GEORGE RUNNER: Confusing lumber tax will fall on state consumers
01/23/2013 11:53 PM
01/24/2013 1:12 AM
In 2013, overtaxed Californians will send more of their hard-earned dollars to Sacramento than ever before, growing total state spending to a record $225 billion.
Higher taxes shouldn't be a surprise. After all, the majority of Californians voted for Proposition 30 in November. But one tax hike that took effect Jan. 1 is catching many off guard and driving up costs for everything from new homes to home improvement projects.
Late last summer, two-thirds of the Legislature approved and the governor signed legislation imposing a Lumber Products Assessment on some retail sales. The law adds a 1 percent assessment on certain lumber and engineered wood products sold in California.
That might sound straightforward, but it's not -- and that's one of many reasons I oppose this tax.
Although some products containing wood will be taxed, others will not. You'll find out when you reach the cash register, assuming your local hardware store has managed to reprogram its cash registers to collect it.
Going forward, an unelected bureaucrat at the Board of Forestry and Fire Protection will have the authority to add or remove products annually from the list of taxable items.
Items subject to the tax must contain at least 10 percent primary wood content. Examples include, but are not limited to, lumber, plywood particle board, poles, posts, structural panels, decking, railings, fencing (poles and solid board), roofing (shakes and wooden shingles), siding and sub-flooring.
Items not within the scope of the tax are "secondary wood products," where additional labor has added significant value to the product, including furniture, firewood, paper products, windows and doors.
This tax came about as a direct result of California's excessive environmental regulations. California timber producers are at a competitive disadvantage to those in Oregon, Washington, Idaho, and other states because of California's high environmental fees, which are a major impediment to doing business and creating jobs in our state.
However, instead of working to lower these high costs, the Legislature concocted a scheme to pass them on to consumers. The 1 percent surcharge, in addition to the normal sales tax charged on most retail purchases, will serve to buy down the environmental fees that producers would normally pay. Instead of producers paying the fees, consumers must now pay them directly.
This sets a dangerous precedent for taxpayers. Which industry will be next to ask consumers to pay the costs of their environmental impact fees? Farmers? Movie producers? Silicon Valley?
This tax also causes significant hardship for retailers, who must reprogram their cash registers to collect the new assessment. One trade group estimated that it will cost on average of $4,500 per business location to perform this government-mandated reprogramming.
While the law provides for reimbursement, a majority of my colleagues on the Board of Equalization voted to limit reimbursement to $250 per location. As a result, business owners will be on the hook for any additional costs.
Meanwhile, the board requested $1 million of taxpayer funds to recoup its own costs of upgrading computer systems to process the tax.
Struck by the inconsistency, I told my colleagues, "I'm a little embarrassed that we are not afraid to ask for our full reimbursement for costs, but we're not willing to ask for full reimbursements for businesses in California."
Is it any wonder why job creators avoid California like the plague? Business owners in our state never know what new government tax or mandate will hit them next.
Rather than cooking up more complicated taxes and fees, the Legislature ought to find ways to help California job creators succeed. Instead of passing the costs of its excessive laws and regulations on to consumers and business owners, it ought to address those issues directly by determining how costs could be reduced overall.
Runner, a former state senator, serves on the state Board of Equalization representing District 2, which includes our region. For more information, visit www.boe.ca.gov.
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