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TaxBuzz Top 5 - CA Businesses Challenge Newsom Over Taxes, Biden Proposes New Airspace Tax & More

TaxBuzz Top 5 - CA Businesses Challenge Newsom Over Taxes, Biden Proposes New Airspace Tax & More

Each Friday, TaxBuzz brings you the top five tax and accounting headlines you need to know from the workweek. We know life can get busy and you don't always have time to scroll through your news feed to stay informed.

We weed through all of the week's stories to showcase the most important updates in the tax and accounting world.

1. CA Businesses Challenge Governor Gavin Newsom Over Taxes

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A coalition of California businesses is challenging Governor Gavin Newsom and his Democratic allies over what they perceive as excessive taxes in the state. These companies have amassed enough signatures to place a measure on November's ballot that would require a two-thirds majority of voters to approve most local tax increases and repeal some recently enacted ones.

If approved, this measure would be one of the most significant changes to California's tax system since Proposition 13 in 1978. Per a Wall Street Journal report, the businesses are arguing that escalating taxes are driving up operating costs and prompting businesses to relocate out of state. However, Newsom, local officials, and labor unions oppose the measure, warning that it could severely impact essential services like trash collection and firefighting.

Despite the opposition, the business coalition is prepared to invest heavily in a campaign to educate voters about their proposal. "The business community is fed up, they want to start stepping up to make a positive change," said Rob Lapsley, president of the California Business Roundtable, leading the "yes" campaign. Mike Roth, a spokesperson for the "no" campaign, emphasized their commitment to informing voters about the potential dangers of the measure. The situation is proof of growing tension between groups advocating for generous public services and those concerned about California's high cost of living.

2. Biden Administration Proposes New Tax for Commercial Space Companies

In response to the current system's disparities, President Biden's latest budget proposal seeks to address funding inequities by requiring commercial space companies to contribute to air traffic control costs via a new tax. In a New York Times article, David Grizzle, former chief operating officer of the Air Traffic Organization, said, "Whenever SpaceX launches a flight, it requires massive air traffic control resources to clear the airspace... And again, it pays zero."

Conversely, Karina Drees, sitting president of the Commercial Spaceflight Federation, opposes taxation of the industry, asserting that companies are actively improving coordination to mitigate impacts on airspace. Despite this, experts like Michael P. Huerta and Michael McCormick stress the urgency of addressing airspace management challenges amid the surge in rocket launches, warning of potential safety risks if current funding and staffing shortages persist.

They cite dozens of near-collision events reported last year, highlighting the thin safety margins within the FAA's current operational framework. As Americans wait to see how the funding debate will play out, the FAA has reaffirmed a total commitment to safely managing the burgeoning space operations while concurrently minimizing disruptions to commercial air travel.

3. Seattle Mayor Asks For $1.35 Billion Transportation Property Tax Levy

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This November, Seattle voters will face a pivotal decision regarding the allocation of $1.35 billion in property taxes over the next eight years for infrastructure projects deemed "essential" by local authorities. Proposed by Mayor Bruce Harrell, the Seattle Times notes that the levy aims to address pressing needs such as repaving streets, maintaining bridges, and enhancing the city's bike network. If passed, it would replace the expiring Move Seattle levy, approved in 2015, and mark the largest property tax levy in Seattle's history.

Despite concerns about increased costs for homeowners, SDOT Director Greg Spotts reassured Seattle residents that the levy's impact would be mitigated by inflation, maintaining a similar purchasing power to its predecessor. Notably, the proposal would constitute approximately 30% of SDOT's budget, providing vital funding for transportation initiatives. Harrell shared the importance of a transportation strategy that will benefit all residents, vowing to address previous missteps and deliver actionable change without overburdening those on fixed incomes.

4. EU Looks Into Hungary's Tax Structure for Foreign Retailers

The European Commission is taking action in response to complaints from the Austrian government and supermarket chain Spar regarding Hungary's tax on foreign retailers. In a Reuters report, Spar Austria CEO Hans Reisch said that Hungarian taxes reach as much as 4.5% of revenue. He expressed concerns about discrimination against foreign retail outlets, noting, "Foreign-owned retailers, including SPAR Hungary... face the highest tax bracket of the special tax. In contrast, Hungarian competitors operating in franchise chains consistently benefit from lower tax rates (0-1%)."

Reisch also purported that the tax forces foreign retailers to operate at a loss due to narrow profit margins in the retail sector. German retailer Lidl, known for its major presence in Hungary, weighed in with a statement that said, "We comply with legal requirements and face up to competition in Hungary. We advocate fair competition and conditions that are the same for all national and international market participants."

The Hungarian government has yet to respond to these allegations. The European Commission has pledged to analyze the complaint and take appropriate action to address the situation if need be.

5. Kansas Democrats at Odds With Democratic Gov. Over Tax Plan

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House Democrats in Kansas find themselves at odds with Democratic Governor Laura Kelly over a recently proposed income tax plan. Despite the governor's endorsement, a faction of Democrats opposes the proposal, contending that it disproportionately benefits the state's top earners.

House Bill 2036, introduced in the eleventh hour of the legislative session, offers tax breaks tailored toward high-income brackets while simultaneously eliminating taxes on groceries and Social Security benefits. Although the Senate has already passed the bill, House lawmakers opted to send it back for further revisions.

The Kansas Reflector shared that critics, including House minority leader Vic Miller, argue that the plan unfairly favors the wealthy, with approximately 70% of the tax relief directed towards the top 20% of earners in the state. In contrast, Governor Kelly views the proposal as a substantial measure for tax relief for all Kansans, despite the fact that it is not "perfect."

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