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As Taxes Go, a Sales Levy Is Among the Most Painful for All

February 21, 1993

Bradley Inman's commentary on the sales tax ("What a Difference Half a Penny Makes When It Comes to State Taxes," Jan. 31) did not explore how the sales tax affects the overall personal tax burden of California residents. It is simple: The sales tax is not deductible when computing federal income taxes, but the state income tax is deductible.

Inman claims that a half-cent cut in the sales tax rate would cost the state Treasury $1.5 billion. A whopping 2-cent cut would thus cost the state $6 billion. If this were replaced with a $7-billion increase in personal state income taxes, the state's revenues would increase by $1 billion--sorely needed at this time. However, after figuring federal income taxes, that $7-billion increase actually may be only $5 billion. Coupled with the $6-billion cut in sales taxes, the overall tax burden of Californians would decrease by $1 billion.

This analysis does not even consider the impact of a 2% reduction in the costs of goods sold in California. Aside from the uncertain effect of stimulating purchases, this would also cause a reduction in the cost of living--reducing state and local budgets for those items that are adjusted for inflation.

Both the inflationary impact of increases in the sales tax and the non-deductibility of that tax have been repeatedly brought to the attention of the governor and Legislature. None of our elected officials can explain why they are so attracted to a tax that has such negative impacts or why they oppose increases in the deductible state income tax.

DAVID E. ROSS

Agoura, Calif.

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