Gross receipts tax is wrong way to reform 

As a former Bay Area resident, I read with interest your coverage of the Board of Supervisors’ decision to send a gross receipts tax to the November ballot in place of the existing 1.5 percent business payroll tax (“Business tax reform compromise set for ballot,” July, 31). No doubt the payroll tax harms hiring and business growth, but I must warn my former neighbors that replacing it with a gross receipts tax is exchanging a bad tax for a worse one.

Gross receipts taxes are widely considered to be among the most economically destructive and complex of taxes. While they have low rates and no deductions, the perniciousness of gross receipts taxes is that since the tax applies each time a business sells its goods or services, the tax “pyramids” on products as they move through the production process. The longer the production chain, the higher the effective tax rate on the final product. This produces major distortions in economic decision-making, with notably negative impacts on low-margin, high-volume businesses.

To mitigate this, lobbyists push jurisdictions with gross receipts taxes to adopt different rates for different industries, a process ripe for confusion and abuse. The City’s ordinance already starts down this road, setting seven different tax rates by industry. For example, retailers would pay just 0.16 percent, while construction would pay 0.45 percent.

No matter how much one fiddles with the rate structure, all gross receipts taxes feature tax pyramiding, which distorts and interferes with business investment decisions. Sales, individual income and property taxes do not have the same tax pyramiding feature, and cause far less economic harm than a gross receipts tax that raises the same amount of revenue. Gross receipts taxes should not belong in any program of tax reform.

Joseph Henchman, Vice president, State Projects, Tax Foundation, Washington, D.C.

Youths too rowdy on Muni

There is no need to grant free passage to teens on Muni since many have always ridden free by boarding through the rear door. In addition to many youths being destructive, they are often loud in their conversations and uncaring of other passengers’ right to have a comfortable ride.

In this age of high technology there must certainly be a way to monitor those who board free. During the week of July 16-20, I counted freeloaders riding between Powell Street and Van Ness Avenue on the 5-Fulton route between 1 p.m. and 3 p.m. and came up with an average of 7.5 for the week. In addition, there are many riders using cellphones, a privilege no longer allowed in Japan and some European countries.

Alvin Gross, San Francisco

A sign of what is wrong

It is a definite sign of a concession to lower intellects within the tea party and the traditional Republican Party when Sarah Palin is the reigning icon of Republican influence.

Despite all her millions gained by appealing to most simple-minded conservatives, where thinking is considered a heresy, she still fails to speak grammatically proficient English. It is not as if she cannot afford a language coach. But then tea party Republicans suffer a phobia against intellectual evolution.

It is a sign of floundering desperation for idol worship when a failed short-term governor can become a new millionaire whose only skill is playing to the declining intellectual, social and cultural handicaps of emotionally scary conservative extremists.

Gail E. Neira, San Francisco

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