Anyone interested in paying a county income tax on top of a
state income tax? I didn’t think so, but that’s what could happen if SB 653
(Steinberg) becomes law.
In anticipation of government restructuring that would move certain responsibilities to county government, this bill would authorize county supervisors to submit to voters a local personal income tax, a local corporate income tax, and a local sales and use tax.
Over fifty years ago, the legislature declared that income taxes would be the sole purview of the state while counties were authorized to levy other taxes such as taxes on hotel stays and business taxes. SB 653 would open the door to a local income tax to be placed on top of the state income tax, already one of the highest in the nation.
Additionally, the legislation would allow for new
uses for sales and use tax at the county. Uniform local sales and use taxes
were imposed by the legislature when taxes varied substantially from county to
county creating a nightmare for businesses and seriously hurting those
firms stuck in counties with higher sales taxes than neighboring counties. SB
653 allows counties to ignore uniformity and seek new sales and use taxes that
could be placed on items or services that currently aren’t taxed.
While
the bill authorizes the addition of local personal and corporate income tax and
a local sales and use tax, it also establishes a blanket authorization which
includes but is "not limited to" these particular taxes. The mind reels at what
a clever tax agency might come up with.
The
bill requires a vote of the people on these taxes. However, not all the people
subject to the tax might get to vote on it. If county supervisors model their
tax on how some other state local jurisdictions tax personal income, if your
work carries you into more than one county, you would be subject to filing
taxes in all the counties in which you received income. It could cause a
nightmare when businesses and individuals have to apportion their income
according to which county income was received for purposes of paying the local
income tax in more than one county.
It
is possible that a roadblock exists for SB 653. Proposition 26, passed last
November, requires that "any change in state statute which results in any
taxpayer paying a higher tax" requires a two-thirds vote of the legislature.
Some argue that making it easier to raise taxes requires SB 653 to get a
two-thirds vote instead of the majority vote tag the legislature has placed on
it. SB 653 may have a court date in the future if it passes.
However,
rather than put hopes on that outcome, businesses, taxpayer organizations and
individuals need to act quickly to see that it never becomes law.