Written by Gordon Webster, Jr.
A coalition of business advocates have joined forces to fight mounting momentum behind a sales tax on services in California.
The California Tax & Budget Research Project is a coalition that includes the California Chamber of Commerce, California Taxpayers Association and National Federation of Independent Business of California.
The project aims to educate Californians on the harmful effects of imposing a a new sales tax on services. Such a tax — on services provided by people such as a plumbers, lawyers, accountants, housekeepers, etc. — would cause a snowball that would only serve to make California an even more expensive place to live.
According to the CalChamber, many economists view a service tax as poor fiscal policy because of “pyramiding,” a process where the costs of taxes are passed on and services repeatedly taxed again through the production chain.
Research by the California Foundation for Commerce and Education found that a 5% sales tax on services would drive up to the average cost of a new single-family home by more than $16,500, construction cost for a new school by $17 million and costs for public infrastructure by 3.2%.
“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, in a statement. “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 don not need another tax to make things worse.”
Such a tax would also punish small businesses that would be unable to bring in-house many of the affected services like a large corporation could, thereby avoiding the service tax.
For more information, visits the California Tax and Budget Research Project at cataxandbudgetproject.com.