Comprehesive Tax Reform

By Betty T. Yee

California's tax system is unfair, outdated, and unsustainable.

Many of the state's tax laws were enacted decades ago to reflect a goods-based economy and not the current services-based economy. Additionally, the nature of income subject to tax has shifted from wages derived from work to compensation derived from stock market-related income and investments. The effects of Proposition 13 enacted by voters in June 1978 have resulted in property tax inequities and diminished authority for local governments.

Consequently, s small base of Californians pay the overwhelming majority of income taxes; the sales tax base continues to shrink; and local jurisdictions are more reliant on state funding and special taxes and fees to fund infrastructure and other priorities. Moreover, recent temporary tax increases pursuant to voter approval of Proposition 30 in November 2012 have affected upper income earners and lower-income households disproportionately.

Prior tax reform efforts have either not been comprehensive (examining the entire tax system) or have been influenced by multi-billion dollar budget shortfalls. And while California's economy is recovering, the recovery is not being felt evenly in all parts of the state and is doing little to improve the standard of living for low-wage workers. The small business sector has been ignored in such past efforts.

California's Controller, the leading State tax official, can serve as a strong, independent voice for comprehensive tax reform, with reform proposals developed pursuant to the public convening of business and community leaders throughout the state who are committed to tax reform that is based on the principles of fairness, certainty, and expanded economic opportunity.