California Commission on the 21st Century Economy Releases FINAL REPORT!

Yesterday, the Commission on the 21st Century Economy released its final report and recommendations on ways to update and improve California’s revenue system and make it more reflective of the state’s economy. See the Press Release.

The Commission is recommending several significant "big" and "bold" changes to California's tax system with a five-year phase-in plan beginning in 2012.

The Commission's Final Report is 425 pages. Here is a "high level" summary:"

Section One:

These recommendations are of a statutory nature, which means they may be made effective upon passage by a majority of the State Legislature and signature by the Governor.

  1. Reduce Personal Income Tax (PIT) for every taxpayer – Reduce the number of tax brackets from six to two. The new tax rate would be 2.75 percent for taxable income up to $56,000 for joint filers ($28,000 for single) and 6.5 percent for taxable income above that amount. These changes would retain the PIT’s progressive nature but reduce income tax rates for all taxpayers. The proposal would reduce the amount of income tax paid by 29 percent.
  2. Eliminate the corporation tax and minimum tax – Eliminate the corporate tax, which is currently at 8.84 percent. The $800 minimum franchise tax should also be eliminated.
  3. Eliminate the state general purpose sales tax – Eliminate the current 5 percent state sales tax, with the exception of the sales tax on gas and diesel fuels which would continue to be dedicated to transportation. Elimination of the sales tax would phase in over five years.
  4. Establish a business net receipts tax (BNRT) – Establish a new tax, not to exceed 4 percent, applied to the net receipts of businesses. Small businesses with less than $500,000 in gross annual receipts would be exempt from this tax. This tax would have a much broader base than the sales tax (since it would apply not only to goods but also to services and to sales into the state from businesses located outside the state) and, unlike the sales tax, be deductible against federal taxes.
  5. Create an independent tax dispute forum – This forum would provide taxpayers with a forum for resolving disputes with the state.

Section Two:

This recommendation requires a change in the State Constitution or a state ballot initiative in order to be effective.

  1. Strengthen the state’s Rainy Day Reserve Fund – Increase the target for the reserve from 5 percent of revenues to 12.5 percent and restrict the government's ability to use reserve assets so that the reserve is available to help fund services during recessionary periods.

For more information see the Commission's website and Final Report Presentation.

What do you think of the Commission's recommendations? How will they effect your business?Do you think the legislature and Governor will enact these changes?

This blog

Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States.  He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect."  For more info, visit his website: www.leveragestateandlocaltax.com

You can reach Brian at strahle@leveragesalt.com.

Connect with Brian on LinkedIn. Follow Brian on Twitter. Join the Leverage | SALT LinkedIn Group, connect and contribute with your colleagues!  

Because state and local taxes are deceptively simple and endlessly complicated.

More from this blog

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.

38811

Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.

69931

Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.

43593

Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

80575
Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.
17471

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".

50594

William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.

74486

Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (www.ubcc.com), a software development firm of high-volume, high-productivity accounting and payroll technology.

22393

Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

58620

Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

31494
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
94900
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.
22423

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

47268
Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
24291
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.
28241

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.

91135

The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.

29701

FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.

101927

Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.

54648

Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

35999
Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.
61891

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors.

87206

AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish AccountingWEB.co.uk share their ideas, insights, and perspectives from across the pond.

48310