Buoyed by a soaring stock market and rising home prices, personal income tax receipts are flowing into the state treasury at a rate exceeding all expectations. But one big question looms as lawmakers and the governor consider how to spend the government’s new found riches: what will happen when the music stops?
Lowering the vote threshold for passage of local school parcel taxes would likely allow far more to pass. But there is no evidence that it would expand their use beyond the sort of wealthy Bay Area school districts that already have them. These are the key findings of a report released today by the Public Policy Institute of California (PPIC). The report assesses the potential effect of reducing the vote required to pass these taxes from two-thirds to 55 percent—a proposal the state legislature has been discussing. Although a parcel tax is one of the only local revenue options available to school districts, these taxes are not widespread. Only about 10 percent of districts have passed one, and the money raised amounts to less than 1 percent of total K–12 revenue.
Recent reports from the Franchise Tax Board estimate that California faces a roughly $6.5 billion “tax gap” from unpaid taxes. Remarkably, the state has overlooked an easy solution that is already on its books to help close the tax gap: a reward program to encourage whistleblowers to report tax fraud and tax evasion.