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Saturday, May 14, 2011

Four Years of Blogging!

I started this blog May 14, 2007. Some of the first topics I posted were about weaknesses in the California sales tax, such as the base being too narrow and the use tax gap. So, what has changed?! Well, the California sales tax rate is 1 percentage point higher today (and a few more weeks). This is unfortunate. It would be better to broaden the base and lower the rate and start phasing out the application of sales tax to business purchases.

The use tax gap exceeds $1 billion per year. Changes in the last four years are minimal in effect in closing this gap. A requirement for businesses without a seller's permit, and at least $100,000 of annual gross receipts to register was added, but I'm not convinced the cost-benefit is there. Instead of creating a new filing regime, there are ways to better enforce the requirement to pay use tax on your income tax form. Improvements there include mandating that anyone who does not file a quarterly sales tax report to have to enter a number of the income tax form use tax line. The "look up" table to be added starting for 2011 tax returns will help because if anyone doesn't keep records of how much use tax they owe, they can just use the lookup table to get figure (3/19/11 post).

But, we still need a lot more education about the existence of the use tax, a more clear line on the Form 540 and instructions, as well as public information on the benefits of lowering the rate and broadening the base.

I'm sure the sales tax topic will continue to show up in this blog. I expect though that the fifth year of this blog will be focused more on federal tax reform and moving our tax systems into the 21st century and reforming them to better meet principles of good tax policy. Congress has held several hearings on tax reform this year and we are expecting a reform proposal from President Obama. Should be plenty to blog about!

Thank you for reading and commenting! I hope you continue to do so!

1 comment:

Peter Reilly said...

Congratulations of your fourth year.

On the use tax we have a table in Mass. I'm still amazed at the number of people who are adamant that the correct number for them is 0. I guess they run their lives differently than I do