BILL NUMBER: SB 328	AMENDED
	BILL TEXT

	AMENDED IN SENATE  APRIL 2, 2009

INTRODUCED BY   Senator  Walters   Dutton 
    (   Coauthor:   Senator   Harman
  ) 

                        FEBRUARY 25, 2009

    An act to amend Section 201 of the Revenue and Taxation
Code,   An act  relating to taxation.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 328, as amended,  Walters   Dutton  .
 Property taxation.   Flat tax.  
   Existing law imposes specified taxes.  
    This bill would make legislative findings and declarations
relating to this state's taxes, and declare the Legislature's intent
to eliminate specified taxes and adopt a flat tax, as declared. 

   Existing property tax law provides that all property in this
state, not exempt under the laws of the United States or of this
state, is subject to taxation.  
   This bill would make technical, nonsubstantive changes to this
provision. 
   Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    (a) The Legislature finds and declares
all of the following:  
   (1) California has the highest personal income and capital gains
tax rates in the nation.  
   (2) California has the 9th highest corporate income tax rate and
the 8th highest corporate capital gains tax rate in the nation. 

   (3) California has the highest gas and diesel taxes in the nation.
 
   (4) Forbes ranks California as the worst state in the nation in
terms of business costs.  
   (5) High taxes negatively impact income and employment growth.
 
   (6) Progressive taxes, economic volatility, high growth rates in
government expenditures, and state and local budget volatility are
all interrelated.  
   (7) California's current economic and fiscal crisis is a direct
result of the state's tax structure.  
   (8) These problems could be addressed by completely revamping
California's tax code, replacing it with a single flat tax on
personal income and business value added.  
   (9) A flat tax eliminates much of the inefficiency and distortion
in the current convoluted tax system by broadening the tax base and
sharply reducing marginal tax rates.  
   (10) A flat tax will lead to a surge in economic growth and an
increase in work, savings, and investments. By increasing incentives
to engage in productive economic behavior, it will also boost the
economy's long-term growth rate and eliminate the need to increase
taxes or reduce state services.  
   (11) A flat tax will reduce the volatility in California's tax
revenue stream. The result will be a more stable economy, more stable
budget revenues and, subsequently, more stable and predictable state
expenditures. Stable budget revenues will eliminate the
boom-and-bust cycles that have plagued California's state budget and
lead to more effective and efficient government.  
   (12) A stable tax system that is revenue-neutral would maintain
funding for Proposition 98 and allow it to grow over time, in
accordance with current law.  
   (b) It is the intent of the Legislature to do all of the
following:  
   (1) Eliminate the existing state personal, corporate, and sales
taxes.  
   (2) Establish a flat personal income tax and business value added
tax at a revenue-neutral rate.  
   (3) Establish a flat tax that would not impact any other existing
revenues, such as local taxes, including sales and property taxes,
and state fees, to be calculated as follows:  
   (A) Income would include income from all sources, including wages,
salaries, interest income, dividends, net capital gains (short term
and long term), royalties, fees, etc.  
   (B) Deductions would be allowed for charitable donations, mortgage
interest payments, and rental payments for renters.  
   (C) Receipts of social security, unemployment benefits, and other
transfer payments would be specifically designated as tax exempt.
 
   (D) The resultant figure would be the taxable income base. 

   (4) The business value added tax would be calculated as follows:
 
   (A) For all entities possessing a business taxpaying identifying
number, including independent contractors, the tax base would be the
total dollar value of all sales during the period less:  
   (i) All purchases from entities that possess a  taxpaying
identifying number (including independent contractors).  
   (ii) All purchases of imported goods with the requisite import
taxpaying identifying number.  
   (iii) Depreciation of pre- flat-rate tax depreciable assets at
their regular depreciation schedules.  
   (iv) Bad debts incurred.  
   (v) Charitable contributions.  
   (B) No other deductions would be permitted.  
   (C) The resultant figure would be the business value added tax
base.  
  SECTION 1.    Section 201 of the Revenue and
Taxation Code is amended to read:
   201.  All property in thisstate that is not exempt under the laws
of the United States or of thisstate is subject to taxation under
this code.