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Beer lovers, this $1.80 tax is for you

Ideas to right the state budget target six-packs, iTunes and porn.

May 09, 2008|Evan Halper | Times Staff Writer

SACRAMENTO — As state leaders hunt for politically palatable solutions to the swelling budget shortfall, some Democrats are proposing unorthodox ways to generate cash.

Strip clubs, six-packs, grocery bags and iTunes downloads are all in their sights as alternatives to broad income or sales tax hikes. So are gas guzzlers and yachts -- and a tax loophole for criminals.

Despite tough odds of overcoming an oath signed by their Republican colleagues to stop any tax hikes, Democratic lawmakers seem confident that their ideas will carry the day. They predict the public won't stand for painful cuts to schools and healthcare to close a shortfall the governor now pegs as high as $20 billion, and say anti-tax forces will ultimately have to accept that more revenue is needed to bring the state into the black.

GOP lawmakers say the majority party simply has an insatiable appetite for taking money from Californians. The California Republican Party recently released an Internet video, set to the O'Jays' "For the Love of Money," in which the tax ideas float across the screen after footage of Senate leader Don Perata (D-Oakland) telling the media in March his prescription for balancing the budget: "Raise taxes. That clear enough? Raise taxes."

Almost all of the Democrats' ideas are being met with some degree of scorn.

"Some people are e-mailing, threatening to come and slug me," said Assemblyman Jim Beall (D-San Jose), who hopes to see a $1.80 tax added to the price of every six-pack of beer sold in the state. "We're getting some pretty nasty comments."

The idea of taxing comforts and conveniences evokes the budget crisis of 1991, when then-Gov. Pete Wilson agreed to impose a "snack tax" on Californians, raising the cost of junk food and bottled water. Voters repealed it a year later.

Supporters of the latest measures may be encouraged by a recent softening of the governor's anti-tax rhetoric -- although he still says he's against new taxes -- and by reports that his administration is exploring possible new levies.

Some of the proposals would be used to help balance the budget; others would fund specific new programs. The legislators say their various causes -- as broad as averting further cuts to the general fund, which is tapped by all government programs, and as narrow as improving local trash cleanup -- are too important to let slide just because the state is broke. They say their quest for revenue is the responsible course of action.

"If we don't do some of these things, we are going to have to cut nearly $5 billion out of schools," said Assemblyman Charles Calderon (D-Montebello), chairman of the Revenue and Taxation Committee. He has proposed some of the Legislature's more unconventional measures, including taxes on digital downloads and adult entertainment.

Calderon said he was moved to push for levies on downloads such as iTunes because state sales tax laws do not reflect the high volume of purchasing that Californians do online. Consumers can download music from the Internet through Apple's iTunes and other services tax-free, Calderon noted, while they pay sales tax for buying the same music on a compact disc at a store.

His proposal would empower state authorities to collect sales tax on the downloads, increasing the cost of a typical 99-cent song to roughly $1.07. Calderon projects that the bill (AB 1956), which could also apply to pornography downloads, cellphone ring-tones, online books and feature films distributed on the Internet, would raise about $500 million for the state budget.

The idea stalled in committee this month in the face of fierce industry opposition. But like the other proposals, it could be revived at any time, most likely when legislative leaders hammer out a budget agreement this summer.

Calderon said the resistance to his bill did not surprise him. But he is perplexed that he hasn't been able to get more traction for another proposal: a 25% tax on sex toys, strip shows, pornographic magazines and videos and anything else sold in an "adult entertainment venue."

"This is a major industry that is putting a disproportionate burden on state services," he said. "Drugs are heavily used. The actors have a short life span. Some leave the industry drug-addicted with no skills. They wind up availing themselves of Medi-Cal and other state programs."

A coalition of porn stars, strippers and others in adult entertainment roamed the halls of the Capitol recently to lobby against the Calderon bill (AB 2914).

They have beaten back similar proposals in the past, typically with the help of anti-tax activists, who say that if levies are imposed, the industry will move elsewhere and jobs will be lost.

Assemblyman Mike Davis (D-Los Angeles) is targeting a wider group of consumers. Almost every Californian would bear some of the brunt of his proposal to charge a 25-cent tax on every plastic carryout bag from stores.

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