You have to start with the premise that all tax policy is both arbitrary and highly politicized and that rationality or fairness rarely influences decisions on who pays what to finance government.

As it happens, the three major components of California's state and local taxation system - property, sales and personal income taxes - are especially nonsensical. Californians' overall tax burden is medium high in comparison with those of other states, but the individual taxation modes run the gamut in terms of relative impact, and all three are riddled with loopholes that accrue to someone's political and/or financial benefit.

Take, for instance, the indefensible differential between taxing the standard software programs that computer users buy from retail vendors and the expensive custom programs that are fabricated for big businesses. The former are subject to sales tax but the latter are tax free, simply because the custom software industry persuaded the Legislature some years ago to punch a loophole.
That loophole, which costs state and local treasuries about $200 million a year in lost revenue, is one of dozens of specific "tax expenditures" written into the tax codes that collectively amount to more than $20 billion a year, or roughly a quarter the size of the state general fund budget.

Logically, we should close as many of those arbitrary loopholes as we can, especially those that benefit only the narrowest of interests. If we simplified the system, it would not only be fairer, but we could probably reduce tax rates themselves and still wind up with as much, and perhaps more, money in the pubic till. And as a bonus, tax reform would also improve public confidence and perhaps lead to an even broader reform of how proceeds from the various taxes are divvied up among levels of government.

One aspect of the state's tax mess - but just one - is the disparate way in which property tax burdens fall because of Proposition 13, the landmark tax limit measure enacted by voters nearly 26 years ago. The California Tax Reform Association, a liberal coalition that wants to revise the system in ways that would produce more revenues, released a new study of commercial property taxes Tuesday, pointing out that otherwise similar parcels of property - office buildings and hotels were used in the study - are assessed widely varying amounts of tax. Proposition 13 fundamentally changes taxable values only when property changes at least 50 percent of its ownership in one transaction, and commercial property owners can structure transactions to avoid the 50 percent trigger.

Thus the land beneath the downtown Sacramento building in which the tax reform group maintains its offices is taxed at 18 cents a square foot, based on a value set in 1975, because it has not triggered the 50 percent ownership change rule, while other commercial land in the same area is assessed up to 10 times as much.

The net effect is to depress growth in property taxes collected on commercial property, the study found, while the share of the total tax bill paid by homeowners increases because houses typically change hands more often and their assessments are upgraded to reflect sales prices.

"There's a huge hole in the middle of our tax system," CTRA Executive Director Lenny Goldberg said.

Perhaps so, and in a perfect world we would eliminate such disparate taxation provisions. But it's just one of dozens of such loopholes, and as a practical matter, none of them will be closed by the Legislature because to do so would take two-thirds votes that reformers could not muster. Business groups, meanwhile, can say with perfect accuracy that ending their tax breaks would simply add billions of dollars to operational costs that are already much higher in California than in other states and thus chill job-producing investment. It's one of those issues in which both sides can bring logic and truth to the table.

Voters may have their say in November. A proposed ballot measure, sponsored by movie director Rob Reiner and the California Teachers Association, would hike taxes on commercial property by $6 billion a year and funnel the proceeds into schools. That's not real reform, just one interest group's effort to extract money from another.