Sen. Carole Migden (D-San Francisco) doesn't buy it. Her bill, SB 323, would have increased penalties on retailers who collect sales tax but keep it.
"My measure merely stated that people can't pocket the state's money," she said. "Who could object to that?"
The governor wrote in his veto message that the bill, which would have slapped retailers with a penalty equal to 50% of the unpaid taxes, "creates a rigid and overly severe punishment."
The veto came after the Chamber of Commerce sent lawmakers and the governor's office a letter opposing the measure. "There could be many benign reasons why a retailer inadvertently fails to remit sales taxes," the letter said, adding that it would be difficult for businesses to prove that they didn't intentionally defraud the state.
Migden said her bill would have given tax officials the authority to let businesses off the hook if they had a good excuse.
As for the proposal to garnish the wages of scofflaws until their debt is paid, Schwarzenegger said he was "supportive of the author's intent to increase tax collections," but the bill "does so at the expense of employers who have done nothing improper."
The author of the bill, AB 853, Assemblyman Dave Jones (D-Sacramento), accused the governor of "letting people with significant tax debts off the hook."
And Democrats said they were bewildered by Schwarzenegger's refusal to sign a bill that would have required taxpayers to pay what they owe to California after an IRS judgment against them.
Such collections have long been the practice of the state Franchise Tax Board, California's version of the IRS.
But a state appellate court recently ruled that the taxpayer doesn't have to send in a check if the IRS judgment comes four years after the taxes were due. The court reasoned that Californians were protected under a state statute of limitations that tax officials said was never intended to apply to such cases.
The decision jolted the Franchise Tax Board. Officials there said it was common for tax evasion cases to drag on for years. They said the governor's veto meant that the state would be unable to collect $30 million from known tax cheats.
The governor said in his veto message that it was "inappropriate and simply unfair to taxpayers to change laws retroactively."
The move angered Democrats.
"I've never seen Republicans do so much to enable tax cheats," said Assembly Revenue and Taxation Committee Chairman Johan Klehs (D-San Leandro).
