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SB-522 Taxation.(2019-2020)

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Date Published: 02/21/2019 09:00 PM


Senate Bill
No. 522

Introduced by Senator Hertzberg

February 21, 2019

An act relating to taxation, and declaring the urgency thereof, to take effect immediately.


SB 522, as introduced, Hertzberg. Taxation.
Existing law imposes various taxes, including sales and use taxes and income taxes.
This bill would make legislative findings regarding the need for further efforts to modernize and restructure the state’s tax system and would state the intent of the Legislature to enact legislation that would accomplish specified purposes, including realigning the state’s outdated tax code with the realities of California’s 21st century economy.
This bill would declare that it is to take effect immediately as an urgency statute.
Vote: 2/3   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

The people of the State of California do enact as follows:


 The Legislature finds and declares all of the following:
(a) California’s tax collections in recent years have been heavily dependent on the income of its top earners. During the 2008 Recession, a 3.6-percent decline in California’s economy resulted in a 23-percent plunge in General Fund revenues. To begin to address this, California enacted new constitutional requirements for a rainy day fund and required new levels of budget reserves to be maintained. Further efforts to modernize and restructure the state’s tax system are still needed.
(b) An underlying problem is that, while California’s economy has evolved, its tax system has failed to keep up with the times. Over the past 60 years, California has moved from an agriculture- and manufacturing-based economy to a service-based economy. As a result, state tax revenues have become less reliant on revenues derived from sales and use taxes on goods and more reliant on revenues derived from personal income taxes. In 1950, sales and use taxes comprised of 61 percent of state General Fund revenues; today, it accounts for about 30 percent. Personal income taxes accounted for 12 percent of the General Fund in 1950; today, it accounts for almost 70 percent.
(c) The service industry is accounting for the largest sector of economic growth and output with 82 percent of the state’s private gross domestic product in 2017.
(d) It is the intent of Legislature to enact legislation that would accomplish all of the following:
(1) Realign the state’s outdated tax code with the realities of California’s 21st century economy.
(2) Create steady revenue growth by aligning taxes with economic growth.
(3) Reduce state budget volatility.
(4) Maintain California’s progressivity in the tax code.
(5) Ensure that out-of-state corporations that do business in California contribute their fair share to California’s economy.
(6) Enact a service tax that would offset a portion of the significant financial benefits provided to businesses under the new federal income tax laws, but allow businesses to deduct from their federal taxes the state sales and use tax imposed on the services they use and, therefore, most businesses would still pay lower taxes than before the federal tax law changes.
(7) Make changes that would more fairly apportion taxes between goods and services and would produce more stable revenues.

SEC. 2.

 This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to enact changes to prevent California’s economy from another recession, it is necessary that this act take effect immediately.