California leaders including Gov. Arnold Schwarzenegger have reportedly agreed a new budget deal, but as the state attracts jeers for its lateness in taking concrete steps to pass a budget, some are booing its leaders for their willingness to sign off on tax hikes when it is being reported that California is owed about $1.4 billion in tax revenue already collected by businesses from consumers, but never remitted to the state.
The LA Times reports:
California is owed nearly $1.4 billion by auto dealers, restaurants and other businesses that collected sales taxes from buyers but didn’t pass the money along to the state — a situation that is aggravating California’s budget crisis.
The tab is up about 25% from a year ago and has almost doubled since 2007, state records show.
That money could make a significant dent in the state’s $19-billion budget gap. Watchdog groups say the state’s failure to collect it is particularly galling because much of the tax money has already been paid by consumers — it just hasn’t been turned over by merchants to the state Board of Equalization.
“All of us want people to pay the tax they legally owe before lawmakers go looking to raise taxes,” said Jean Ross, executive director of the California Budget Project, a Sacramento nonprofit that advocates for lower-income Californians.
Indeed, reports indicate that Republicans in the Golden State have reluctantly signed off on one tax increase as a possible pathway to getting more tax cuts included in any budget. According to the Sacramento Bee, as of last week, GOP leadership had agreed to a delay in implementation of a net operating loss (“NOL”) deduction originally intended to begin this year until 2012– a move that would supposedly bring in about $1.4 billion.
But some skeptics of the plan, who wish to avoid all tax hikes in their totality, are arguing in light of the LA Times report that this delay is unnecessary, given that $1.4 billion in sales taxes is currently not being collected by the state, but should be. They charge that nixing the NOL deduction could have a negative effect on the state’s economy, which ought not be further risked given these circumstances. California is currently suffering from 12.4 percent unemployment.
In addition, concern remains that California Democrats could continue to pursue implementation of a tax scheme whereby out-of-state retailers who maintain no operations in California are forced to collect and remit California sales tax despite that fact simply because they advertise with websites based in the state. Critics charge that scheme is both unconstitutional and would possibly aggravate California’s economic woes (as sites like Overstock.com have curtailed paid marketing within states that have pursued a similar scheme). However, they also charge that looking for more solutions focused on sales tax collection and remittance is an ironic move given the fact that the state is already failing to make those who clearly and indisputably owe sales taxes pay up.
The California legislature is set to vote on the budget deal on Thursday.
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