After months of negotiations, California Governor Jerry Brown was ultimately unsuccessful in his attempt to balance the state’s massive budget using new tax dollars, specifically, $11 billion in revenues from an extension of temporary increased personal income and sales taxes and vehicle fees. Rather than including the revenue in his own budget proposal, Brown stuck to a campaign promise to take all tax increases to the voters (this was also necessary because it takes a supermajority to pass tax increases in the legislature). He was unable to garner the support of enough GOP legislators to put the extension on the ballot this summer or fall, so he gave up to allow the state’s budget to be completed in time for the new fiscal year.
On the eve of the new fiscal year, Governor Brown signed a plan that relies primarily on deep spending cuts and higher than previously forecast revenues to close the state’s budget gap. Still, deeper cuts in spending will need to be made if revenues do not hit the $4 billion above target projection lawmakers counted on when balancing the budget.
In response to the enacted spending plan, the California Budget Project wrote: “This is a very tough budget for families and communities across California… it is deeply disappointing that the approved budget does not reflect a balanced approach that combines additional revenues with spending reductions to move the budget toward balance.”
One significant tax change did make it into the final budget. California became the 7th state to adopt an “Amazon law” which will make it more difficult for state residents to evade sales taxes when shopping online. Under California’s new law (which went into effect July 1), a larger set of online and catalogue retailers (specifically, those partnering with in-state businesses in order to generate sales) are required to collect and remit sales taxes. Traditional brick and mortar retailers have dutifully fulfilled this responsibility for decades – and indeed, having the retailer collect sales taxes is the only effective method for enforcing existing sales tax laws.
In response to the enactment of this new law in California, Amazon.com and Overstock.com ended their relationships with their California affiliates (a move the retailers also made in North Carolina, Rhode Island and Connecticut). These large online retailers’ tactics are doing very little to slow the spread of this sensible method for reducing sales tax evasion. Illinois, Connecticut and Arkansas enacted Amazon laws this year and nearly a dozen more states seriously considered them. The seven states with Amazon laws include nearly 30 percent of the country’s population.
Photo via Neon Tommy Creative Commons Attribution License 2.0