Tax overhaul bill would boost California revenue $10 billion a year

Bill would broaden state sales tax to possibly include legal work, advertising, Internet usage, dry cleaning

Even though a new crop of lawmakers has arrived at the Capitol, some old favorite issues have never left. Notably taxes.

Already under discussion this year are tax increases on wealthy people's incomes, cigarettes, crude oil, commercial property and more. Supporters are gearing up; so are opponents.

But one veteran Los Angeles politician has much bigger ambitions: State Sen. Bob Hertzberg (D-Van Nuys) has introduced a bill he hopes to use as a vehicle for a sweeping overhaul of California's state and local tax structure.

The idea, he said, is to broaden the sales tax to possibly include legal work, advertising, Internet usage, dry cleaning and other services. At the same time, he would lower the personal and corporate income tax and even boost the minimum wage.

The legislation, though sketchy, seeks to increase state government revenue $10 billion a year, he said.

"I'm trying to be more thoughtful and long-term," said Hertzberg, who knows his way around the Capitol, having served in the Assembly from 1996 to 2002, the last two of those years as speaker. "It's a big debate ... but the Legislature is the place to get a serious discussion."

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FOR THE RECORD

Jan. 12, 12:30 p.m.: An earlier version of this article said Sen. Bob Hertzberg was Assembly speaker from 1996 to 2002. He served in the Assembly during that period, but was speaker from 2000 to 2002.

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It won't be an easy task, since any tax increase requires a bipartisan vote from two-thirds of the members of the Senate and Assembly.

Hertzberg's goal of bringing together Democratic and Republican legislators and lobbyists of every stripe is getting a surprisingly warm reception.

Champions of groups as varied as low-income workers and big businesses say they're enthusiastic about opening a dialogue that could make the tax code fairer while creating jobs.

"We are fully appreciative and supportive of him taking leadership on this discussion," said Rob Lapsley, president of the California Business Roundtable, which represents most of the state's largest corporations. "It's so easy to duck the discussion on tax reform because of all the stakeholders, all the complexities and the politics."

Chris Hoene, executive director of the California Budget Project, agreed that it's helpful to "broaden the conversation and not be about just one individual tax." Hoene advocates for the poor and middle class.

Even the state Senate's Republican leader, Bob Huff of Diamond Bar, says he's looking forward to a full airing of tax issues.

But he remains wary of taxing services, such as telecommunications, legal work or accounting. "It's a problem because it's very regressive. It hits the poor the hardest," he said. Huff also opposes boosting revenue by $10 billion, warning that it's "a huge hit on somebody."

Huff also stressed that any big rewrite of the state tax code should lessen California's reliance on the state's richest 1% of earners, who pay 40% of the personal income tax.

California "depends on the fortunes of a small group of people," said Bill Watkins, an economist at California Lutheran University in Thousand Oaks, but changing that won't be easy.

"I don't think the political will is there," he said. "It's just a tough thing to do."

marc.lifsher@latimes.com

Twitter: @MarcLifsher

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