PERSPECTIVE-Donald Trump first teased us with his tax plan, then disclosed a very vague framework of how it would lower taxes for most and reduce the deficit. His key assumption? It would invigorate the economy and thereby promote growth in tax revenue.
While there is logic to the correlation between economic growth and lower taxes, the impact on the deficit is another matter. Nowhere did he offer any rudimentary analysis of how deficits would be reduced, much less by how much. The Donald is supposedly wealthy enough where he could have engaged a think tank to model the plan and provide the public with some data to chew on.
But, no.
Just an example of political pablum designed to win votes from those easily seduced by the promise of lower taxes.
California State Senator Bob Hertzberg is doing his best Donald Trump impersonation with SB8, a bill he introduced that would raise state taxes by $10 billion per year through a combination of subjecting most services to sales tax while lowering personal income tax rates – a regressive combination if there ever was one. The senator had the audacity to name the bill “The Upward Mobility Act.”
Euphemisms are usually concocted to divert attention from the true purpose of underlying actions, and Bob created a classic one.
According to the California Budget Policy Center update issued in April 2015, thirty-six percent of the state’s revenue came from sales tax in 2011. Forty-eight percent came from personal income tax. Any version of Hertzberg’s plan would likely close that gap.
My best guess is SB8 may not be as regressive as it appears, but, regardless, the additional $10 billion per year has to come from our pockets. But Bob, like Donald, is not sharing key details.
It would be nice to know what segments will bear the brunt of the increase.
I think he knows -- or at least he alluded to that when he suggested Governor Brown, who expressed skepticism of the bill, would like it if he knew the details. As reported by the Sacramento Business Journal, Hertzberg said: “People are making assumptions on limited information and it’s just not accurate. The governor is a brilliant guy … I think he will like the proposal when he sees what it will look like.”
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Please do share the details, Bob -- not only with the Governor, but with the public as well.
The senator has taken to social media to promote his bill. He cited an article in Forbes that complimented him for supporting the application of sales tax to services. The author correctly points out that higher-income earners pay more in gross sales tax, but fails to mention the disproportionate effect it has as income decreases. The article was not an endorsement of Bob’s bill – it supports a much lower sales tax rate on services and criticized him for keeping the already high rate unchanged.
The bill is dead for 2015, but Hertzberg will reintroduce it in 2016.
Trump will be out of the picture by then.
The tax stage will be all yours, Bob.
At least in California.
(Paul Hatfield is a CPA and serves as President of the Valley Village Homeowners Association. He blogs at Village to Village and contributes to CityWatch. The views presented are those of Mr. Hatfield and his alone. They should not be construed to represent the opinions of the VVHA or the residents of Valley Village, individually or as a group. He can be reached at: [email protected].)
–cw
CityWatch
Vol 13 Issue 80
Pub: Oct 02, 2015
