It’s time to close the loopholes - Women's Foundation California

lhIn a televised interview on Sunday, President Obama explained that he’s now looking into eliminating loopholes and deductions—as opposed to further raising tax rates—as a way to stop the rise of the federal budget deficit.

“Can we close some loopholes and deductions that folks who are well connected and have a lot of accountants and lawyers can take advantage of so they end up paying lower rates than a bus driver or a cop?” said Mr. Obama according to a report in the New York Times.

Our CEO Judy Patrick asked the same question in a Huffington Post op-ed in January. Talking about the California budget she said:

“By closing just four of the current deductions (deduction for mortgage interest on second homes, capping mortgage interest at $500,000 for principle homes, shifts in taxes on inherited property, slight alteration in the charitable gift deduction), we could realize more than $1.1 billion of new revenue.”

“This vital funding, for example, could close the child care funding deficit that has mounted since 2008.”

The above numbers Judy quoted come from the California Board of Equalization and were presented by Betty Yee, member of the Board, on June 11, 2012 at a special hearing that the Women’s Foundation of California sponsored.

You can read here the PDF document that was discussed at the hearing and made available to everybody in attendance.

It’s a compelling argument. The media and our political parties often make it seem as if there are only three options left to balance the budget:

  1. Spending reductions
  2. Temporary revenue increases
  3. Borrowing, deferrals and other one-time solutions.

But, tax expenditures need to be on the table. As Betty Yee noted, in California, we could realize more than $1.1 billion in new revenue in 2013 and as much as $1.4 billion in 2014.

Seeing these numbers makes it clear that closing tax loopholes in California warrants some serious consideration.

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