New Study: Proposed tax on services could costs Californians $122.6 BILLION per year

Just in time for Tax Day, the Board of Equalization issued a study requested by the Senate Committee on Governance and Finance estimating the revenue take from taxing untaxed services would be $122.6 billion. The study will become fodder in the coming debate over Senator Bob Hertzberg’s effort to restructure the state tax system to include taxes on the service economy.

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Hertzberg commented on the study results, “California’s economy has changed from one that had been dominated by making goods to today where 80 percent is producing services.”

Hertzberg’s plan, Senate Bill 8, would tax services as part of a restructuring plan and raise an additional $10 billion in tax revenue.

In response to the study, Board of Equalization Vice-Chair George Runner said,  “I’d consider a broader sales tax only if it’s part of revenue neutral tax reform, such as abolishing California’s income tax and the Franchise Tax Board, along with other taxes that destroy jobs. … The last thing overtaxed Californians need is another tax.”

Runner opposes Hertzberg’s proposal.

There will be plenty of time to get into the debate over service taxes. However, it should be noted that the $122.6 billion the service tax could supposedly raise is not only larger than the current General Fund budget of $113 billion, but almost $10 billion larger. In other words, a tax on services as outlined in the study could replace the General Fund revenues and get the additional $10 billion that Hertzberg is looking for while eliminating the income tax, state sales tax and corporate tax.

Hertzberg’s proposal would not attach a service tax to all the items delineated in the BOE study, pointing out education and health care as tax-free services.

If not all services are taxed the door would be open for other services and industries to seek exemptions from the tax — a potential field day for the state’s lobbyists.

Cross-posted at Fox and Hounds Daily


  1. Really?
    We’re expected to stand still while they drain from our pockets more money than they have currently budgeted, so they can expand their Corruptocracy even larger than it is.
    We used to talk about Torches & Pitchforks, and Tar & Feathers; but this calls for REVOLUTION!, and Heads on Pikes.

  2. No politician in his or her right mind would ever want to stop a tax. After all, there is all that deferred maintenance on infrastructure, unbuilt desalination plants to produce potable water and unfunded public employee pensions. Given California’s recent political tilt, the tax on services would be layered on top of all the other levies.

    Interesting though that the folks responsible for paying out refunds for the 30% of recycled beverage containers actually returned can find the money and staffing to check each and every container to ensure it has printed on it ‘California recycled value.’ If the point is to keep litter to a minimum, maybe ensuring more participation with less hassle would be a more appropriate end?

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