The Wall Street Journal reports on the tax proposal coming out of California’s governor Arnold Schwarzenegger’s bipartisan tax commission. This would be a tremendous improvement over the current system.

According to the Journal:

The heart of the new plan is to broaden the tax base and slash tax rates on personal income, business and sales. California currently ranks at or near the top in all three categories. This has, paradoxically, contributed to the state’s inability to pay its bills by driving men and women from the state and leading to revenue boom and bust. We don’t agree with everything in this report, but there’s no question it would be a huge improvement over the current tax code in its economic incentives, simplicity, revenue stability and fairness.

But:

One danger is that the revenue-generating efficiency of the Business Net Receipts Tax would eventually increase the overall tax burden in California. To protect against this, the commission calls for a permanent cap on the BNRT at 4%. Some business groups don’t like the new business tax because it means they’d have to pay tax even if they don’t make money. But a sales tax has that same feature.
A higher rate would defeat the purpose of this corporate tax reform, which by eliminating the corporate income tax would go far to restore the state’s competitiveness with other states, as well as Japan, China and Europe. Conservatives should insist that the current two-thirds vote requirement in the legislature to raise taxes applies to this new business tax to protect against jacking up the rate to grow the state government.

The rest of the article is here.