![]() While the idea is not new, the combination of pro-individual and pro-business tax cuts in an effort to reduce the size of government, i.e., the FTB, while streamlining the tax collection process is quite innovative. In addition, there is a sales and use tax exemption for manufacturing equipment which will encourage manufacturing in California and most importantly, create new jobs in the state. In order to partially offset the increase in sales and use taxes paid by companies that will not benefit from a repeal of the personal income tax, there is a provision in the initiative that calls for the reduction of the corporate franchise/income tax rate by 1.84% and a tax rate decrease of 0.3% for subchapter S corps. The Flat Tax Initiative will also repeal withholding and information reporting. Essentially, the overall sales and use tax rate will increase by 5.5%. ![]() The innovative initiative calls for the repeal of the California personal income tax, which is the highest rate in the country, and replaces it with an increased sales and use tax rate. ![]() The introduction of the Flat Tax Initiative was the first step in a multi-year strategy to generate public interest, debate and support. In 2007, Former California Deputy State Controller, Rex Halverson, a state and local tax attorney and founder of Sacramento’s Rex Halverson & Associates, filed a Flat Tax Initiative with the Attorney General’s Office to introduce the concept of a fundamental and critical tax overhaul for the State of California.
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