AgdaPkt 2009-10-12 - Laserfiche WebLink

Browse Search

8A Page 24 retirement account interest,and medical and retirement benefits.Tax credits including those for child care and dependent care tax credits eliminated. 3. Eliminates the state generai purpose sales and use tax(SU�rate. a. Leaves all rates allocated to focals in place including the Bradley Burns,Prop. 172, county health and welfare rate,and locai voter approved add-on rates. b. Leaves the state SUT on gasofine and diesel fuels that is allocated to Prop.42 state and locai transportation programs and the public transportation account. 4. Establishes a new Business Net Receipts Tax(BNRT}.This is a kind of subtraction based value added tax that would apply to a broad base of economic activity including goods and services such as food,entertainment,medical,dental, utilities, fegal, real estate and housing.The report recommends that government and nonprofit activities be exempted from paying the BNRT.A reduced BNRT rate would apply to financial services. 5. Estabfishes a new Rainy Day Reserve Fund. Higher Sales and Use Tax Administration Costs The COTCE proposes to eliminate the 5 percent general purpose state sales and use tax rate, (currently 6 percent until Apri!2011)and leave local rates and the state rate apptied to gasoline and diesel fuels. Total state and local sales and use tax collections would falf by over 55 percent.Assuming that Board of Equalization (BOE)administration costs do not change significantly,and assuming these costs would be re-spread to the remaining revenue allocations, B�E administrative charges fo local agencies would more than double. The Legislature's Concern for Sales &Use Tax Will Decline The structural problems with California sales and use tax have been well documented for many years and indeed were part of the discussion of the COTCE.Although California has the highest states and use tax in the nation,the base to which it applies is narrower than any other state. Because of its narrow application in Ca(ifomia,taxable sales continue to fall behind population an inflation growth. C�TCE recommendations would leave the existing sales and use tax in place with no reform, However,it would wlthdraw the state as a recipient of ar�y sa(es and use tax revenues except for state kransportation program allocations ftom the Prop.42 sales tax on gasoline(about$600 million per year).Sales and use taxes going to the state general#und— currently about$33 billion—would be phased out. With so much less at stake in the sales and use tax,the Legislature will have less interest in broadening the sales and use tax base to make it more sustainable,less interest in ensuring that the costs and efficiency of tax administration is kept reasonable,and(ess concern about the revenue impacts of the myriad of requests for tax exemptions in law that it receives each year. What Lies Ahead The Governor is expected to call a special session of the Legislature to examine the COTCE recommendations.With such a potential major change in tax policy,the proposal has a number of poficy, (egal and technical problems and uncertainties.The COTCE proposal is unlikely to survive in its current form yet it is likely to be the basis for continued discussions and efforts at reform of the states troubled fiscal structure. The League will continue to analyze the potential impacts of this proposal on cities, participate in and monitor legislative discussions,and alert cities of any important developments. RTAC Report Recommends ARB Base Emission Reduction The Regional Targets Advisory Committee(RTAC), the committee created by SB 375 to advise the Califomia Air Resources Board(ARB�how to set regional green house gas(GhG}emission targets, has released its report in time to meet its Sept.30 statutory deadline. 4