Sacramento, Calif. – A broad coalition of small businesses, taxpayers, employers and services providers announced forming the California Tax and Budget Research Project (CTBRP) to educate Californians about the harmful impacts of imposing a new sales tax on services on the state’s economy, budget, consumers and taxpayers.
CTBRP was formed in response to recent proposals and growing discussions around imposing a new sales tax on services in California, ostensibly to solve the volatility of California’s state budget. Recent economic research by the California Foundation on Commerce and Education (CFCE) found that none of the recent sales tax on services proposals would have fixed California’s budget volatility if they had been in place from 1997 -2017.
“If the problem is budget volatility, then a sales tax on services is not the solution, no matter how it’s structured,” said Allan Zaremberg, President and CEO of the California Chamber of Commerce. “Once you strip away this pretense, you see that a new services tax is just another tax that will simply make services more unaffordable for all Californians.”
Many economists view taxing services as poor fiscal policy in part because of a process known as “pyramiding,” whereby the costs of taxes on services are passed on and repeatedly taxed again through the production chain. These tax costs can rapidly snowball and add serious costs to end-consumers, particularly in services-intensive sectors. The CFCE research found that a 5 percent sales tax on business services would have the following impact:
- The average cost of a new single-family home would increase by more than $16,500;
- The average construction cost for a new school would increase by more than $17 million; and,
- Costs for public infrastructure like roads and bridges would rise by 3.2 percent.
“A sales tax on services is effectively a tax on housing, a tax on infrastructure and a tax on everyday goods and services,” said John Kabateck, State Director of the National Federation of Independent Business of California. “California families and small businesses are already grappling with the astronomical costs of housing, with roads in need of repair, and with the high cost of living and doing business here – we do not need another tax to make things worse.”
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About the California Tax and Budget Research Project
The California Tax and Budget Research Project (CTBRP) is a coalition of small businesses, employers, taxpayers, and labor concerned about the impacts of imposing a sales tax on services in California. CTBRP’s mission is to educate Californians about the impacts of imposing a new sales tax on services on the state’s economy, budget, consumers and taxpayers. Members of the CTBRP coalition include the California Chamber of Commerce, California Taxpayers Association, National Federation of Independent Business of California, and organizations representing accountants, realtors, contractors, architects, engineers, attorneys, finance and entertainment.
Contact: Ned Wigglesworth