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The horribly monikered business net receipts tax demystified.

By Jessica Lussenhop

The Commission on the 21st Century Economy has passed its recommenda-tions on to Gov. Schwarzenegger, and included in its massive overhaul of the state's outdated tax system is this funky little acronym: the BNRT, or business net receipts tax. The BNRT would, in theory, replace the revenue lost when the rest of the commission's recommendations took effect, including chucking the corporate income tax and state sales tax and flattening the personal income tax. And while the sales tax at the bottom of your receipts would go away, it would actually only be "invisible," according to Santa Cruz County Treasurer Fred Keeley, because the businesses subject to the BNRT would raise their prices to offset it. The real cost would get handed down to the consumer.

Keeley, who served on the commission (but did not sign his name to the recommendations or to the BNRT), explains it this way: "It would be about a 4 percent tax on all consumption," he says. "If it's a law office, they're buying law books or legal software or whatever it might be, they would deduct that from the amount of money that comes in from their law firm and they would pay 4 percent on the net.

"A group of nationally renowned economists who viewed this proposal for the commission [concluded] it would have an upward pressure on prices and downward pressure on wages," he adds. "It sounds like a lose-lose."

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