Last week on CalBuzz I penned a column outlining how I thought a bipartisan deal could be put together to end the Single Sales Factor tax break (a goal of Governor Brown) — but that it would not be accomplished through the plan the Brown put on the table. You can read that column here, which goes into great detail on why conservatives have an important motivation to get rid of this particular break (rewarding bad behavior is not a good thing).
That having been said, how do you get conservatives on board with getting rid of the Single Sales Factor tax break? It’s simple. Two things. The first is that it must be replaced with an equivalent level of tax cuts so that the ending of the Singe Sales Factor break is revenue neutral to the state. The second is broad based tax relief. Ideally this relief would come in the form of a permanent (admittedly slight) reduction in the state’s sales or income taxes. There could be some room to negotiate tighter tax relief such as a reduction in taxes for small businesses.
I believe that Republican support for this deal evaporates quickly as soon as Democrats start trying to (as Dan Walters puts it) pick winners and losers. In other words the tax relief must broadly relieve all small business owners — not ones who are politically well connected (e.g… for “green” business, or just one type of business.). Frankly, it’s already tough to tighten the relief to just small businesses when it should be across the board.
The bottom line is that there is a path here for a bipartisan deal — but it presumes that Capitol liberals are able to put aside their thirst for more revenue to the state, and their insatiable desire to narrowly “target” tax relief to their favorite causes. I’m skeptical.
To recap: Revenue Neutral. Broad tax relief.