Raise our taxes further, and 10-15% of the population who has money, will move away. That 15% will take with it 10% of your revenues ... forcing you to tax even more to compensate for that loss, which will further force middle-class taxpayers to leave the state, leaving a majority in California who do not pay taxes.
Won't that be fun.
Tax at your own peril.
Calif. governor wants to tax golf, auto repairs
By STEVE LAWRENCE, The Associated Press
SACRAMENTO, Calif. - Golf course owners and some of their customers are teed off at Gov. Arnold Schwarzenegger. So are veterinarians, auto mechanics and amusement park operators.
Their anger is directed at the Republican governor's proposal to extend the state sales tax to cover more services, an idea that has surfaced in other states as they race to plug crippling budget deficits. The Center on Budget and Policy Priorities, a research clearinghouse, predicts such deficits nationwide could reach $350 billion by 2011.
In California, Schwarzenegger wants to help close a nearly $42 billion budget deficit by taxing rounds of golf, auto repairs, veterinary care, amusement park and sporting event admissions and appliance and furniture repairs.
Democratic Gov. David Paterson in New York has proposed levies on MP3 downloads, taxi rides, movies, concerts, sporting events, and personal services such as haircuts, manicures and massages.
Schwarzenegger's fellow Republican in Utah, Gov. Jon Huntsman, has shelved a proposal to tax attorney and accounting services but promises to bring it back next year.
Service taxes in other states include levies on pet grooming, water well drilling, fur storage, massages, shoe repairs, swimming pool cleaning, taxidermy, and dating and diaper services. But that doesn't make the groups affected by Schwarzenegger's proposal feel any better.
"We're old and retired. We don't need any more taxes," said Fred Mayers of Sacramento as he played golf recently at a public course in the state capital. "The only luxury we have is playing golf. They can't charge us any more."
Scott Pattison, executive director of the National Association of State Budget Officers, said more states could be looking at service taxes as they get deeper into legislative sessions.
"It's one of those things that's so politically difficult and controversial that it's usually one of the last proposals that's floated," he said.
California already taxes some services, including gift wrapping, tuxedo rentals and video rentals for home use. But virtually every other state applies its sales tax to more services, said Jean Ross, executive director of the California Budget Project, a Sacramento think tank.
The tax on services is part of $14.3 billion in hikes Schwarzenegger has proposed to help close a budget deficit that's projected to total $41.6 billion over the next 17 months. He also is seeking $17.7 billion in spending cuts and $10 billion in additional borrowing.
In addition to the service tax, Schwarzenegger proposes hiking the sales tax by 1.5 percent through the end of 2011, boosting taxes on alcoholic drinks, increasing the vehicle registration fee by $12 and taxing companies that extract oil.
Local sales taxes in California range from 7.25 percent to 9.25 percent, varying from county to county and even from city to city. A 1.5 percentage point increase would boost the rate to nearly 10 percent in many areas of the state.
Republican lawmakers have refused for months to consider raising taxes but recently indicated a willingness to consider hikes if they're tied to tough spending controls.
Schwarzenegger and lawmakers have little time left to strike a deal. The state controller has said he will have to delay tax refunds and some other payments for 30 days starting Feb. 1 because of a cash shortage. The governor also has ordered tens of thousands of state employees to take two days off a month without pay, starting Feb. 6.
"There's no good time to raise taxes," said H.D. Palmer, a spokesman for Schwarzenegger's Department of Finance. "This is not something that the governor is putting forward because he enjoys it."
He said the six types of services Schwarzenegger is proposing to tax were picked because they involve businesses that commonly collect sales taxes on goods they sell and could quickly adjust.
The affected industry groups say they are being unfairly targeted and that similar businesses are exempt.
"You don't see a tax on movies," said Bob Bouchier, executive director of the California Alliance for Golf. "You don't see a tax on bowling. You don't see skiing. You don't see a tax on any other sport."
The administration estimates that the service taxes would raise $1.4 billion through the fiscal year that ends June 30, 2010. Schwarzenegger wants to implement the taxes on appliance and furniture repairs, golf, veterinary care and vehicle repairs by March 1. The taxes on amusement park and sporting event tickets would kick in on April 1.
Opponents question whether the taxes would raise that much, saying they would result in layoffs and fewer customers.
"You're looking at a $50 increase on a $500 (repair) bill at a time when people are not buying new cars and instead are having their old cars repaired so they can keep them on the road to drive to work," said Peter Welch, president of the California New Car Dealers Association.
"This is really going to hit people when they're down."
Opponents also suggest that other increases, such as a boost in income taxes or restoration of the annual vehicle license fee that Schwarzenegger cut when he took office, would be less damaging.
Not everyone that would be affected is upset.
Sean Grace, a home remodeling contractor from the Sacramento suburb of Elk Grove, said die-hard golfers will find a way to pay the tax if lawmakers approve it.
"Ten percent is not too much," he said before slamming a long drive down the fifth fairway at Sacramento's Land Park golf course. "You've got guys paying $100 (for green fees). What's another $10? They're going to find it somewhere."