California commission considers tax changes

It seemed appropriate that a panel examining ways to overhaul the state’s tax structure met Thursday in the academic confines of UC Davis rather than the politically charged Capitol.

The discussion focused on the theoretical, from examining the merits of a flat income tax to considering a “split-roll” property tax system that treats commercial businesses differently from homeowners.

The daylong meeting occurred largely in a political vacuum, for now ignoring the difficulty of getting such ideas through a divided state Legislature where special interests hold great sway.

But Chairman Gerald Parsky said the state’s current fiscal woes may allow for a substantial overhaul despite the usual political dynamics.

“Sometimes when you’re in a form of crisis, it gives you an opportunity to make major change,” Parsky said.

The 14-member Commission on the 21st Century Economy is expected to recommend changes in the state’s tax structure by July 31. Lawmakers have agreed to consider the package in its totality.

Gov. Arnold Schwarzenegger and legislative leaders established the panel last year in an effort to stabilize the state’s tax structure. The Davis meeting was the commission’s fourth.

The commission originally was slated to make recommendations by April 15, but the governor extended the deadline to July so that members could consider the policy ramifications of the upcoming May 19 special election.

The panel includes a bipartisan mix of business leaders, academics, lawyers and former legislators. Parsky asked members eventually to support a consensus package of tax changes rather than back only the particular taxes they support.

In earlier meetings, an energy expert discussed a carbon tax that would raise gas prices by 20 cents a gallon, a finance professor said the state should tax more services and music downloads, and an economist suggested reducing the corporate income tax while boosting the sales tax.

The morning discussion matched Robert Murphy, a senior fellow from the conservative-leaning Pacific Research Institute, with Robert McIntyre, director of the liberal-leaning Citizens for Tax Justice. Murphy advocated a 3 percent flat tax and the elimination of gift and estate taxes, while McIntyre called California’s Proposition 13 property tax limits a disaster.

The commission has not yet incorporated any of the ideas into a concrete proposal. But with the July deadline looming, the panel asked its staff Thursday to begin drafting different tax ideas and analyzing their impacts for discussion at a June meeting.

Commissioners had a spirited discussion at times. Former Democratic Assemblyman Fred Keeley asked staff members to draft the carbon tax that had been previously discussed. He also asked for an analysis of a sales tax on services that excluded business-to-business services and anything consumed by “low- or moderate-income individuals.”

When a staff member asked Keeley to clarify what would fall into the latter category, Michael Boskin, a Republican and a Hoover Foundation senior fellow, suggested somewhat mockingly, “Golf courses.”

Lenny Goldberg, executive director of the labor-backed California Tax Reform Association, said it would be difficult for the panel to reach consensus, though he welcomed the discussion.

As staff members presented a plan that would tax health care benefits and retirement contributions that are currently exempt, Goldberg noted the gap between the theoretical and the practical.

“This proposal is sort of a good economist’s proposal,” he said. “But do you think the Legislature would even consider that?”

Call Kevin Yamamura, Bee Capitol Bureau, (916) 326-5548.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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