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Sunday, July 26, 2009

Missing from California Budget

The budget has been passed without tax increases which closes a $24 billion shortfall. Thus, there were a variety of spending cuts most of which will make significant changes in many people's lives.

While it is good to review spending to look for any waste, inefficiencies, expenditures that perhaps should have a fee attached to them, etc., there were some tax changes that would have made sense, such as:

1. A tax amnesty. Many other states are doing this now which means that taxpayers, particularly, businesses are looking to see if they owe anything in these states. That process may uncover that they owe tax in California. Why not provide an extra incentive to pay it?

2. The oil severance tax. This has been talked about for a while. Most states impose one. Yes, it will increase the cost of oil (including gasoline for cars), but California has ambitious CO2 emission reduction targets that will require people to reduce their oil consumption. So, for many reasons, this would be a good idea.

3. Repeal overly generous/unnecessary personal deductions, such as interest expense and property taxes on a second home and mortgage interest on debt in excess of $500,000.

4. Start broadening the sales tax to include certain personal services and entertainment, and lower the sales tax rate at the same time.

More information on the budget:

What do you think?

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