Looking at the Controller’s report on revenues coming into the state you have to wonder what the Democrats on the Assembly Revenue and Taxation Committee were thinking as they embraced new business tax proposals yesterday. Revenue collection is below estimates in most tax categories. One of the few exceptions is the Corporation Tax.
The Democrats’ solution? Let’s kill that golden goose, too.
On a party line vote, the Democrats on the committee supported raising property taxes on business property and eliminating business tax breaks that were passed in last year’s budget negotiations.
With those tax cuts on the books, corporations fared better than expected from the beginning of the fiscal year through April. Revenue from the Corporation Tax is running 3.6% ahead of estimates. Compare that to revenue generated by the Alcohol Beverage Tax, Cigarette Tax, Insurance Companies Tax, Personal Income Tax, and Vehicle License Fees, which are all running below estimates. The only major tax exception is the Sales and Use Tax, which is 2.9% ahead of estimates after a recent surge in revenues.
Reversing the tax decision on corporations will undoubtedly knock the Corporation Tax into the same hole with most of the other taxes. Clearly, the tax increases enacted in last year’s budget deal did not bring in the predicted revenue.
The taxes that were increased generally did worse than anticipated, the Corporation Tax that was promised a tax cut did better than anticipated. Hitting business with increased taxes just when signs of recovery are on the horizon is bad medicine.
The committee members should heed the advice of John Maynard Keynes: ""Nor should the argument seem strange that taxation may be as so high as to defeat its object, and that, given sufficient time to gather the fruits, a reduction of taxation will run a better chance than an increase of balancing the budget."
Maybe we have it all wrong. Maybe the Democrats at Rev and Tax really do not like taxes, because they adopt measures that produce less of them.