LOS ANGELES, CA – The importance of nurturing an environment in which businesses can remain competitive is critical to any contemplated change to California’s tax structure, the California Chamber of Commerce told the Commission on the 21st Century Economy on Thursday.

“Any changes to the tax system should be undertaken primarily with the health of the economy in mind. Care should be given to considering what aspects of the tax system are actually ‘broken,’ before prescribing remedies,” said Kyla Christoffersen, CalChamber policy advocate on taxation and legal issues.

Gov. Schwarzenegger's October 2008 Executive Order S-12-08 created the bipartisan Commission on the 21st Century Economy to “re-examine and modernize California's out-of-date revenue laws that contribute to feast-or-famine state budget cycles.”

Applying the principles outlined in Schwarzenegger's Executive Order S-12-08, the commission was directed to “suggest changes to state and local revenues that will result in a revenue stream that is more stable and reflective of the California economy.”

The order does not mention whether the recommendations should be revenue neutral, although CalChamber believes the commission should err on the side of revenue neutrality, given the requirement that the changes promote economic prosperity and competitiveness.

Protecting California jobs and competitiveness

CalChamber believes that sound fiscal policy will result in material improvements to California’s economy and encourage a swift and strong rebound from the current slowdown. On the other hand, the wrong policies will only make matters worse. Ultimately, the solution to California’s budget crisis will only come from robust economic growth and job creation.

As the commission considers changes to the state’s tax structure, the CalChamber believes the top priority must be a long-term plan for restoring and growing the state’s economy, said Christoffersen.

“The state’s fiscal health cannot be restored without a strong economy,” she said. “Any change to the tax structure should balance the need to maintain necessary government programs and the need to stimulate economic growth.

“Fostering economic health for California relies upon a tax structure that does not target specific industries, services, or income and investment with higher taxes. If taxes are raised in these three areas, it will kill jobs and future investment in high quality jobs for Californians. If taxes must be raised, they should be broad-based, temporary and nondiscriminatory, and above all minimize adverse impacts on economic competitiveness and equity,” said Christoffersen.

The commission will report its findings to the Governor and legislature on or before April 15, 2009.

The California Chamber of Commerce (CalChamber) is the largest broad-based business advocate to government in California. Membership represents one-quarter of the private sector jobs in California and includes firms of all sizes and companies from every industry within the state. Visit the chamber online at www.calchamber.com.

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