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1 Micah Cohen & Kiran Sheffrin, Finding Stable Ground: California Reform Commission Puts Tax Overhaul on Table 1 (2009)

handle is hein.taxfoundation/ffbibxz0001 and id is 1 raw text is: UFISCAL July 2009FACT No. 181 Finding Stable Ground: California Reform Commission Puts Tax Overhaul on Table Net Receipts Tax Could Replace General Fund Sales Tax and Corporate Income Tax By Micah Cohen and Kiran Sheffrin Introduction As California legislators and the governor postpone the day of budgetary reckoning, a special commission is considering a permanent solution: fixing the state's tax system. Earlier this year, Governor Arnold Schwarzenegger assembled the Commission on the 21 st Century Economy to suggest reforms to the state's tax code. These reforms are to be revenue-neutral, i.e. raising the same amount of tax revenue as current laws do and taking the political catfight over raising and lowering taxes out of the equation. California relies heavily on volatile revenue sources, and this reliance has contributed to the budget crisis. For example, according to one report, Corporate income taxes fell 24% in the last recession, increased 115% in five years, and have fallen more than 20% in this recession.1 By collecting revenue disproportionately from sources that experience exaggerated ups and downs, the tax code shares in this dramatic year-over-year volatility. The reform commission hopes that its proposals will combat the fluctuations which leave the state penniless in times of recession, primarily by broadening the tax base, lowering the rates, and reducing current distortions. The Commission must report a final plan to the Governor and Legislature in September 2009. 1Robert Cline, Analysis of Business Net Receipts Tax. Ernst and Young. June 16, 2009, p. 4. Micah Cohen and Kiran Sheffrin are adjunct scholars at the Tax Foundation.

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