Just when it appeared that a well-crafted and politically palatable tax package containing a 5% service tax component was positioned to hit the November 2012 ballot, California Governor Jerry Brown has caused its withdrawal by sponsoring his own November tax initiative, one that would raise the sales tax rate 0.5% and the income tax rate 2% on the highest marginal bracket. Too many tax initiatives tend to spoil the electoral stew; at least, that’s what the politically potent “Think Long Committee” reasoned when it announced the “postponement” of its comprehensive package of new taxes (services) and tax decreases.
The reprieve is welcome news for a golf industry reeling from the Great Recession. Adding 5% to the cost of every golf transaction (greens fees; club dues; club assessments; club minima; cart rental fees; range buckets) in this economy would be burdensome, particularly as there would be no value added to the consumer.
When polled separately on the twin tax increase proposals, the electorate favors the income tax proposal by wide margins but opposes the sales tax proposal, albeit by much smaller margins. When combined as part of the same ballot Initiative, whether the latter trumps the former and causes the Initiative to fail or whether the former trumps the latter and results in the Initiative’s passage – well, that is anybody’s guess at this early date.
In either case it would be foolish to think that the service tax idea is going to go away anytime soon. The Governor has already committed to draconian budget cuts should his tax Initiative fail, which would likely cause the “Think Long Committee” to resurrect its package in an appeal to an electorate looking to restore services. Remember, this particular “package” contains more tax decreases than it does increases, and the decreases are in the taxes paid by the largest swaths of the electorate – sales taxes and middle level income taxes. Should the Governor’s Initiative succeed, most experts have already concluded that it will generate considerably less revenue than the Governor has predicted, because it is over-reliant on the revenues generated by the highest marginal income tax brackets – leaving the electorate back where it started with respect to dissatisfaction with service levels.
Whatever the result, the industry needs to remain vigilant about service taxes; it is a notion sure to keep percolating.
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