CalChamber-Backed Study Says Service Tax Would Disadvantage California Businesses

Aiming to short-circuit an idea that has long captured the imagination, if not yet the votes, of legislators, a study backed by California Chamber of Commerce has found that adopting a business service tax—i.e., a tax on lawyers, accountants and consultants—would hurt the economy and put the state at a competitive disadvantage.

The 56-page report released Wednesday took aim at Sen. Bob Hertzberg’s SB 522, which would set the stage for updating California’s sales and use tax by expanding the levy to business services. Although the concept of a business services tax has been repeatedly blocked—business interests oppose it and SB 522 hasn’t even been heard this year—Hertzberg has been among policymakers calling on the state to modernize its tax structure, and the Los Angeles legislator’s measure could form the basis of an overall tax overhaul in 2020.

Such a rethinking, he says, would  reduce budget volatility and capture a greater share of tax revenues in the expanding economy. (Read our explainer on taxes here.)

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