Hon. Marc Steinorth
California State Assembly Member
It is understandable why voters are cynical about politicians’ words, especially when it comes to taxes. History is littered with broken promises about how taxes are only “temporary” or “won’t hurt the middle class” only to emerge as being untrue. When Proposition 30 was passed in 2012 by California voters, it was sold as a temporary tax increase that would protect public education from devastating budget cuts.
Despite this, there is already talk in Sacramento about the need to make these “temporary” taxes permanent. Not only is there a strong possibility they will not be temporary, but much of the extra revenue collected from these increases have been diverted to other uses not related to education. If voters cannot believe the promises made when they passed Proposition 30, then they certainly should be wary of “tax reform” plans to extend sales taxes to services.
Applying sales taxes to services, such as auto repairs, dry cleaning, legal services and countless other business services would increase taxes by $10 billion per year. Sacramento tax reform proposals promise to lower income and corporate taxes to help ease the burden of a massive new service tax. But the devil is always in the details and too often the working and middle classes end up bearing the burden.
A tax on services would be extremely regressive and would disproportionally affect lower income Californians. A sudden increase in the cost of everyday services would take a big chuck out of the monthly budget for someone working a minimum wage job who is already struggling to get by. Wealthy individuals would not have the same problem.
Furthermore, many regions of California, including the Inland Empire, are still struggling to recover economically. Increases taxes by $10 billion will not help speed the recovery. Bear in mind that California consistently ranks as one of the states with the highest tax burden and worst business climate. Also, many service-related companies are small businesses that cannot afford new taxes on their products. As a small business owner myself, I know the struggle of operating in California all too well.
A burdensome regressive tax on services is the exact opposite of what policymakers in California should be entertaining. Instead, we should be sending a strong message that California is open for business by creating an environment that will allow companies to hire more workers and provide good benefits.
Having serious conversations about reforming California’s tax law is the right thing to do. We need to change the volatile tax structure that forces the state into boom and bust budget cycles. But I can only support a tax reform plan that (1) does not increase taxes overall and (2) does not unfairly burden the working and middle class. History shows us that self-interested groups will voraciously protect the status quo and tax increase proposals often do not live up to their promises. “Tax reform” that simply increases the overall tax burden is wrong for California and the economy.