San Jose Democrats dress up corporate tax dodges 

San Jose’s John Vasconcellos presided over the Assembly’s budget committee for many years in the 1970s and 1980s, and, being the liberal Democrat he was, he frequently railed about a lack of money for what he considered to be vital public services.

Peculiarly, however, Vasconcellos also carried into law one of the most outrageously unfair and illogical corporate tax breaks ever enacted in California. It exempts custom-computer-software programs from sales taxes, but leaves in place taxes on consumers’ off-the-shelf software.

The exemption costs state and local treasuries an estimated $120 million a year.

Perhaps there’s a chemical in San Jose’s water that compels liberal Democratic politicians to carry water for corporate interests, because one of Vasconcellos’ successors is doing the same kind of favor for airlines.

Now, Assemblyman Jim Beall, D-San Jose, is carrying Assembly Bill 81, which would protect airlines from paying higher sales taxes on their fuel purchases in California when prices spike upward. It would levy taxes on the average of spot fuel prices for the preceding five years, rather than on the current price.

The state Board of Equalization estimates that, if enacted, the measure would reduce sales tax revenue by $108 million a year — just about what Vasconcellos’ software loophole costs, interestingly enough.

Like the Vasconcellos measure, the Beall bill would grant corporations a tax break that ordinary consumers don’t get. Motorists would still pay higher taxes when fuel prices spike.

Beall is one of the Legislature’s more liberal members, and he, like Vasconcellos, often bemoans the lack of funds. Nevertheless, he sounds like a Republican Milton Friedman acolyte when he argues that an airline tax loophole would be a big economic boon.

“Rather than looking to airlines and their passengers to fund programs that are clearly government functions, California should take the lead in rationalizing aviation charges,” he told the Assembly Revenue and Taxation Committee. “Airlines need to be provided a stable and efficient fee and tax structure, as the domestic passenger aviation system is a key to the state’s economic competitiveness.”

He continued, “A significant amount of jobs in the state depend on the business provided by the services of the airline industry. Domestic airline carriers must be provided a predictable structure of fees and taxes in order for airlines to schedule more passenger flights to and from California.”

The measure is the latest in a long string of attempts by the industry to get a fuel tax break similar to one that ships have. “Tax certainty is good tax policy,” Chuck Allen of US Airways told the committee.

We’d all like to have fuel-tax certainty, but Beall wants to provide it just to airlines. Think of that the next time he bemoans the lack of revenue.

Dan Walters’ Sacramento Bee columns on state politics are syndicated by the Scripps Howard News Service.

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