Tax Reform Panel Issues Report

The blue-ribbon commission appointed to suggest reforms to California’s tax system released its formal report and recommendations Tuesday.

The final recommendations from the Commission on the 21st Century Economy came as no surprise, as they had been signaled throughout its recent public deliberations.

But the likelihood they will be adopted appears slim, as the recommendations have come under fire from both left and right, and only nine of the 14 commissioners were willing to sign the final document.

The final recommendations include: significant reductions in personal income tax rates, with most taxpayers topping out at 6.5% instead of 9.3%; and eliminating both the corporation tax and the state sales tax and replacing them with a new business net receipts tax, a levy on business transactions designed to have a much broader base than the sales tax.

Gov. Arnold Schwarzenegger immediately proclaimed a new special session of the Legislature to consider the recommendations, though that does not mean lawmakers immediately will jump into action.

“I pledge that the Senate will approach this crucial discussion with vigor and intelligence in the coming months,” Senate President pro tempore Darrell Steinberg, D-Sacramento, said in a statement.

Seven of the commissioners were appointed by the Republican governor, and the other seven were appointed by the Democratic leaders of the Legislature.

Six of the governor’s appointees signed the final report, the exception being William Hauck, president of the California Business Roundtable, who had expressed concern about the net receipt tax’s effect on business.

Only three of the Democratic appointees signed the report.

One of them was Edward De La Rosa, founder and president of the public finance investment firm De La Rosa & Co. He signed despite a list of concerns and recommendations for alternate approaches he outlined in a letter to his fellow commissioners last week.

With those reservations recorded, De La Rosa signed the final report, citing “the fact our commissioners have strived to find a consensus, while remaining true to our individual principles,” according to the letter.

The report, as well as commissioners’ correspondence, is available at http://www.cotce.ca.gov.

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