Will California’s $11 Billion Budget Deficit Result in a Golf Tax?

California's Republican Governor Arnold Schwarzenegger is a skier, not a golfer.

That may be the only logical explanation for golf's inclusion in a proposed sales and use tax that would also be applied to appliance and furniture repair, vehicle repair and veterinarian services Feb. 1, 2009 if the legislation passes. That rate would be 8.75 percent if the governor's proposed three-year sales tax increase of 1.5 percent also is passed. 

For example, a course that regularly charges a greens fee of $100 would be forced to charge 108.75 and pass along the tax rate to its customers, or absorb the tax itself. According to Bob Thomas, Senior Director of Communications for the Southern California Golf Association, this is a potential hardship for an already struggling industry.

"There are certainly a large number of golf courses on the razor's edge now, and they could end up closing," he said. "This is a distressed industry, and to put something into it that has the potential to add expense or turn people away from playing, then that's a serious issue we all need to take into account."

The SCGA and the California Golf Alliance, which encompasses all of the golf associations in the state, are spearheading a lobbying effort to combat the proposed tax.

The issue at hand isn't necessarily whether or not tax increases are needed; an $11.2 budget deficit will be hard to solve with only tax cuts and without a stream of extra sources of revenue. Rather, the question raised is why golf has been singled out among recreational pursuits. Perhaps the false stereotype that golf is played only by affluent members of society who can afford a tax increase is at the root of this proposal. Either way, the SCGA and its allies just want every industry to share an equal burden in any proposed tax hike.

"While we recognize the precarious nature of the state's financial condition, we believe that to single out golf as one of a very few proposed services that would be taxed is both short-sighted and nonproductive for the state's economic health overall," said SCGA President Kent Keller.

"I think it's a cheap shot," Rex Cole, GM and Director of Golf at Cottonwood Country Club in El Cajon recently told the San Diego Union-Tribune. "It's the wrong time right now. Golf courses are really struggling; golf professionals are struggling."

The ambiguous nature of the Governor's written proposal, which merely stated ‘golf' would be taxed, has left golfers wondering whether the tax would only affect greens fee or if it could extend beyond the course to things like equipment purchases.

While it's estimated that only eight to ten percent of California's mammoth population plays golf, the industry still manages to have a significant economic footprint.

According to the independent research firm SRI International, golfers, golf courses, equipment suppliers and the activities they supported pumped $6.9 billion into the state's economy in 2006. And when indirect impacts - such as the goods and services purchased by golf courses and by golf employees - are included, the total direct and indirect economic impact of the golf industry in California is estimated at $15.1 billion.

While the consequences for such an action could cause significant damage to the golf industry, passing such tax increases won't be easy. Such legislation regarding a tax item would require 2/3 majority in both the senate and assembly, and while the Democrats hold a substantial majority and will gain a few seats in both houses after recent elections, the Republican party still has enough votes to constitute a third of the vote, and could stall any type of tax increase.

"The democrats said we've cut as much as we can cut, and now we need to raise taxes," said Thomas. "Whether or not there are enough republicans that will move toward raising (taxes), I'm not sure. They (the democrats) are closer now. The day the republicans decide to go along with them, a lot of things are on the table."

While California wouldn't be the first state to do so, should it decide to pass a tax on golf in any way shape or form, it could lead to a number of states across the country at least entertaining the idea. And as the economy stands at the current moment, any added costs to the golf industry certainly wouldn't help.

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