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News from the Capitol
SENATE RETURNS TO COMPLETE UNFINISHED BUSINESS, INCLUDING SB 67
On September 11th, the last night of the regular Legislative Session, the Senate Republicans became angry over what they believed were a series of broken promises by Senate President pro Tem Darrell Steinberg, and subsequently they refused to provide the necessary 2/3 vote on approximately 20 important bills that contained "urgency clauses." Among the bills was SB 67, by the Committee on Budget, which contained several technical "clean-up" changes in order to implement the Proposition 1A Securitization program that more than 1100 cities, counties and special districts have already enrolled in. In order to meet the public notice requirements of the Brown Act, and the required deadlines for a mid-November Bond issue, the Senate needed to act on SB 67 by today, October 15th. Fortunately, the earlier disagreements had been resolved, and SB 67 easily passed the Senate yesterday on a bipartisan vote of 37-0. Since the bill had previously passed the Assembly, and merely needed to be acted on by the Senate, the Governor is expected to quickly sign the measure.
HEARINGS ON GOVERNOR'S TAX COMMISSION PROPOSAL
On September 29th, the 14 member Governor's "Commission on the 21st Century Economy," also known as the Governor's Tax Commission, chaired by Gerald Parsky, wrapped up nine months of work in attempting to overhaul the State's tax system. The Commission incorporated its recommendations into a 326 page draft legislation document. While the recommendations do not specifically impact local government, they are perhaps the most significant tax policy changes ever proposed. In brief, the Commissions recommendations are:
1. Reduce Personal Income Tax collections by $15 billion by reducing the number of tax brackets, lowering the top rate and eliminating most credits and deductions.
2. Eliminate entirely, the Corporate Income Tax,
3. Eliminate the State's portion of the sales tax, except for gasoline,
4. Replace the above lost revenues with an entirely new tax on the net receipts of businesses, known as the Business Net Receipts Tax or BNRT.
Last Thursday and Friday, and again yesterday, the Assembly Revenue and Taxation Committee held day-long hearings that included presentations by chairman Parsky, and several of the commissioners. Five of the fourteen commissioners refused to sign the report, including former Assemblyman Fred Keeley (also a member of the reform group "California Forward"). While Parsky argued that the new BNRT would help end the revenue volatility resulting from California's high reliance on the Personal Income Tax, Keeley and dozens of other witnesses argued against the wholesale change to an entirely new untested tax system. Witnesses noted that while a "value added" tax is used in Europe, the new BNRT has not been implemented anywhere in the world.
When pressed by reporters at a recent press conference, where the Commission's report was unveiled, the Governor said he would sign the proposal if it reached his desk. However, given the minimal support for the Commission's recommendations, and the strong opposition from the business community, unions, advocacy groups, and others, it is unlikely legislation implementing the proposals will ever reach the Governor's desk. Work on this subject matter will continue throughout the Fall/Winter with various interim hearings in each house. Interestingly, while the proposal does not directly impact local government, issues such as State/local revenue sharing, and changes to Proposition 13 were discussed during the hearings.
Submitted by Mike Dillon and Christina DiCaro, CLA Lobbyists
Posted on October 15, 2009 3:50 PM | Permalink