The people elected me to fix what was broken in Sacramento. Together, we have tackled the big issues, whether it is workers’ compensation, infrastructure, redistricting or the budget.
Now, we have a historic opportunity to reform another broken system and help unleash a new wave of prosperity across our state.
California’s tax system was created nearly 100 years ago, before the Great Depression. It is outdated and antiquated, and no longer works in our technology and information-based economy.
That’s why last October, I joined Democrat and Republican leaders to form a bipartisan Commission on the 21st Century Economy.
Composed of economic experts from all political stripes, its mission was to study California’s tax code and propose reforms to make the system more stable, more fair, more simple and more conducive to economic growth.
After months of careful analysis and extensive public input, the 14-member Commission released its proposal.
A tax reform package would benefit California for a number of reasons.
First and foremost, it could help release the power of California’s tremendous economic engine.
Our state currently imposes the highest income tax rate and one of the highest corporation tax rates in the country. This discourages investment and hinders growth. The Commission’s plan would increase productivity, lower the cost of investing in California’s companies and make us more competitive in the global economy.
Second, it could bring more stability to state revenues.
California’s current tax system is the epitome of boom or bust. It relies on one just percent of taxpayers to provide nearly half of all our income tax revenue. And that one percent is highly dependent on unpredictable capital gains and stock option revenues.
This has resulted in wild swings in revenue, and a tax system that resembles Wall Street’s economy more than California’s.
This roller coaster ride, up one year and down the next, is no way to fund health care, education, public safety and other vital programs. It also leads to monster deficits and endless calls for tax increases.
The Commission’s proposal substantially reduces that volatility by lowering the income tax rates and reducing our dependence on an unstable revenue source.
The Commission also recommends strengthening our state’s Rainy Day Fund. This would further stabilize our revenues, and is something I have been fighting for since taking office.
Finally, this proposal would promote greater fairness and simplicity by broadening the tax base and making the system easier for families and small businesses to understand.
The bipartisan commission members and staff should be applauded for their hard work and dedication. Yet as we know, big government reform efforts of any kind often elicit fierce and largely instinctive cries of opposition. And the bigger the reform, the louder the cry.
So as expected, the Commission’s proposals have been met with howling protests from an army of lobbyists and special interests, left and right, who rely on the status quo.
They are seeking to torpedo this proposal without even the decency of an open and honest debate.
When President Reagan was pushing tax reform in Washington, he encountered similar resistance. He spoke of “an army” of lobbyists and special interests who were ready to “fire with every weapon they own.”
Sacramento in 2009 is eerily similar to Washington in 1985. I’ve made it clear, our current volatile system is no way run the economy of the golden state. The people of California deserve better. We can do better.
The Commission’s proposal deserves and demands our thoughtful consideration.