AgdaPkt 2008-11-10 Clsd and Reg - Laserfiche WebLink

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8A Page 3 with by state officials with state funds whl!e city leaders do the same thing locally, keeping our neighborhoods safe and supporting the economic recovery. 'Commission' Continued from Page ,... Its report will be due April 15, 2009. The Govemor indicated this is long-term action that will help avoid the extreme revenue swings that cause crippling deficits while maintaining a tax structure that will ensure our continued competitiveness and attraction to employers and workers. In support of this action, the Governor's Office noted: California's antiquated revenue system is a major contributor to our feast-or-famlne budget cycles. OUf tax system has not been restructured in over 80 years even though our economy has changed dramatically. . Fifty percent of California's personal income tax revenues come from just 1 percent of residents. That's fewer t~an 150,000 taxpayers, and much of their income is based on volatile investment income - so when their income dips the state's tax revenues fall too. . When Wall Street sneezes, California catches a cold. Nearly 15 percent of our revenue comes from capital gains - meaning the turmoil on Wall Street brings pain straight to Main Street, Cafifomia. In contrast, the state of Washington is projecting a revenue shortfall of less than 1 percent, while our state may face a shortfall of nearly 10 percent. The difference is that our state's tax revenues reflect Wall Street's economy more than California's economy. This annual uncertainty makes it difficult to fund government operations year-la-year. Boom years produce more spending than can be sustained in bust years, putting state services in constant annual jeopardy. . Such a volatile revenue stream is unacceptable for California's 38 million residents who rely on a stable funding for a host of state-funded programs. We need a revenue system as diverse as our economy. Unlike our budget system, California has one of the most diverse economies in the world. A tax system as diverse as our economy would produce stable revenue. . An improved revenue-gathering system would decrease the pressure for future tax increases to address revenue shortfalls, which will continue to occur if the volatility of our tax system is not reduced. . A tax stNcture that better reflects California's economic strengths could actually grow the economy. For example, reducing the corporate income tax would boost hiring, creating jobs. The news release from the Governor's Office on the creation of the commission contained supportive, but nuanced, statements from the four legislative leaders: "California's tax system is antiquated and long overdue for an overhaul. Our state is one of the most advanced economies of the 21st century, but it relies upon an outdated and volatile tax model that no longer makes sense. This commission will examine how to best capture revenue in California's dynamic economy and put the state's finances on the stable and sound footing needed to remain a global leader. . - Senate President pro Tempore Don Perata 'We need a multifaceted approach to the national economic downturn. That's why I proposed a thorough, non-partisan review of California's economic structure, which was built for the 1930s. This Commission will provide recommendations to help get vital programs like education, 3