Hertzberg Needs to Define “Revenue Neutral”

PERSPECTIVE--Last Friday, I attended a community breakfast sponsored by Senator Bob Hertzberg at Vitellos in Studio City’s Tujunga Village neighborhood.

Among the subjects he covered was his latest attempt at state tax reform.

Yes, latest.

Soon after he took office in 2015, fresh from a hiatus from the legislature, where he had served as Speaker of the Assembly, he introduced SB8: the Upward Mobility Act. It was a plan to restructure taxes, an admirable objective, except it was not revenue neutral – not even close.   Try about  $10 billion per year in additional tax revenue. At the breakfast, he made a point that I had criticized SB8 for that very reason, a true statement.

But where would the additional revenue come from?  A component would have applied sales tax to many services, regressive to say the least.

The bill went nowhere.  Even Governor Brown objected to it in no uncertain terms:

Politically, the idea of applying the sales tax rate to professional services would look like an attempt to “burden the ordinary folks.”  

The plan “may be logical with some green-eye-shaded accountants, but I don’t know that from the political point of view that is very viable”.

On February 5 of this year, Hertzberg introduced SB993, the Middle Class Tax Relief Act. He assured the audience … and me, in particular … it was revenue neutral.

I would have taken him at face value, after all, there is very little detail available and it does appear the sales tax on services would not be as far reaching as SB8’s.  But in the same breath, he adamantly denied that SB8 would have increased taxes.

I reminded him of what he stated when SB8 was introduced, “Projected revenues from SB 8 would be in the range of $10 billion that would be apportioned in the following way: $3 billion for K-12 schools and community colleges, $1 billion each for the two university systems, $3 billion for local governments, and $2 billion for a new earned income tax credit for poor families.”

Noble objectives, indeed, but not revenue neutral.

So, the senator needs to define what he means by insisting his latest legislative proposal will be revenue neutral.

If it is, then let’s give it consideration.

But we need to check the math.

Paul Hatfield is a CPA and serves as President of the Valley Village Homeowners Association. He blogs at Village to Village and contributes to CityWatch. The views presented are those of Mr. Hatfield and his alone and do not represent the opinions of Valley Village Homeowners Association or CityWatch. He can be reached at: [email protected].)