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Jewish World Review March 19, 2001 / 24 Adar, 5761

Dan Walters

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Consumer Reports

Time to send Ventura
to California -- Jesse Ventura, the one-time Navy SEAL and professional wrestler who is now the governor of Minnesota, may be something of a flake, as well a something of a fluke.

Notwithstanding his antics - such as serving as commentator on XFL football games - Ventura has launched himself on a laudable mission to overhaul Minnesota's state and local taxation system with proposals nothing short of audacious, including extending sales taxes to services and Internet transactions. Ventura's chances of winning the tax battle are not high, given the opposition. But the mere act of attempting state tax reform merits praise, simply because so few politicians are willing to take on a massive headache.

California may have the nation's most unbalanced state and local tax system, the product of both conscious acts, such as Proposition 13, and the evolution of the state's economy.

The state's overall tax burden is middling, but our property tax load is among the nation's lowest, leaving local governments inordinately dependent on either sales taxes or handouts from the state. State government, meanwhile, has become highly dependent on income taxes generated on capital gains and stock options, a narrow pillar that could collapse at any moment if the high-tech industry continues to falter.

From time to time, academics and a few politicians have talked about a rearrangement of the state-local tax system. Two failed candidates for governor in 1998, Democrat Al Checchi and Republican Dan Lungren, raised the notion of tax reform as part of an overhaul of state-local government relations. But nothing has come of the theoretical talk.

There is, meanwhile, continuing resentment among city and county officials over a decade-old shift of property taxes - now amounting to about $4 billion a year-from their coffers to schools, a maneuver that allowed the state to reduce its direct support of schools by a like amount. The property tax shift is a major reason for the state's ability to run up budget surpluses in recent years. Last year, Gov. Gray Davis vetoed a bill that would have capped the property tax shift and allowed local governments to reap some of the revenue benefits of new construction, even though the measure enjoyed wide support in the Legislature.

The League of California Cities is in the initial stages of building a political organization aimed specifically at insulating city revenue sources and powers over such matters as land uses from further state depredation. It's building a grass-roots network now and may place a measure on the 2002 ballot if it can raise enough money.

The time is ripe - overripe, in fact - for a fresh look at California's tax system with the goal of installing more predictability and balance, before the state-local hostilities escalate even further. We should examine the possibility of a tax swap that would give local governments a share of the income tax because of its upside potential, and state government a larger share of the sales tax because of its predictability. We should look at expanding the sales tax to services, as Ventura is proposing, to realign it to the realities of the new economy. Taxable retail goods, such as cars, furniture and clothing, have a stagnant or declining share of the personal income stream - a trend born of the aging of the population - while services command an ever-greater share. And the shift of retail sales to the Internet merely exacerbates the trend.

Other reforms - such as closing loopholes in the sales tax - are also needed, but a comprehensive tax overhaul would require some political courage, or the kind of devil-may-care attitude that a citizen-politician such as Ventura can exhibit. That's why it's not likely to happen in California anytime soon.

Dan Walters is a columnist for the Sacramento Bee. Comment by clicking here.


© 2001, SHNS