Schwarzenegger proposes temporary California sales-tax hike to close budget gap

[flashl]

Source: LA Times



The one-cent-on-the-dollar increase hinges on lawmakers agreeing to automatic spending restraints and new powers for governors to cut programs whenever the state falls into the red.

By Evan Halper and Nancy Vogel, Los Angeles Times Staff Writers
August 5, 2008

SACRAMENTO -- Gov. Arnold Schwarzenegger proposed during private negotiations over the weekend to close the state's $15.2-billion budget gap with a temporary but immediate one-cent hike in the state sales tax, according to legislative sources.

The proposal, floated in meetings with the Legislature's leaders and their staff, hinges on lawmakers agreeing to automatic spending restraints and new powers for governors to cut programs whenever the state falls into the red.

People involved in the negotiations said Schwarzenegger, who has repeatedly vowed never to raise taxes, would back away from the proposal in the absence of the spending controls.

The increase of one cent per dollar would take effect soon after a budget is signed and last three to four years; after that, the tax rate would gradually drop. It would ultimately settle at a level lower than the current statewide rate of 7.25%.

Read more: http://www.latimes.com/news/local/la-me-budget5-2008aug05,0,6637454.story

[no_hypocrisy]

1. In my lifetime, I've never seen anything the government says is "temporary" to be temporary.

[slackmaster]

3. Yup, we already pay over 8%, and sales tax is as regressive a tax as you can have

I do more and more purchasing over the Internet just to avoid paying it.

How's that for unintended consequences, Herr Governator?

[joeglow3]

15. Which is tax evasion.

You are supposed to file a use tax return to pay this. New York has added a spot on their individual income tax returns (and I believe have standard amounts based on your income that they assume you would have incurred).

[slackmaster]

26. No, that is not correct

Section 6203 of the California Revenue and Taxation Code requires retailers who are engaged in business in the state to collect state sales taxes.

6203. (a) Except as provided by Sections 6292 and 6293, every
retailer engaged in business in this state and making sales of
tangible personal property for storage, use, or other consumption in
this state, not exempted under Chapter 3.5 (commencing with Section
6271) or Chapter 4 (commencing with Section 6351), shall, at the time
of making the sales or, if the storage, use, or other consumption of
the tangible personal property is not then taxable hereunder, at the
time the storage, use, or other consumption becomes taxable, collect
the tax from the purchaser and give to the purchaser a receipt
therefor in the manner and form prescribed by the board.
(b) As respects leases constituting sales of tangible personal
property, the tax shall be collected from the lessee at the time
amounts are paid by the lessee under the lease.
(c) "Retailer engaged in business in this state" as used in this
section and Section 6202 means and includes any of the following:
(1) Any retailer maintaining, occupying, or using, permanently or
temporarily, directly or indirectly, or through a subsidiary, or
agent, by whatever name called, an office, place of distribution,
sales or sample room or place, warehouse or storage place, or other
place of business.
(2) Any retailer having any representative, agent, salesperson,
canvasser, independent contractor, or solicitor operating in this
state under the authority of the retailer or its subsidiary for the
purpose of selling, delivering, installing, assembling, or the taking
of orders for any tangible personal property.
(3) As respects a lease, any retailer deriving rentals from a
lease of tangible personal property situated in this state.
(4) (A) Any retailer soliciting orders for tangible personal
property by mail if the solicitations are substantial and recurring
and if the retailer benefits from any banking, financing, debt
collection, telecommunication, or marketing activities occurring in
this state or benefits from the location in this state of authorized
installation, servicing, or repair facilities.
(B) This paragraph shall become operative upon the enactment of
any congressional act that authorizes states to compel the collection
of state sales and use taxes by out-of-state retailers.
(5) Notwithstanding Section 7262, a retailer specified in
paragraph (4) above, and not specified in paragraph (1), (2), or (3)
above, is a "retailer engaged in business in this state" for the
purposes of this part and Part 1.5 (commencing with Section 7200)
only.
(d) (1) For purposes of this section, "engaged in business in this
state" does not include the taking of orders from customers in this
state through a computer telecommunications network located in this
state which is not directly or indirectly owned by the retailer when
the orders result from the electronic display of products on that
same network. The exclusion provided by this subdivision shall apply
only to a computer telecommunications network that consists
substantially of online communications services other than the
displaying and taking of orders for products....

The last paragraph in the quoted section leaves many Internet sales exempt. If sales tax is required, it is the seller's responsibility to collect it.

But thanks for openly accusing me of breaking the law. It's always fun to shoot down idiotic remarks from people who don't know me very well and doesn't even live in the same state.

:hi:

[joeglow3]

35. Not only are you breaking the law, you suck at research

Look at what Use tax is. Granted, I do not live in California, but all states use the SAME concept (I know this as a tax CPA).

A quick 30 second search yielded me the results on how you can report this to California from the Franchise Tax Board.

http://www.ftb.ca.gov/current/usetax.shtml

But thanks for openly accusing me not knowing what I am talking about. It's always fun to shoot down idiotic remarks from people who don't know me very well and can't do research worth a shit.

[Zhade]

45. No, you're still wrong - and YOU flung the serious accusation of tax evasion.

You're ignorant about our laws. Don't embarrass yourself further.

[joeglow3]

48. Are you kidding me?

1. I am a tax CPA and know this is true in almost every state.
2. Just to be sure, I confirmed with a friend who is a SALT (state and local tax) manager at a Big 4 firm.
3. I have found multiple citations on the California tax boards explaining how and why you need to do this.

All you have responded with is "nuh uh." Well, if I am ignorant, elighten me. Show me how I am wrong. Show me how states fighting Public Law 86-272 and Congress's refusal to address sales and use taxes on internet is all made up.

The fact is that you are flat out wrong. I don't think this. I don't believe this. I ABSOLUTELY KNOW FOR A FACT you are wrong.

[slackmaster]

51. I know about the use tax, Joe, but it is neither enforced nor enforcable in California

I have read that New York has subpoenaed the Senecas and other Indian tribes for records of non-taxed cigarette sales, and actually gone after some consumers for not paying. I don't know what kind of penalty provisions NY law provides for non-payment of use tax, but California law has none for consumers. Retailers are subject to misdemeanor charges if they are required to collect sales tax and do not. The state could bill someone if they discovered, in the course of an investigation of some other matter, that a person had not paid the use tax; but I have never heard of that happening in California. There is no provision in the law for any kind of penalty for a consumer not paying it. I consider it a voluntary tax. Maybe I am technically wrong about that, but the reality is that a lot of people buy stuff online because it saves them a substantial amount of money.

The sales tax is intended to fund infrastructure and services provided by the state that are of benefit to both retailers and consumers. The purpose of the use tax was supposedly to level the playing field between in-state and out-of-state retailers. It was the epitome of protectionism, enacted during the Great Depression when the state was desperate for money. Internet sales have created a huge sales tax problem for most states, but the problem is partly of their own making. My whole point here is that the state of California increasing its sales tax would encourage more people buying more things in ways that are not subject to any kind of tax that can actually be collected. Raising the sales tax will not necessarily increase sales tax revenues to the desired extent. The state needs to figure out some other way.

I feel as most people here do, that I pay plenty of taxes to the State of California. Tax revenues here have steadily increased over the years even accounting for inflation and increases in population. The state has plenty of money. It just needs to figure out how to budget it like normal people do. The people most likely to be harmed by an increase in sales tax, i.e. the poor, are also those least able to defend their buying power by acquiring things in other states. It's as regressive as you can get.

I haven't given you enough information here to know with certainty that anything I have ever purchased online is necessarily subject to California use tax. I have my taxes done professionally, and my accountant has never asked me anything about Internet purchases. Please don't accuse people of wrongdoing in an open forum like this.

[joeglow3]

58. Look, I am simply stating the facts

I am not judging you. I, too, do not file use tax returns for my state. However, I do think Congress will EVENTUALLY settle the whole internet purchase issue.

[slackmaster]

59. Interstate commerce is an issue for the federal government to deal with

Thanks!

[petronius]

50. He is correct - internet retailers are not required to collect sales tax,

but CA residents are required to pay the use tax on anything purchased for use in the state that has not been otherwise taxed. On the Form 540a, for example, it's line 49.

From the instructions:

"Line 49 – Use Tax. This is not a total line.
As explained on page 6, California use tax applies to purchases from
out-of‑state sellers (for example, purchases made by telephone, over the
Internet, by mail, or in person).
You may report use tax on your income tax return instead of filing a use
tax return with the State Board of Equalization. To report use tax on your
income tax return, complete the Use Tax Worksheet on the next page.
For questions on whether a purchase is taxable, go to the State Board
of Equalization’s Website at www.boe.ca.gov, or call their Information
Center at (800) 400‑7115 or TTY/TDD [phone].
If you owe use tax but you do not report it on your income tax return,
you must report and pay the tax to the State Board of Equalization. To do
so, download a copy of Publication 79-B, California Use Tax, from
www.boe.ca.gov or request a copy by calling the State Board of
Equalization’s Information
Center."

[Cleita]

63. Well I used to be a retailer and the sales tax is a tax on gross sales within California.

You can either skim it off your sales or add it to the sales to be paid by the consumer of your goods. This is generally what happens. There is no way you can just not file your quarterly return and not send them a check if you don't want to end up in court or worse.

[joeglow3]

14. EXACTLY what I was going to say

Show me a "temporary" tax that eventually went away. Very few examples, comparatively speaking.

[The Croquist]

17. You are so wrong!!!!!!!!!!!!!!

The temporary phone tax enacted during the Spanish-American war was repealed after only 108 years.

SO THERE!

[no_hypocrisy]

18. Point conceded for that example alone.

I stand humbled before you.

:hi:

[The Croquist]

32. Thanks

In hindsight I thought someone might take me seriously.

[happygoluckytoyou]

22. VOWED ? ? ? ? gotta get me one of those POLITICAL dictionaries i guess!!!!

People involved in the negotiations said Schwarzenegger, who has repeatedly vowed never to raise taxes, would back away from the proposal in the absence of the spending controls.

VOWED..VOWED..RHYMES WITH BENT OVER HERE IT COMES AGAIN..........

so what does VOWED mean anyway... i'm having a bit of trouble with this one
.......................read my lips....... IYAMDEGOBERNATOR !!!!

[Parche]

2. Why Dont They Recall Him

Thats what they did to Davis....:grr: :hi:


Total Recall

[pennylane100]

4. I just found this on the web , I am going to check it out.

http://www.savecalnow.com/

[ForPeace]

25. Looks out of date

and a really horrible color scheme :) Last update January 17th 2008.

[Blue_Tires]

31. dunno

especially when davis hasn't done half the damage arnie has

[onehandle]

5. Just another failed Republican Governor who resorts to raising taxes to fix his problems.

I hope the idiots who thought, "It'll be cool to have the Terminator as Governor," have to pay the most.

Jackasses.

[Cleita]

64. He has to raise taxes. There is no other way. It's just that he is raising the

wrong taxes. Back when we had a budget surplus under a Democratic Governor, the Republicans in office since then have successfully cut taxes to the rich and uber rich with the result of all our once progressive programs for the whole of society have been eroded or eliminated. This is in the sixth largest economy in the world. Thanks a lot you capitalistic, fascist pigs.

[mike_c]

6. raising taxes is the best thing to do, frankly....

I'd like to see a different tax approach, certainly, but the state needs to close it's revenue shortfall and taxation is probably the best option available. I'll be happy to pay a little more sales tax if that's what it takes to keep social services available, keep state worker pension plans intact, help the state honor its salary obligations, and so on. I DO wish they'd repeal or amend Prop 13 instead, though.

[Auggie]

27. State income taxes on the wealthy should be first

[mike_c]

37. totally agree...

...although I'd really like to see changes to Prop 13 first of all. That would be the fastest way to close the budget shortfall, IMO.

[David Zephyr]

39. No it will penalize California home-grown businesses and their employees.

California businesses that sell to customers here in California already have to apply between 8% and 9% (depending on municipality and county) to all sales they generate. This opens up a great unfair competitive advantage and unfair opportunity for businesses within Nevada and Arizona to sell right into California with ZERO sales tax which is essentially a full 10% discount against our California businesses who are struggling and doing the right thing already...the very businesses who are supporting our schools, prisons, roads, parks and shoreline and more.

Another 1% sales tax applied on top of what California based companies small and large are already adding on to their sales will just about kill the goose (the California goose) that is laying our Golden State's eggs.

This is a lousy way for Arnold to solve the problems that he created when he borrowed so much fucking money in the first place.

Tax revenue will go up for a short time and then began to plummet as sales revenues within the state drop proportionately.

A very bad idea that will hurt Californians, California businesses and those employed by them.

[mike_c]

40. that's why I prefer to amend Prop 13....

But let's face it-- the real problem facing California's budget right now is a 16 billion dollar revenue shortfall. More money needs to be collected from SOMEONE.

[David Zephyr]

41. Now we totally agree, Mike.

Back when Prop 13 was being touted as the solution to seniors being taxed out of their homes, Governor Jerry Brown opposed it, but supported Prop 8 which was essentially Prop 13, but with the exclusion of commercial real estate. The GOP sold Prop 13 and the fiscal crisis we now face is a direct result of it.

Prop 13 is fine, but commercial real estate holdings greater than one (where a family owns one business in one location) should be assessed at least every five years and taxed accordingly.

Prop 8 was the real thing, but Prop 13 was the imposter with the poison pill.

[flashl]

7. Missing from the 'tax our way out' scenarios are discussions to reduce BUSINESSES tax giveaways. nt

[Double T]

8. 'temporary' sales tax hike?

Dats a gud von!

[Truth4Justice]

46. More online sales to California sans tax. BTW when I lived there it was 8.75 %.

[bahrbearian]

9. Why didn't he pursue the Enron $9 Billion fraud?

[redqueen]

19. Nothing to do with that secret meeting he had with Enron bigwigs,

I'm sure.

[AndyTiedye]

10. Gropernator Has to Raise Taxes Because He Let ENRON ROB US BLIND!

Now, thirty-four pages of internal Enron memoranda have just come through this reporter's fax machine tell all about the tryst between Maria's husband and the corporate con men. It turns out that Schwarzenegger knowingly joined the hush-hush encounter as part of a campaign to sabotage a Davis-Bustamante plan to make Enron and other power pirates then ravaging California pay back the $9 billion in illicit profits they carried off.

Here's the story Arnold doesn't want you to hear. The biggest single threat to Ken Lay and the electricity lords is a private lawsuit filed last year under California's unique Civil Code provision 17200, the "Unfair Business Practices Act." This litigation, heading to trial now in Los Angeles, would make the power companies return the $9 billion they filched from California electricity and gas customers.

It takes real cojones to bring such a suit. Who's the plaintiff taking on the bad guys? Cruz Bustamante, Lieutenant Governor and reluctant leading candidate against Schwarzenegger.

Now follow the action. One month after Cruz brings suit, Enron's Lay calls an emergency secret meeting in L.A. of his political buck-buddies, including Arnold. Their plan, to undercut Davis (according to Enron memos) and "solve" the energy crisis — that is, make the Bustamante legal threat go away.

http://blogcritics.org/archives/2003/10/05/172924.php

[fascisthunter]

21. Kick for your post

it doesn't get enough attention

[Trillo]

11. Higher Taxes for the Poor!

The California governor wants new executive powers. He also signed mandatory minimum wage for the State's hourly workers!

[endarkenment]

12. Of course - the most regressive tax possible.

But he should be stripped of his refuglican credentials for daring to raise any tax at all.

[kimmylavin]

13. "new powers for governors to cut programs whenever the state falls into the red"

That's the part that scares me.
Let's see... what will go first?

[WhiteTara]

16. re instate teh car fees and we will close

the budget gap instantly...this is just another regressive tax on the working class and poor.

[Patchuli]

56. But then our dipwad 'governor'

would have to admit he shouldn't have cut the car fees. You know rethugs cannot admit when they screw up!

[redqueen]

20. Republicans never met a regressive tax they didn't like.

Tragic that they can fool so many suckers into voting for them based on all their smoke and mirrors "issues", when enriching the already rich is really the only thing that party really does.

[happygoluckytoyou]

23. vowed... vowed... ahhhh.....like a promise except you can UNvow...i get it

[happygoluckytoyou]

24. a lot like a 1 % pay cut through your spending ability.....

[Bluestar]

28. Why not a windfall tax on the damn oil companies

who suck oil out of the ground here in California? We are one of the few states (if not the only state) that doesn't tax nearly enough for what the oil companies take. Many oil-producing states have NO income tax--we are taxed to the hilt.

[WriteDown]

29. Unenforceable....

Windfall profit taxes are nearly impossible. The tax would merely be passed on to the consumers as almost all coporate taxes are. Removing subsidies will have a similar effect, but in principal, I agree with the idea. Also, windfall profit taxes would run into a slew of constitutional issues.

[Patchuli]

57. Yeah and some of those states,

like Alaska the Welfare Queen, gives a nice chunk of change to all the residents for the oil. That state pays the least in tax to the Fed and gets the most back, I've heard. We in CA pay the most and get the least.

[llmart]

30. When will the outcry from the Republicans start?

I thought it was only Democrats who raised taxes? Hmmm.... Hope the Californians who thought Arnold was so cool and voted for him like this.

[LynnTheDem]

33. "temporary taxes"...

:rofl:

[Xolodno]

34. I agree with this...

If if was a cut in services or projects many here would be screaming and hollering over that. No win situation. But I also believe this temporary increase will be "extended" a few times very quietly.

Plus its a lot better than the alternative that was being tossed around....raiding the coffers of cities and counties. Which eliminates services for them and causes them to raise taxes and already having to deal with issues of vandalism, crime, etc with a collapsed housing market. And a vehicle tax will only exacerbate a problem with the cost of transportation on the less fortunate. Sales tax, doesn't feel as painful as a huge hike in your annual DMV bill.

Sure a lot of right wing newspaper columnist will be screaming about this and trying to whip everyone into a frenzy...but in the end, it will be forgotten and most won't really notice the tax all that much. Why? Its really only apparent when your buying big ticket items. And in this economy, not too many will be doing that.

Is there pork barrel stuff going on in Sacramento? Of course, but which legislator is willing to offer their pet project to be cut that provides an influx into their district? Not a single Republican or Democrat is willing to do that. And I'm willing to bet many of these projects encompass several districts (with even Republicans and Democrats as allies) thereby forming substantial voting blocks for their shared interest. So naturally at budget time when their is belt tightening there all saying sure cut some programs and projects....just not in my backyard. Viola...stalemate.

Hence perhaps the willingness of the legislators to surrender this power to the Gov...that way they can blame him during election time as to why the promised road to nowhere that was going to bring jobs and income will not be built.

As for Prop 13, yeah, it needs to be reformed...but its a constant reminder of when government goes to far with taxing and people who pay off their homes have to sell it when they are old because they can't afford the huge tax increases on it. A new system needs to be put in place that allows the State to raise tax revenue from property but at the same time doesn't put grandma and grandpa out on the street because taxes exceed their yearly income. But more importantly, credibility must be restored with the State to allow it to do so, and when their in budget impasse's, they aren't making any progress on that ideal.

[pinniped]

36. I bought a 6k item in OR and forgot to pay taxes on it.

Where do I send the check for $528.70?

[Truth4Justice]

47. Send it to me. I will file it for you. Or I would if I still lived in CA.

:sarcasm:

[slackmaster]

52. If the California sales tax was only 4%, would have been more or less likely to buy that item in CA?

;-)

[roody]

54. If it is a yacht, you don't have to pay it.

[David Zephyr]

38. And this is the dickwad that recalled Gov. Davis for raising taxes?

Who is this shithead?

[David__77]

42. I oppose sales tax in general. It's the GOP's favorite tax.

They don't want to tax wealth they want to tax consumption. The stupidest thing ever from an economic standpoint.

[flashl]

43. WOW

California to buy Exxon Mobil

Democratic and Republican lawmakers in Sacramento just might be bailed out of their budget standoff by a new initiative that would slap a one-time wealth tax of 55% on Californians rude enough to have $20 million or more in property. The ballot measure wouldn't come to voters until June 2010 at the earliest, but that might not be a problem, seeing as how the current year's budget will probably still be stalled.

Secretary of State Debra Bowen announced today that the initiative is entering circulation. See the announcement here (pdf), and the initiative language here (pdf). The approach is, on the surface, the same as the Democrats' plan for closing California's gaping budget hole -- get it from the rich with new tax brackets. But the numbers differ and, when you get to the details you realize that this measure is creative. And by creative, I mean weird.

Most of the revenue would be used to balance the budget provide for the poor improve education build rapid transit, umm, no, try again.

Most of the revenue would be used to buy Exxon-Mobil. And Chevron. And GM, Ford, Goldman Sachs, J.P. Morgan Chase, and Citigroup. Why? To assure California of an adequate supply of energy, at stable prices, without offshore drilling. And to repatriate off-shore manufacturers.

Oh, and to restore the Hetch-Hetchy Valley, which currently is a reservoir supplying water to the Bay Area, to the way it was at the beginning of the last century.

So, rich folk, you say you'd just take your money and Chevron stock and move to Telluride? Or the Bahamas? These guys are way ahead of you. The wealthy would have to pay to leave the state, whether their mode of exodus is a limousine or a pine box.

Gotta read the fine print.

[bemildred]

44. Go where the money is, tax the rich. nt

[DailyGrind51]

49. In Chicago, we have the highest sales tax in the nation (10.5%),

frankly, I can't shed any tears for Californians.:nopity:

[slackmaster]

53. You have much higher property taxes than we do here as well

I hope Daley and his cronies have the common decency to give you a reach-around.

(OTOH IL personal income taxes are about 1/3 what we pay here, so I guess it balances out in a way.)

[roody]

55. Let's reply with a spending moratorium on all

non-essential taxable things.

[slackmaster]

60. I have been using barter for a lot of transactions lately

It still works!

[Lifetimedem]

61. My experience with "temporary "

taxes and fees is they never go away...

[Cleita]

62. So Arnold finally admits that he has to raise taxes to

cover the state budget, however, the tax he chooses is the most recessive one that will place a burden on the poor instead of taxing the filthy, filthy rich of this state who are not paying their fair share of taxes and getting a pretty free ride in this state. Of course that would mean that he and Maria would have to pay taxes on all their properties and assets if this were done the way it should be done.

Fer chrissakes this is the sixth largest economy in the world. It seems he could find a lot of areas to tax that wouldn't cause a hardship instead of targeting the poor and the working poor.