They’re the ones entitled to the relief.
Would Democrats agree to broad based tax relief? Go ahead and bet on the snowball.