Tax on Services Bill is Stalled

This Weeks News
May 18, 2018

On Wednesday, May 16, the Senate Governance & Finance Committee held a hearing on the latest iteration of a tax on services bill, SB 993. Due in part to the fantastic response to our call to action last week and the many calls that our Members, both current and former, made to Committee members in opposition, Chairman McGuire and the other members of the Committee were not supportive of SB 993. While a discussion did take place, it did so without a vote. CSEA's Legislative Advocate Jennifer Tannehill attended the hearing on behalf of CSEA, and along with representatives from many trade associations in California, spoke in opposition to the bill.

Despite not having the votes to pass, the hearing on SB 993 was an extension of good faith by Chair McGuire who wanted to accommodate Senator Hertzberg’s desire to begin an “extended discussion” on what modern tax reform would look like in California. Senator Hertzberg’s main argument centered on the notion that a tax on services would better align California’s tax system with the growth of our economy, because the increase in the cost of services is proportional to the growth of the economy more so than the increase in the cost of products. He also argued that a larger dependency on service tax revenue, instead of income tax revenue, was an effective way to diminish the effects of volatility in our economy. The Berggruen Institute, which has been assisting on the bill, even put together a video to demonstrate Hertzberg’s argument, which can be seen here .

Moving forward, Chairman McGuire has committed to an informational hearing scheduled for Wednesday, June 13, with panels of support and opposition. The CA Department of Tax & Fee Administration (CDTFA, formerly BOE) will also be there to “take a deep dive” into a tax on services and discuss how the state would administer such a tax. We are confident that we will be well prepared to continue to address this issue in the future, thanks to our strong coalition and our motivated and responsive Members.

 Please email Advocacy and Governance Coordinator Brian Pedersen at with any questions.