Sales Tax Code Taxes the Mind and Wallet Alike

By now just about everyone has heard of Mortal Kombat, the popular video game that has set new standards for gore. The object of this bloodfest is to rip your opponent’s heart out. And so the debate rages over whether Mortal Kombat and other violent games are corrupting America’s youth.

Mortal Kombat fans may at least acknowledge this much: Fantasy carnage may be fun, but it is not one of life’s necessities.

Louis Barak, a retired high school teacher and fledgling gadfly, asks you to consider this question: Why aren’t the video arcades collecting the 8 1/4% sales tax on all those quarters? Why doesn’t society get a piece of the action?

Barak is less concerned about video game violence than values in the larger sense. If you really want to discuss warped values, Barak suggests you start with the California tax code.

What kind of society is it, he asks, that charges a tax on diapers, Dr. Seuss and college textbooks--but not on Mortal Kombat or pro boxing?

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Sometimes Lou’s wife wishes he’d be quiet a minute about this tax stuff. The man is almost obsessed. In one generation, California’s sales tax has ballooned from 4% to as high as 8 1/2%, depending on the county. Los Angeles is at 8 1/4%. Barak’s anger is fueled by the fact that sales tax is so regressive. The less money you make, the more it hurts.

And then there are the loopholes that make the rich feel even better.

When Barak taught government at Grant High in Van Nuys, he discovered that his students assumed they paid tax on such luxuries as concerts, movies and trips to Universal Studios. They don’t. Even now, Barak often finds himself informing well-educated professionals that they don’t pay a cent of tax on the $65 orchestra seats to “Sunset Boulevard” or the big bucks spent on prime seating at concerts or sporting events. “They think it’s included in the price,” Barak mutters.

If you don’t believe Barak, you can ask the State Board of Equalization, as I did. They say Barak’s absolutely right. There’s no end to the illogic of California’s sales tax.

Cheaper forms of entertainment are dutifully taxed. Say it’s one of those nights that you aren’t out partying with Jack Nicholson in your $500 courtside seats at the Forum. Instead you decide to rent “Batman,” which made Jack something like $50 million. There’s a tax on the rental.

Or say you decide to bring “Green Eggs and Ham” home to teach your kid to read. Sorry, books are taxed. This is true even of the volumes at your local library. Your taxes, in covering the operating costs of the public library, also cover the tax the library pays on its purchases. That’s right: The library pays sales taxes.

How did things get this way? Sales tax, conceived in California’s agrarian economy of the 1930s, was applied only to tangible goods not deemed necessities. Unprepared food, prescription medicine and shelter are not taxed. But otherwise, sales tax follows us from the cradle to the grave. There is a tax on diapers and a tax on coffins.

The big exception to sales tax is “services.” But as the law defines it, “services” describes everything from a plumber fixing your toilet to a $4-million ballplayer named Darryl watching strike three.

The Assembly Revenue and Taxation Committee estimates that $351 million could be raised annually by extending the sales tax to entertainment and sporting events. Assemblyman Johan Klehs (D-San Leandro), chairman of the committee, says “powerful special interests” have defeated measures that might hurt their industries. Hollywood gets what it wants, and so do pro sports franchises.

“It’s very, very tough to close a tax loophole,” Klehs explains. Because of Proposition 13, “it takes a majority vote in both houses to open up a loophole, but a two-thirds vote in both to close a loophole.”

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It’s not that Lou Barak wants to tax the $7 movie ticket or the cheap seats at the ballgame. “That’s a poor man’s hobby,” he says. He just thinks taxes should be fair and reflect good values. The tax code is pro-Mortal Kombat and anti-literacy.

In any case, if we want more prisons, we’ll all be paying more tax before long.

Hollywood would whine, but my suspicion is that The Biz could cover a sales tax without screwing us. Think of how Art Buchwald’s lawsuit exposed the industry’s creative accounting practices. Think of those $5-million-a-movie stars and the moguls who make so much more.

Think of Mickey Mouse. Think of how, last year, Walt Disney Co. chief Michael D. Eisner exercised $197 million in stock options and his No. 2, Frank Wells, took $60 million in options. And can you imagine their tax shelters?

No wonder they call it the Magic Kingdom.