Bee Columnist calls for fix of one tax provision

by Brian Leubitz

There has been much discussion on whether to tax services in the same way we tax goods.  It could bring in several billion dollars of revenue in new sales taxes. However, before we even get there, the question of what is a “good” and what is a “service” acts as a threshold question.

And Dan Walters found one particular good/service question to address:

Ordinary computer users continue to pay taxes on off-the-shelf software but custom programs designed for big corporate and government customers, some costing millions of dollars, are exempt.

Why? The sponsoring legislator, John Vasconcellos, a Democrat who often railed about cuts in state spending, offered a lame rationale about software being mostly services, but the real reason was that the industry had political clout and used it.(SacBee)

And as Walters points out, this question alone could mean nearly two hundred million of revenue annually for the state. On one level, it is hard to blame Sen. Vasconcellos for the loophole, in a hate the game, don’t hate the player sort of way. But, the state has been suffering from these little injuries as we seek to balance the budget, and they add up.  

Walters calls for tax reform generally, and that isn’t necessarily a bad idea. But, for many years that has just been a code word for reducing progressivism and putting more of the burden on the middle class. If we can clean up the tax code, great, but we have to be careful about how we go about it. We must ensure the protection of a consistent revenue stream while also avoiding a shifting of the bill away from those who can most afford it to those who can’t.