California Senate Bill 8 – the state bill introduced by State Senator Bob Hertzberg last year that would mean a sweeping overhaul of California’s tax system – generated significant discussion in the media and press this past month. The bill would introduce a sales tax on services, as originally proposed by the Berggruen Institute’s Think Long Committee in 2011, of which Sen. Bob Hertzberg (pictured) was a member.
In an editorial on June 8, the Los Angeles Times Editorial Board argued that “the California tax code is like a handyman’s rickety stepladder, as untrustworthy as it is essential.” Due to a shift in California’s economy, a much larger percentage of tax revenue comes from “personal income tax revenue, which rises and falls much more sharply with the economy.” Seeking to tax services, as SB 8 does, would “lessen the state’s reliance on personal income taxes” and is thus aimed at “smoothing out state revenue while also promoting growth.”
Also covering the issue, KQED – Northern California’s PBS and NPR stations – asked “Is a Do-Over on the Horizon for California’s Sales Tax?” As the article notes: “California’s sales tax remains largely focused on goods and not services, while the state’s economy has decidedly shifted toward more growth and reliance on services.” The author highlighted SB 8 as a leading proposal in the discussion to reform California’s sales tax system.
Finally, as Berggruen Institute senior adviser Nathan Gardels opined in the Sacramento Bee: “Even though California has one of the most progressive tax structures in the nation, inequality is rising and dashing hopes. Something more is needed as USC professor Edward Kleinbard has articulated and former Assembly Speaker, now Senator, Bob Hertzberg has sponsored in legislation: namely, a new philosophy of governance that focuses on the overall progressive outcome that can be achieved through modernizing the tax code and investing in infrastructure and public higher education – the key means of upward mobility. Such investments are inherently progressive in the distribution of their benefits and in the creation of new well-paying jobs.” The bill will undergo hearings in the California legislature in the fall.