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BOE Member George Runner

How About Eliminating California’s Income Tax?

Today during the 2015 Cal Tax Annual Members meeting, I called for a meaningful public discourse on tax reform ideas that make life easier for taxpayers. Specifically, I suggested replacing California’s income tax with a sales tax on services.

As you may know, Senate Bill 8 (Hertzberg) seeks to extend California’s sales tax to services. As currently written, the bill amounts to nothing more than a massive tax increase that would just make California less competitive while adding thousands of state auditors and tax collectors to state payrolls.

Reform, by its definition, should not include growing government or making taxes more complicated.

Any shift to a broader reliance on sales tax must be combined with real tax reform that removes barriers to doing business in our state. That’s why I proposed eliminating California’s personal and corporate income tax and the Franchise Tax Board. One less tax agency would make California a far more attractive place for jobs, retirees, and investment.

If California eliminated income tax, more companies would base themselves in California. Also, more residents would stay in the state upon retirement, leading to more revenue.

California would join seven other states that do not have income tax. Those states include Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.

We need dynamic economic modeling of the likely benefits of an elimination of income tax. I encouraged the businesses in attendance this morning to conduct their own modeling to weigh the pros and cons of such a structure.

This is a much better alternative to simply raising taxes. We must not be seduced by false reform that would make California’s tax code more complicated for everyone.

I look forward to your feedback on the issue.

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