California’s tax system is in need of reform

Paul Gann and Howard Jarvis, backers of Proposition 13, celebrate their victory in 1978.
Paul Gann and Howard Jarvis, backers of Proposition 13, celebrate their victory in 1978. The Sacramento Bee File

On June 7, people in a Shasta County school district will vote on a $3.5 million school bond. In Isleton, voters will decide whether to add a half-cent sales tax to fund firefighters and ambulances.

In Davis, voters will to decide whether to impose a 10 percent gross receipts tax on marijuana sales. Sacramento voters will consider a 5 percent tax on weed cultivation, with proceeds to go to children’s programs.

In 89 jurisdictions from Siskiyou County to Long Beach, Californians will decide on $6.6 billion worth of local school bonds, parcel taxes, sales taxes and business license taxes, according to CaliforniaCityFinance.com.

There must be a better way.

Ever since California voters disrupted the tax system by approving Proposition 13 in 1978, cities, counties, schools and special districts have groped for ways to pay for their services. In the process, they have created a patchwork of add-on fees, property tax surcharges and varying sales tax rates.

The 89 measures on the June ballot represent only a slight uptick from the 85 measures in June 2014, and 79 in 2010. In other words, this is a normal ballot. Officials putting each of those measures to voters arguably have good reasons, from the need to restore recessionary cuts to the fear that voters will feel less expansive when the economy dips as it surely will.

Many local measures are intended to fund roads and transit. Locals must step in because the Legislature has failed for 20 years to raise the revenue source that’s supposed to pay for transportation infrastructure, the state gasoline tax.

Public school officials have placed bonds on ballots for new classrooms in anticipation that there will be a statewide $9 billion school construction bond in November. Locals will have to provide matching funds.

Turning to voters in June also makes sense because the November ballot is expected to be larded with tax measures, including a statewide effort by the California Teachers Association and other public employee unions to extend a 2012 income tax aimed at people who earn above $1 million.

Plus, there likely will be a $2 per pack increase in the tobacco tax, pushed by doctors, hospitals and unions representing health care workers. If that measure goes before voters, the tobacco industry will spend tens of millions playing on voters’ taxation concerns.

We shed no tears for the tobacco industry and believe the wealthiest among us should pay the most. But California’s income tax rate on the richest residents is 13.3 percent, far higher than other states. Nevada, Texas and Florida, states that actively try to lure California businesses, have no income taxes. Worse, California’s heavy reliance on volatile income taxes makes for boom or bust budgets.

California’s sales tax rate averages 8.48 percent, also among the nation’s highest, but the state doesn’t tax most services, though we increasingly live in a service economy.

And that’s not the only contradiction. Why, for example, are there service taxes on gift wrapping and welding, but not dry cleaning or accounting?

Why are the owners of multimillion-dollar remodeled mobile homes in Malibu taxed as if they were living in vehicles rather than mansions? The loophole can mean the difference between a $29 fee and thousands of dollars in personal property taxes. A tax break for one rich person means other people end up paying more.

Why is the state tax on wine, a popular but socially costly product, lower than in all other states but one? (Hint: The wine industry has clout.) Why is California’s cigarette tax among the lowest in the nation, even though relatively few Californians smoke? (Hint: Tobacco has very good lobbyists).

This month, Gov. Jerry Brown said he might be willing to expend effort in his final two years in office overhauling the tax system. That would be fitting; he was, after all, governor when Proposition 13 became law. Sen. Bob Hertzberg, a Los Angeles Democrat, also is looking to improve the tax system, as is Controller Betty Yee, to their credit.

In the meantime, voters will have to deal with another hodgepodge. If past is prologue, half to 80 percent of the asks will win passage, which, given the vast needs in this state, makes sense.

But it shouldn’t take a ballot measure to decide whether to spend $6.5 million to improve athletic fields and air conditioning at Merced’s Ballico-Cressey School District. And voters shouldn’t have to delve into the weeds of public finance every two years. Elections are complex enough as it is.

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