As your taxpayer advocate and elected member of the California State Board of Equalization, I'm fighting to protect your rights and bring about fair tax policies that help grow our economy and jobs. As always, I welcome your ideas about how we can work together to solve the problems facing our state.
- GEORGE RUNNER
California’s Revenue Roller Coaster
The constitutional deadline is just two weeks away and the Governor and Legislature are busy negotiating the state’s next budget. With Democrats now holding enough seats in the Legislature to pass the budget without Republican input, we can expect a budget that reflects their priorities and grows the size of the government. Fortunately for them, budget revenues this year are exceeding expectations and multi-billion budget deficits appear to be a thing of the past—at least for now.
As you can see in the graph, California’s “roller coaster budgeting” is based primarily on volatile personal income tax revenue. About 40% of this revenue comes from just 1% of California taxpayers, and much is related to investment gains. As a result, when the stock market does well, so does state revenue. But the opposite is true as well.
Recent voter-approved tax increases only make this problem worse. As California increasingly looks to high income earners for revenue, many are rethinking whether they want to keep living in California.
A recent survey found that a quarter of the state’s residents living in affluent communities are considering moving out of state to reduce their tax burden. The biggest factor in explaining whether or not someone is considering leaving California is whether he or she has a friend or family member who has made a similar move. The survey’s authors note this creates the possibility for a “snowball effect.”
As I’ve often said, tax policy has consequences. California’s budget may be balanced this year—at least on paper, but it’s anyone guess whether current revenues will be sustainable as we continue to ride this roller coaster.
This year, I’ve been warning that despite last year’s voter-approved multi-billion tax increases and flush state revenues, legislators appear hungry for even higher taxes.
Legislators have introduced bills seeking new bullet taxes, cigarette taxes, insurance taxes, oil taxes and soda taxes—to name just a few.
The good news is that most of these measures have been blocked or put on hold—at least for the time being.
Of course, as we experienced last year, the Legislature can resurrect and pass a tax increase even in the final hours of session. We must remain vigilant.
Fire Fee Update
Earlier this month, I had the pleasure of hosting a telephone townhall about the confusing and controversial fire fee with Senator Ted Gaines and Assemblymembers Frank Bigelow and Beth Gaines. During the townhall, we were able to answer questions about billing issues and explain the difference between taxes and fees. The audio from the townhall is available at CalFireFee.com.
During the Board of Equalization's May 2013 meeting, David Gau presented the latest information on CAL FIRE’s 2013 Focused State Responsibility Area Review, which resulted in some of the State Responsibility Area maps being changed to fix "errors and inconsistences" in the boundaries. Statewide, the changes resulted in 4,659 acres being added and 17,502 acres removed. The Board of Forestry, which approved the new map lines, set the effective date as July 2013. This means that homeowners whose properties were removed will not be receiving refunds for their 2011-12 fire fee bills and will still have to pay the 2012-13 fire fee when bills go out, most likely sometime this summer
As of May 24th, more than $76.4 million has been collected through the fire fee. Nearly 87,000 Californians have filed appeals challenging the fee and successful refunds have totaled more than $1.4 million.
Q - How can I make sure I don’t get stuck with a huge tax bill when I’m buying a business?
A – To protect yourself you should request a certificate of tax clearance. If you do not obtain a clearance before you buy the business, and if taxes are owed and the previous owner has failed to pay those taxes, you could be required to pay any taxes, interest, and penalties that are due.