During the past 60 years, California has moved from an agriculture and manufacturing-based economy to a services-based economy. As a result, state tax revenues have become less reliant on revenues derived from the Sales and Use Tax on goods and more reliant on revenues derived from the Personal Income Tax. As personal incomes tumbled during the Great Recession, state revenues plummeted disproportionately, causing states to cut many essential services such as health care and child care for low-income families when they were needed most. Relying on the wealthiest taxpayers to support California’s needs is an outdated practice and dangerous during hard economic times.
Senator Bob Hertzberg proposed his “Upward Mobility Act” this year to help reform the current tax structure in order to make stronger, long-term investments in education, skills training, and infrastructure needs that will help ensure that California’s residents and businesses can thrive in the 21st century global economy. The initial goal of the upward mobility act is to explore problems with the current tax structure and discuss reform alternatives, such as expanding the application of Sales and Use Tax law by imposing a tax on specified services, incentivizing entrepreneurship and business creation by evaluating potential changes to the corporate tax law, and examining the impacts of a simpler Personal Income Tax Law. By reviewing the current tax structure and adapting it to meet the future needs of the changing economy, Senator Hertzberg’s plan will help revitalize education funding, jumpstart job creation, and foster improved state finances and business climate, helping expand opportunity for more California residents for many years to come.