The final report on changes to the state's tax system should be ready by this weekend.
It will look like nothing California has seen before when it comes to the way we pay taxes.
Gov. Arnold Schwarzenegger and legislative leaders formed the Commission on the 21st Century Economy last year in an effort to reduce reliance on the state's income tax.
One of the commission's key proposals is a flattened income tax that would benefit the wealthy. The state would have two tax rates: 2.75 percent for a married couple making up to $56,000 annually, and 6.5 percent for a married couple making more money.
Itemized reductions would be available for mortgage interest, property tax and charitable contributions.
According to the LA Times:
Someone making less than $50,000 might pay $4 less in taxes, a 1.8 percent reduction, while Californians making $1 million or more would reap, on average, nearly $109,000 -- a cut of more than 31 percent.
Under the current system based on personal income and sales taxes, sizeable windfalls are generated during good economic times. But when the economy sours, things go downhill fast.
"We are basically just looking for one thing and that is to create stability," Schwarzenegger said of the commission when it was created.
Forty-four percent of the state's tax revenue comes from personal income taxes. That percentage would drop to 31 under the commission's proposal.
To make up for the decrease in revenue from income tax, the commission wants to create a sweeping business tax. Taxes would extend to the service sector.
The new business tax and a small sales tax are projected to provide 56 percent of state revenue.
Schwarzenegger is attempting to garner support in the Legislature, and it's not certain that all of the panel's 14 members will sign the report. At least two members indicated they might not provide their signatures, according to the Times.
