The “Tax Commission” has released details of a plan to completely overhaul California’s tax system.
According to their summary description, there are five major components of the plan:
1. A substantial reduction to the Personal Income Tax rates to just to brackets, 2.75% for joint filers earning $56,000 or less and 6.5% for everyone else. As part of this change, all credits and many deductions would be eliminated. The following is proposed legislative language:
Section 17039.3 is added to the Revenue and Taxation Code to read:
17039.3. Notwithstanding any provision of this part or Part 10.2 (commencing with Section 18401) to the contrary, for each taxable year beginning on or after January 1, 2014, any credit otherwise allowable under any provision of Chapter 2 (commencing with Section 17041) or Section 17063, including the carryover of any credit under any provision of Chapter 2 (commencing with Section 17041) from a prior taxable year, any former provision of that chapter, or Section 17063, shall not be allowed against the “net tax” (as defined in Section 17039).
2. Elimination of the Corporation Tax.
3. A gradual phasing out of the Sales or Use Tax.
4. The creation of a Business Net Receipts Tax to replace the other taxes:
A business net receipts tax (BNRT) would be imposed on all businesses deemed to be doing business in the state. Doing business would constitute not only physical presence in the state but also economic presence. The tax would be based on net receipts, calculated by subtracting purchases from the gross receipts of the firm. It would apply to all forms of business including C corporations, pass-through entities and sole proprietorships. The BNRT would apply all sectors of the economy. The tax would be phased-in over a five year period as other taxes were eliminated and phased-out.
5. Increase of the “Rainy Day Fund.”
See also “Tax panel plan includes value-added tax, lower income tax” in the Sacramento Bee Capitol Report.
