SB 328 has been amended by Sen. Dutton to essentially scrap the entire income tax system in the State and replace it with a flat tax. Though not explicitly enumerated in the bill, one would assume this would eliminate all tax credit programs as well.
Sen. Dutton’s press release states:
Senate Bill 328 seeks to eliminate the state’s convoluted personal, corporate and sales taxes and instead establish a flat personal income and business value added tax.
“We all know that California’s tax code is broken and contributes to California’s poor business climate,” said Senator Dutton. “Study after study shows California is an expensive state to do business. We have the highest personal income and capital gains tax rates in the nation. We have the highest gas and diesel taxes. These taxes are now even higher because of the largest tax increase in the history of California that was passed in February.”
Senator Dutton said that a flat tax will not only help to stimulate the economy, but it will also reduce the volatility in California’s tax revenue stream. Stable budget revenues will eliminate the boom-and-bust cycles that have plagued California’s state budget and lead to a more effective and efficient government.
The bill language itself is quite a manifesto on the state of current tax structure:
SECTION 1. (a) The Legislature finds and declares
all of the following:
(1) California has the highest personal income and capital gains
tax rates in the nation.
(2) California has the 9th highest corporate income tax rate and
the 8th highest corporate capital gains tax rate in the nation.
(3) California has the highest gas and diesel taxes in the nation.
(4) Forbes ranks California as the worst state in the nation in
terms of business costs.
(5) High taxes negatively impact income and employment growth.
(6) Progressive taxes, economic volatility, high growth rates in
government expenditures, and state and local budget volatility are
(7) California’s current economic and fiscal crisis is a direct
result of the state’s tax structure.
(8) These problems could be addressed by completely revamping
California’s tax code, replacing it with a single flat tax on
personal income and business value added.