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ARTICLE

STATE TAXES

Allow California Tax Credits Against Unitary Group Liability:  The Need for Legislative Action. Members of a unitary group should be treated consistently as one taxpayer for all income tax purposes, including tax credits, say Chris Micheli, attorney and lobbyist for the Sacramento governmental affairs firm of Carpenter Snodgrass & Associates, and E. Scott Ewing, attorney and senior tax manager for the Los Angeles office of Deloitte & Touche LLP.

Summer Blackouts Could Cost the State’s Economy $21.8 Billion; 135,000 Jobs. “Rolling blackouts that culminate in 20 hours of electricity outage will have significant adverse implications for growth of the state eoconomy and will result in lost jobs and reduced income … Any additional periods of effective electricity loss in excess of 20 hours due to rolling blackouts would be sufficient to push the California economy into recession this year,” according to a study by AUS Consultants that was released by the California Alliance for Energy & Economic Stability.

Assessing the California Energy Crisis. “Perhaps the single most important thing that California failed to do in avoiding a supply and price crisis was to remove impediments in the electrical gridto true competition among buyers and sellers of electricity,” says Mark W. Seetin, vice president for government affairs of the New York Mercantile Exchange.

Time for New Look at Nuclear Power. “The State of Vermont gets 70 percent of its electricity from nuclear power. France gets 76 percent. And yet, under current law, a nuclear power plant application cannot even be considered in California. How are we to meet the fdemands for cheap, clean and abundant electricity without it,” asks State Senator Tom McClintock.

STATE BUDGET

Gray Davis says “Break Out the Umbrellas.” In his May budget revision, Governor Gray Davis axed $3.2 billion from his spending plans issued just five months earlier, but is his proposal to spend down the reserve too risky? He says reserves are for “rainy days” and it is raining. By the Cal-Tax Staff.

Smart Housing Policies Needed to Ease Housing Crisis. “Much like California’s energy crisis, the housing affordability crisis is, at its core, a supply vs. demand issue. For the past 10 years, California built less than half the homes needed to accommodate our growing workforce and population.” The Job-Center Housing Coalition has proposed a package of bills to address the problem, says Allan Zaremberg, president of the California Chamber of Commerce and co-chair of the Job-Center Housing Coalition.

Stiff Tobacco Taxes Inspire Flourishing Black Market. In California, a black and gray market in tobacco products already was costing the state an estimated $50 million when voters approved Proposition 10, an initiative that more than doubled the tobacco tax rates. In the two years since, illegal and other untaxed sales have mushroomed, state and federal officials told James P. Sweeney of Copley News Service. He reports on an outbreak of counterfeit tobacco tax stamps unlike anything state agents had ever seen in California.

“Trial de Novo” Wins Assembly Approval. Assembly Speaker Robert Hertzberg’s impassioned presentation helps gain a 64-2 Assembly vote for AB 934, a top business community priority in the 2001 legislative year. “This measure levels the playing field by providing locally assessed taxpayers their day in court,” Mr. Hertzberg said. … Split-Roll Bill is Dropped. Assembly Member Bill Leonard said he abandoned his AB 1013 “because there is no data to show commercial property owners have taken advantage of state law to the detriment of residential property owners.” … Amid Blackouts, Senate Passes “Windfall Profits” Tax. Although critics called it a “perverse” tax incentive that would backfire on energy-hungry California, the Senate on May 7 approved SB 1X (Soto), imposing a 100 percent excise tax on sales of electricity at a price above $80 per megawatt-hour. … Franchise Tax Board Postpones Protest Regulation Action. State Board of Equalization Chair Claude Parrish, a member of the FTB, said he would continue to pursue a compromise on the FTB regulation for taxpayer protests. Coverage of key developments by the Cal-Tax staff.