taxes

WITH the summer holidays in full swing, travellers would do well to be wary of scammers spoiling their trips abroad.

A British tourist was recently charged £490 for an £8 taxi fare in Paris after a cabbie got her out of his car, claiming his internet connection was poor, changed the amount on the card reader, then got her to pay through the window.

In-person payments like this don’t offer the same automatic protection against fraud as bank transfers.

Around one in every 20 British holidaymakers falls victim to some sort of physical or digital scam while travelling overseas, and more than 9.4million have been caught out over the past five years.

Graeme Buck, Abta’s director of communications, said: “Always apply the same personal safety rules that you would at home, and read the Foreign, Commonwealth and Development Office travel advice for the destination you are travelling to.”

With millions of us jetting off this month and next, we reveal tricks con artists use to target you, as well as tips on how to keep your hard-earned holiday cash safe.

CLEAN BANDITS

IF you suddenly find an “accidental” dollop of ketchup, spilt coffee or fake bird droppings on your jacket or bag and an over-friendly local steps in to dab it off with tissues, keep your wits about you.

While you are distracted by the person cleaning you, their accomplice will rifle through your pockets and help themselves to valuables.

BED RECEPTION

TIRED after a long day travelling, you check in at your hotel and head off to bed.

Then someone claiming to be from reception calls to explain there is a glitch with the card you have just used, and they ask you to verify again your payment details over the phone.

But it could be a scammer after your money.

Never give card details over the phone. Go down to the desk to verify what the caller said.

JUICE JACKING

SNAPPING holiday photos can drain your phone’s batteries.

Exploiting this vulnerability, scammers tamper with public USB charging ports in hotels, cafes and aiports to steal data such as bank information, or to infect your mobile with malware.

Plug your own charger into a standard wall outlet or use a USB data blocker (an adapter that cuts off data transfer).

Or safer still, invest in a portable power bank.

Always tap “don’t trust” if a pop-up asks to share data.

FREE GRIFT

Couples tend to be a magnet for this sort of con in Paris, Milan, Rome and other European cities.

A stranger hands you a flower or ties a bracelet to your wrist, then demands a large cash payment — or the fake act of kindness is a distraction technique for pickpocketing.

Refuse the item and walk away.

THE SELFIE STEAL

WOMEN are mostly the target for this scam.

A random friendly couple asks you to take their photo.

The request might seem harmless — but do not oblige if they then ask you to join them for a selfie.

Once up close they’ll grab your purse, phone, watch and jewellery — and because they’re experts at what they do, you won’t feel a thing.

THE FRIENDLY WAITER

WHILE out sightseeing, you bump into a waiter who claims to recognise you and says: “I served you last night at dinner at your hotel. Don’t you remember?”

This is a red flag. Unsuspecting holidaymakers have told how they were conned into a “cheaper tour” by someone pretending to be their waiter, and intimidated into buying items from their friends’ shops — only to discover the conman didn’t work in their hotel at all.

Scammers can know where you are staying just by looking at your wristband, so turn it inside out when venturing outside the hotel.

PEA & CUP GAME

THE trickster lines up cups, hides a pea under one and moves them around.

You’re encouraged to bet on which one contains the pea.

A couple who are in on the scam get it right — and because you can see where the pea is, you then take a risk.

You win the first round but lose the rest.

One victim explained: “They won’t let you get away until you’re skint, and you’ll find it very intimidating. Just walk on by.”

TAKEN FOR A RIDE

A taxi driver insists the meter is broken, takes longer routes or charges hidden fees for the ride.

Or, upon picking you up from the airport or station, they claim your booked hotel is closed, under renovation or in a dangerous location.

The driver offers to take you to a better hotel where they get a commission for your new booking.

Always ensure the meter is running, use trusted apps such as Uber, Bolt or Freenow, or pre-book air-port transfers before your trip via a trusted site.

There’s a tourist Facebook site for many destinations, so head to the relevant one for transfer recommendations.

WHATSAPP TRAP

Scammers hack legitimate hotel and Airbnb messaging accounts so they can message guests shortly before arrival.

The con artists claim your booking will be cancelled unless you re-enter your card details, often via a WhatsApp or phishing link.

Never pay or click links outside the official app platform.

JUST SIGN HERE

TRICKSTERS — usually groups of young people — approach British tourists near major sights asking them to sign an English petition for a deaf charity or human rights cause.

While you are holding the board to read the details or sign, they pressure you for cash or pickpocket you.

TICKET TRICK

Hanging around busy stations such as Paris Gare du Nord or Rome Termini, swindlers posing as transit staff or helpful locals offer to assist you with the complicated ticket machines.

They will overcharge you, snatch your change or sell you cheap child-fare or invalid tickets.

SANTIAGO, Chile, July 22 (UPI) — Chile’s Congress approved most of the economic and tax reforms promoted by President José Antonio Kast — one of the flagship initiatives of his government agenda.

The reforms include a gradual reduction in the corporate tax rate from to 23% from 27% to encourage investment and revive economic growth.

The Chamber of Deputies on Tuesday passed the National Reconstruction and Economic and Social Development bill, which also establishes tax incentives for the repatriation of capital, creates compensation mechanisms for companies when courts overturn projects that have already received Environmental Qualification Resolution approval and eliminates the tax on a first home for older adults.

Finance Minister Jorge Quiroz said the initiative seeks to “restore tax competitiveness” and provide greater certainty for investment.

“We have approved measures to restore certainty for investment in Chile, remove permitting barriers that have kept investment projects and economic activity stalled, and provide security for those who decide to invest,” he said.

The approval represents one of Kast’s main legislative victories since taking office in March, and allows him to advance one of the pillars of his economic agenda — reducing the tax burden to stimulate private investment and accelerate growth.

Jorge Berríos, academic director of the Graduate Diploma in Finance at the Faculty of Economics and Business of the University of Chile, told UPI that the reform is intended to restore investor confidence and create conditions for the country to return to growth above 3%.

“A reduction of several percentage points in the corporate tax rate has positive effects on companies and the economy, although those results are generally seen over the long term,” he said.

Berrios said some effects could be felt sooner in the labor market because of the subsidies included in the initiative, as well as through an improved perception of Chile among domestic and foreign investors.

“The Chilean market is returning to a structure similar to that of the 1990s, with market-oriented reforms that allowed the country to achieve strong growth and stand out in Latin America,” he said.

Berríos said the Chilean economy experienced several years of uncertainty marked by increased regulation and higher taxes — factors that he believes damaged the country’s standing among investors.

The Confederation of Production and Commerce, the country’s leading business organization, welcomed approval of the bill. Its president, Susana Jiménez, said the initiative represents “an important step toward restoring the economy’s dynamism and returning to growth.”

The only provision still awaiting approval is the compensation mechanism for municipalities, which will lose part of the revenue generated by the tax on residential properties.

WASHINGTON — President Bush, formally abandoning the central pledge of his 1988 presidential campaign, declared Tuesday that preserving a healthy economy will require new taxes.

“It is clear to me that both the size of the deficit problem and the need for a package that can be enacted require” a series of measures including “tax revenue increases” as well as spending cuts, Bush said in a written statement issued after a breakfast meeting with congressional leaders of both parties.

He specifically mentioned the possibility of trimming “entitlement and mandatory” spending programs, a reference to Social Security, Medicare, Medicaid and other benefit programs. He did not specify the type of tax increase he had in mind.

With his statement, Bush abandoned his campaign pledge–”Read my lips, no new taxes”–and opened the door to a “grand compromise” with Congress that could narrow or even close the federal deficit. Richard G. Darman, Bush’s budget director, has been advocating such a compromise almost since the day Bush took office.

At the same time, however, Bush may have sparked a full-scale revolt among conservatives in his party, many of whom believe that higher taxes are far worse for the country than continued deficits. He may also have given up what many Republican strategists see as the party’s most important issue–low taxes.

Rep. Robert K. Dornan (R-Garaden Grove) said the President’s announcement that he would consider raising tax revenues set off a “firestorm” among conservative Republicans.

“I signed a letter today . . . that said, ‘Mr. President, we hope that (tax) rates are untouchable, that they are absolutely radioactive.’ ”

Rep. William E. Dannemeyer (R-Fullerton), one of the most fiscally conservative members of Congress, said, “The Democrat game plan all along in this Congress has been to break George Bush of his promise not to raise taxes and so to lay the foundation of a campaign against him by saying he broke his promise and he can’t be trusted.

“And frankly, I’d disappointed in Mr. Bush. I thought he was smarter than falling for that.”

Democratic leaders, by contrast, welcomed Bush’s new stance, which was prepared, word by word, during the breakfast meeting.

Administration and congressional negotiators, who have been meeting since May 9 to try to craft a deficit-reduction package acceptable to all parties, have discussed a host of potential tax increases.

Some proposals, such as increased “user fees” and hikes in tobacco and alcohol taxes, might be relatively easy for Bush to embrace. The Administration has already proposed roughly $20 billion in new user fees and other minor revenue increases.

But Tuesday’s statement was made necessary because Democratic leaders said that package was unacceptable. And while White House spokesman Marlin Fitzwater said it was up to the negotiators to decide what to do next, he pointedly refused to rule out broader tax increases.

Republicans, however, may find it difficult to accept Democratic demands to increase income taxes for the wealthiest Americans. “I can’t see Democrats agreeing unless there are (income tax) rate changes that ensure that (the final package) is not unfair to the poor and middle class,” said House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.).

Budget negotiators hope to work out a final package before Congress leaves Washington for its August recess.

Before Tuesday’s developments, said Senate Budget Committee Chairman Jim Sasser (D-Tenn.), the budget talks “were stalemated, going nowhere. The President broke an impasse.”

Bush himself told reporters at the White House Rose Garden Tuesday afternoon: “It is essential that these talks get moving and get moving faster. I want to see this economy grow. I want jobs. I want to see the deficit down.”

Democratic leaders had insisted when the talks began that they would not get involved in specific negotiations unless Bush publicly admitted that a tax increase would be needed.

At the time, the White House insisted that all issues were “on the table” and that Bush would impose “no preconditions” on the talks. But Democrats had insisted on a more explicit statement.

After Bush gave them what they had sought, Democratic leaders appeared solemn and reserved as they struggled to avoid seeming to take political advantage of Bush’s retreat.

“We hope this is not going to be the subject of a political campaign effort,” said House Speaker Thomas S. Foley (D-Wash.) “Someone who wants to complain about taxes being raised will have to complain against both parties.”

When the negotiations began, Democrats feared that Republicans would maneuver them into a corner–forcing them to call for a tax increase and then campaigning against them as “tax-and-spend” liberals.

Many Republican candidates for the Senate this fall already have been doing just that, much as Bush had done in 1988. In that year, Bush’s favorite line–”Read my lips, no new taxes”–formed the centerpiece of his standard stump speech.

Tuesday’s statement not only abandoned that pledge but also gave up on a central tenet of the Republican political philosophy for the past decade–that the deficit is caused by too much spending, not by too little revenue.

Fitzwater, explaining Bush’s decision, said that closing the deficit without new taxes would require spending cuts so large that they “would be unacceptable to all parties.”

The White House estimates that the federal deficit will be roughly $160 billion in fiscal 1991, which begins on Oct. 1. The Gramm-Rudman deficit reduction law would require about $100 billion in across-the-board spending cuts unless the President and Congress agree on a new budget plan.

To mollify conservatives, Bush aides spent much of the day circulating word that the White House was not agreeing to anything beyond the approximately $20 billion in new user fees and related taxes that Bush has already advocated.

“I’m not changing my mind at all” on taxes, Bush insisted during a 45-minute session with 15 Latino reporters from around the country.

Vice President Dan Quayle echoed the theme. “It should not be viewed as a change of policy,” he said in an interview in Los Angeles, where he was raising money for GOP candidates. “This is a deficit reduction summit, not a tax increase summit.”

Asked if he would now admit that Bush was breaking his campaign pledge against new taxes, Fitzwater responded with a laugh: “Are you crazy? . . . Everything we said was true then, and it’s true now. We feel he said the right thing then; he’s saying the right thing now.”

Democratic leaders reacted with some anger to the White House damage control efforts.

“The President’s statement is clear and unambiguous,” said Senate Majority Leader George J. Mitchell (D-Me.). “He said that it is clear to him that tax increases are required. This is a new statement by the President. Any attempt by White House officials or other Republicans to describe the statement otherwise are totally inconsistent with what occurred today.”

Even Fitzwater conceded as much as he listed a series of factors that had forced Bush to change his mind.

The most important was the weakening of the economy since Bush took office. Fitzwater noted that economic statistics continue to show interest rates higher and growth rates lower than the White House had hoped. Bush advisers and most Democratic economists hold deficits at least partly responsible, a point conservatives dispute.

Moreover, the mounting cost of the savings and loan bailout has swelled the deficit, Fitzwater said.

Not all members of Bush’s party, however, were willing to abandon their belief that new taxes are worse than continued deficits.

“Any tax rate increase now threatens recession,” Rep. C. Christopher Cox (R-Newport Beach) said in a statement. “Just the prospect of a tax increase is like a dagger pointed at the jugular vein of the American economy.”

Within hours of Bush’s statement, 90 Republican members of Congress signed a letter to Bush declaring “we were stunned by your announcement that you would be willing to accept tax revenue increases as a part of a budget summit package.”

Rep. Ron Packard (R-Carlsbad), who represents southern Orange County, said he was “a little bit disappointed and a little bit surprised, because I think it was in a way caving in on the issue.”

“A tax increase is unacceptable,” the GOP congressmen wrote. “We will not vote for a budget package that increases tax rates for the American people.”

Sen. Phil Gramm (R-Tex.), one of the authors of the Gramm-Rudman law, said that an agreement may not be worth having if it means a tax increase.

Times staff writers George Ramos and Robert W. Stewart in Washington and Cathleen Decker in Los Angeles contributed to this story.

GEORGE BUSH ON TAXES Oct. 12, 1987: “There are those who say we must balance the budget on the back of the workers–raise taxes again. . . . I am not going to raise taxes again.” Announcement of candidacy in Houston. Jan. 16, 1988: “I want to be the President who finally whips the budget into shape by holding the line on taxes.” Televised debate with five Republican rivals in Manchester, N.H. May 31, 1988: “I’m not going to propose a tax increase.” After meeting with campaign economic advisers at summer home in Kennebunkport, Me. June 14, 1988: “That’s the difference–as plain as day–between us. Tax cuts vs. tax hikes. I will not raise your taxes, period.” At Cincinnati rally, comparing his position with that of Democratic front-runner Michael S. Dukakis. June 24, 1988: “I’ve ruled them all out.” At a Cincinnati news conference, when asked if Bush included excise taxes or other “revenue enhancers” in his rejection of new taxes. July 9, 1988: “If you go to Yosemite Park with your trailer . . . you may have to pay a little more.” At Atlanta news conference, conceding that costs of some programs might rise for users but asserting that voters understood the difference between user fees and tax hikes. Aug. 18, 1988: “My opponent won’t rule out raising taxes, but I will, and the Congress will push me to raise taxes, and I’ll say no, and they’ll push again, and I’ll say to them ‘Read my lips: no new taxes.’ ” Acceptance speech, Republican National Convention, New Orleans. Jan. 31, 1990: “That budget brings federal spending under control. It meets the Gramm-Rudman target. It brings that deficit down further and balances the budget by 1993 with no new taxes.” State of the Union address, discussing budget he proposed to Congress. March 13, 1990: “You know my position and I have no intention of changing that position.” At White House news conference, when asked if he could promise no new taxes this year. May 24, 1990: “Things are complicated out there on this subject. . . . I’d like to do it exactly the way I propose. I’m now enough of a realist to realize that it might not be done exactly that way.” At White House news conference, when asked if he could fulfill his campaign promise. June 26, 1990: “It is clear to me that both the size of the deficit problem and the need for a package that can be enacted require . . . tax revenue increases.” Written statement after meeting with congressional leaders. PROJECTED IMPACT OF VARIOUS TAX INCREASES

Revenue Impac Proposal Next Year Fossil Fuels Tax fuels linked to global $23 warming Social Security Raise tax on benefits to 12 high earners Energy Impose 5% tax on wide range 14 of energy sources Gasoline Raise tax to 21 cents per 12 gallon from 9 cents Stock Market 0.5% tax on stock and bond 8 transactions Cigarettes, Raise 32 cents per pack and 10 Alcohol 25 cents per ounce Income Increase top income tax 4 rate to 33% Acid Rain Tax sources of air 3 pollution Estate Tax capital gains held 2 until death

t (in billions) Proposal Five Years Fossil Fuels $163 Social Security 100 Energy 80 Gasoline 59 Stock Market 58 Cigarettes, 51 Alcohol Income 42 Acid Rain 22 Estate 10

Source: Congressional Budget Office

PERSPECTIVE ON CHANGE–White House feared that Democrats would quit budget talks and blame Bush. A15

OTHER COVERAGE: A14

Published on
06/07/2026 – 11:38 GMT+2

The South Korean government intends to set aside the extra tax income flowing from its record-breaking chip industry in a dedicated “future response fund”, the presidential office said, using the proceeds of the AI boom to bankroll public projects ranging from industrial infrastructure to support for younger generations.

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Behind the windfall sit Samsung Electronics and SK hynix, whose memory chips have become essential to the data centres powering the global AI race.

Their record profits this year have propelled the wider economy, and swollen the government’s tax receipts along the way.

Presidential chief of staff Kang Hoon-sik outlined the plan at a meeting between the government and the ruling party on Sunday, saying the fund would help finance large-scale projects built around AI and semiconductors, while also tackling inequality and helping young people with housing, start-ups and work.

Kang warned that the extra revenue thrown off by the chip boom must not be squandered at what he described as a decisive moment for the country’s future.

No figure was provided for the fund’s size, as the government will consider its use at a fiscal strategy meeting this month before consulting the public.

In an interview with the Dong-A Ilbo newspaper, Kang added that part of the money would go towards the utilities on which chip plants depend, above all power and water.

A boom that keeps giving

The windfall reflects an extraordinary run for Korea’s chipmakers.

Samsung shares surged more than 170% in the first half of the year, and SK hynix shares rose more than 300%, carrying both companies past $1 trillion (€874bn) in market value.

Samsung is due to publish preliminary second-quarter earnings on Tuesday, while SK hynix plans to raise 45 trillion won (€25.7bn) through a listing on the Nasdaq.

Both are also part of an 800 trillion won (€457bn) public-private push, unveiled last week, to build a new chipmaking hub in the country’s southwest.

How the windfall should be spent has become a live political debate.

In May, presidential policy chief Kim Yong-beom floated using it for start-ups, young people, basic income schemes in rural and fishing communities, and support for artists.

The boom has also emboldened workers as Samsung averted a major walkout in May by agreeing to a bonus deal with its largest union.

Additional sources • AFP

June 26 (UPI) — President Donald Trump on Friday threatened to impose a 100% tariff on any country that enacts a digital services tax against a U.S. company.

The new tariff would be applied to all goods shipped into the United States and be levied on top of any other tariff already in effect for that country, Trump said in a post on Truth Social.

At least a dozen nations have digital services taxes, which are meant to limit the influence of large technology companies — especially large U.S. companies such as Apple, Amazon and Meta — and are being considered by several European countries, CNBC and Politico reported.

Canada last year rescinded a digital services tax hours before it was set to go into effect in order to restart trade negotiations with the United States, which Trump held back on until the tax was canceled.

“Please let this statement serve to represent that any Country that imposes such a Tax will immediately be met with a 100% TARIFF on any and all Goods sent to the United States of America,” Trump said in the post.

“This TARIFF will supersede Trade Deals made with the Country, whether implemented, signed, or not,” Trump said. “Additionally, the 100% TARIFF will be immediately imposed, if they proceed.”

Canada’s tax was to be levied against online marketplace and advertising services companies, as well as social media companies, but Trump called it a “direct and blatant attack” on the United States and canceled talks on the tax was rescinded.

June 26 (UPI) — Britain’s King Charles III paid $17.2 million in taxes in 2024-25 and almost $40 million since he ascended the throne in 2022, according to the first ever tax statement published by the crown.

The British monarch has no tax liability in law, but both the then-Prince Charles and the late Queen Elizabeth II began paying voluntarily in 1993.

The palace said in a news release Thursday that the move to release the sovereign’s personal tax bill — but not his tax return — together with a statement detailing income sources was “part of the Royal Household’s commitment to transparency.”

The Royal Household’s annual financial statement shows Prince William paid a little over $10.3 million in taxes in 2024-25, bringing the total father and son paid to His Majesty’s Revenue & Customs to more than $66 million since September 2022.

Charles’ effective rate of tax remains unknown because the only source of income provided is $33.7 million revenue from his Duchy of Lancaster, a private estate that has provided the reigning monarch’s personal income since 1399, out of which other working members of the royal family are paid.

Same for William, who earned $28.5 million in revenue from his Duchy of Cornwall, out of which he pays his own way for himself and his family.

William’s duchy, which he inherited from his father, was worth $1.59 billion, while the King’s had assets of $911 million. Neither can benefit from sales of assets belonging to their respective estates.

Taxation experts said the releases did little to increase the transparency they were billed as providing.

Dan Neidle of Tax Policy Associates told the BBC that the King’s affairs remained “highly opaque”.

“We don’t know how much of that is capital gains tax, how much is income tax. Very importantly, we don’t know what expenses he’s deducted to come up with the figure on which he pays the tax,” he explained.

At the same time, the Sovereign Grant for the financial year ended March 31, money the government pays each year to fund the monarch’s official duties, the travel of working members of the royal family, and running and maintaining the main five royal palaces and castles, rose to $174.6 million after remaining flat for the past four years.

More than half, $88.2 million, went on maintaining and “reservicing” the royal real estate, according to the Sovereign Grant Statement.

The grant will rise to $182.4 million in the current financial year, which started April 1, but the rise is a one-off to cover the final year of a 10-year, $489.4 million modernization program for Buckingham Palace, and will thereafter be pegged at $132.2 million a year through 2032.

The grant is a fixed share — 12% — of the profit generated over the two previous financial years by the Crown Estate, a sprawling $16 billion business, real estate and land portfolio that technically belongs to the monarch but was surrendered to parliament in 1760.

Keeper of the Privy Purse, James Chalmers, pointed to the stability afforded by previous reigns during periods of historic transition, saying today’s monarchy was continuing to adapt to meet the challenges of the modern world where the Royal Family’s “soft” diplomacy was ever more valuable.

“So, while much changes, our central principles remain: to deliver value for money and to support the Royal Family as they seek to help shape a better world, here in the United Kingdom, across the Commonwealth and beyond,” he said.

“While Royal finances can sometimes appear complex, the underlying system is clear in principle, structured in law and refined over time to ensure the Monarch can serve with independence, accountability and in the long-term interests of the nation,” added Chalmers.

The king also used the news release to announce that, despite the costly refurbishment, he and Queen Camilla will never live at Buckingham Palace — the iconic official royal residence since Queen Victoria made it her home in 1837 — although it will continue to be used for official events and engagements and will be opened to the public.

King Charles’ preferred royal residence is the nearby Clarence House.

SACRAMENTO —  The Democrats’ mantra this election year — especially among wannabe governors — is that the richest Californians should “pay their fair share.” But by any objective measurement, they already do.

I’m referring to state taxes, not federal. It’s a valid argument that the most prosperous Americans should kick in more to the federal government, particularly after President Trump and the Republican Congress lowered taxes for the wealthy, who already had a pretty good deal.

But it’s a different story in California, where state government lives off the well-heeled. Yet, never-satisfied liberal Democrats and public employee unions constantly cry for more.

In fact, an unexpected surge of $16.8 billion in state tax revenue, mostly due to the stock market boom and capital gains earnings, is bailing out Gov. Gavin Newsom and allowing him to claim a balanced budget as he prepares to depart Sacramento and run for president in 2028.

The state Franchise Tax Board recently reported which income groups pony up the most taxes. The more money you earn, the steeper your income tax burden. Of course, that’s the way it should be. But California pushes its progressive tax system to the extreme.

We’ve got by far the highest state income tax rate in the nation at 13.3%.

In 2024, the latest year for which there’s complete data, the top 1% of California taxpayers accounted for 40% of the total state income tax revenue, the FTB reported. But they earned just 24% of the taxable income. To be in the top 1%, your annual earnings had to be at least $973,000.

The top 0.1% kicked in 21% of the tax, while earning 12% of the income. To be in that megarich class, you needed annual earnings of at least $4.7 million.

By contrast, middle-class families with incomes between $73,000 and $139,000 paid 9% of the state’s income tax take.

This doesn’t mean we should weep for the rich and demand more from the struggling lower middle class.

But the problem with Sacramento living off the wealthiest taxpayers is that they’re unreliable. Their fortunes flourish in boom times and fall when the economy busts. When the stock market sneezes, California state government catches pneumonia.

If the state treasury is overflowing, Democratic lawmakers tend to spend freely, expanding programs and creating new ones. Then when the cache inevitably shrinks in bad times, the policymakers’ usual response is to essentially turn their eyes.

Rather than sharply whack spending and raise taxes, they gimmick up the budget with borrowing, deferred spending and crossed fingers. And they dig the hole deeper.

For decades, under Democratic and Republican governors, we’ve sorely needed to update our archaic tax system to make it less volatile and more dependable.

A reform that makes lots of sense is to extend the sales tax to services primarily used by businesses. They could deduct the cost on their federal tax returns. And California state and local governments would steadily collect several billion dollars annually. Some income and sales tax rates could even be lowered.

California also has the nation’s highest state sales tax rate at 7.25%. Combining state and local sales tax rates, we have the seventh-highest at 8.99%.

Taxing deductible business services makes sense to many politicians — but only privately. They’re too weak-kneed to seriously consider it in public. There’d be winners and losers and high political risks.

When Xavier Becerra, the current Democratic front-runner in the June 2 gubernatorial primary, entered the race a year ago, I asked him about extending the sales tax to services, as all other states do. He wanted nothing to do with it.

“We need to stabilize our tax system in California with a more steady source of revenue,” he told me. “But I’m not a fan of the sales tax to begin with. It lands on working families.”

He was not interested in exploring a possible tax on services that didn’t hit working families.

Becerra, a former California attorney general and U.S. health secretary, added: “Before we start exploring new taxes, we should explore existing budget spending. We have to scrub the budget.”

In revising his new budget proposal last week, Newsom proposed $5.1 billion in modest tax hikes on businesses — even as unanticipated revenue was surging. He asked the Legislature for a limit on corporate tax credits and a tax on digital software.

He also proposed to trim $3.7 billion from Medi-Cal healthcare for the poor.

Newsom proposed spending $349.9 billion in the next fiscal year and asserted that budgets would be balanced for 18 months. But after that, he and practically everyone else in Sacramento foresee deficit spending without extensive fiscal restructuring.

But you don’t hear a peep about that from leading Democratic candidates running to replace Newsom. Most are talking about imposing significantly higher business taxes to pay for new or expanded programs.

Billionaire hedge fund founder Tom Steyer wants to close “the corporate tax loophole.” What he’s talking about is gutting Proposition 13’s property tax breaks for commercial holdings. He’d make it easier to reassess when partners sell their portions of a property — a commonly called “split roll” that would treat commercial property differently than residential.

That was tried in 2020 and rejected by voters.

Steyer also supports the billionaire tax that’s expected to be on the November ballot. It would impose a one-time 5% tax on the net worth of California’s 200-plus billionaires.

To their credit, no other gubernatorial candidate supports this misguided proposal. Practically all the $100-billion windfall would flow solely into healthcare while causing fed-up super wealthy to flee the state.

Former Orange County Rep. Katie Porter would raise taxes on the most profitable corporations to pay for free child care and college tuition. They’re both good causes but of questionable fiscal feasibility right now.

Rather than pushing rich investors and job creators out of state, we should be encouraging them to stick it out in California and continue to pay their fair share.

What else you should be reading

The must-read: Who won and who lost in Thursday night’s California gubernatorial debate? Our columnists weigh in
TikTok dough: The Steyer campaign pays influencers. Their posts don’t always make that clear
The L.A. Times Special: Steyer campaign staffer linked to video of rival Katie Porter berating staff

Until next week,
George Skelton

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