Are California taxes fair?

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Why you pay more, and corporations pay less

Let's start with an assumption that I think most sane (non-libertarian, non-right-wing-GOP) people agree on: A tax system ought to be based on ability to pay, ought to avoid as much as possible special-interest breaks and should avoid the appearance and the reality of unfairness.

So as Jerry Brown tries to convince voters to approve his fall tax measure that's part income taxes on the rich and part sales taxes on everyone, how does the state add up? The California Budget Project, which is one of my favorite organizations ever, has a couple of reports out that shed some light on why half of Brown's plan -- taxes on the millionaires -- makes sense, and the other half of it doesn't.

You can read the two reports here. Let's start with who pays the taxes:

Measured as a share of family income, California's lowest-income families pay the most in taxes.

Yes, many individual rich people pay more in terms of gross dollars -- but when they're done and the taxes are turned over to the government, the poor have very little left, and the rich have plenty. In fact, even with higher income tax rates, the wealthiest Californians only paid 7.4 percent of their incomes on state and local taxes. They poorest paid 10.2 percent.

Part of that comes from the inherently regressive nature of sales taxes. Part of it comes from the way different types of income are taxed (poor people don't tend to have a lot of dividend or capital-gains income, which is taxed less than the income you earn from working all day at a job). But overall, the picture suggests that the income taxes on the wealthiest aren't high enough.

For all those types who complain that high taxes are hurting the state's business climate, the report shows that California is pretty close to the national median in overall taxes. But it also notes that corporate income has soared relative to personal income: Over the past decade, the total reported taxable income of corporations in the state rose 485 percent. Total personal income rose 24 percent. Meanwhile, corporate tax liability rose only 58 percent, while personal liability rose 42 percent.

The result: Individual working people are paying more of the tax burden and corporations are paying less. (Unless you agree with Mitt Romney that "corporations are people.")

Now let's turn to the fairness report. It has some of the same data, but puts it in context:

California's tax system is modestly regressive ... [which] results from the relatively large share of income that lower-income households pay in the form of sales and excise taxes [and] the fact that low- and middle-income households spend all, or nearly all, of their incomes on necessities, including on many goods that are subject to tax.

I'm voting for the tax measure in November because the state desperately needs new revenue. But I say that recognizing that Brown's proposal won't do much of anything to address the basic unfairness of the way California raises the money to pay for state services.

 

 

Comments

Eat the rich.

Posted by GlenParkDaddy on Jun. 25, 2012 @ 11:55 pm
Posted by Troll II on Jun. 26, 2012 @ 1:38 am

Catch 22....dont matter who/what you tax we are screwed either way. Just stop the free handouts.

Posted by Guest on Jun. 26, 2012 @ 2:31 pm

I read the reference article at Cal Budget Project. Similar to this authors analysis - it is completely anecdotal and not worth the time.

Statements like "most people agree" and " most economists agree" are manipulative and misguided. Sadly, the references are full of these statements and the author (above) has been victimized by the poor analysis.

Here are the facts:

1. California has spent its way into a corner
2. The wealthiest people in the state are the landowners - not the workers followed by the public pension recipients.
3. Our tax rates are already among the highest in the nation
4. Our public services are not worth the burden that they cost

Posted by Guest on Sep. 18, 2012 @ 10:44 am

Stephen Frank Stated on 11/14/2012 on California deficits as follows at http://capoliticalnews.com/

In the past two months, the cash deficit of the State has gone from $22.3 billion to $24.7 billion—just for the first four months of the year.
Plus the State OWES $12.5 billion to K-12 education

It owes $15 billion stolen from Trust Funds to cover cash deficit

It owes $10 billion BORROWED to cover the rest of the cash deficit. The State owes the Feds $10 billion for the loan to the unemployment insurance fund—so California can continue to send out unemployment checks.

That is a total of $71.5 billion—and there is more. Yet, the State claims “California faces a $1.9 billion deficit through June 2014, significantly smaller than in recent years after voters passed two tax initiatives last week, the nonpartisan Legislative Analyst’s Office said last Wednesday”
They claim we will have this small deficit, instead of $71 billion because of the $9 billion Prop. 30 is going to bring in, in new revenues! Any wonder our kids are illiterate—this is the math taught in our schools. Government lies—and tries to make you feel good about being insolvent.
Seems like marijuana must be legal in government offices, he has studied.

HOW MANY LEGISLATORS ARE BRAZENLY LYING ABOUT THE TRUE DEFICIT IN THE 50 STATES?

California has the highest population of illegal aliens who have settled there. Thousands of children of illegal alien parents gaining automatic citizenship and the cost is thrown at the taxpayers. Health care and other free handouts that are the right of citizens is being disbursed to anybody who sneaks across the border or steps off a plane. None of the 50 states is exempt from this silent attack on our country or the pilfering of their general treasuries. Now the Democrats have their majority public entitlements will be pouring out across the state to all the “Freeloader voters” the spongers and the people who have no intention of finding a job. Obviously there is an exception to this rule, whereas there are special needs people, the sick and handicapped in some form or other. There are the homeless veterans and plenty other others, but we have become an public assistance nation, but some of the 49 percent that Mitt Romney talked about have scrounged their way through life and allowed the taxpayers to carry them. A great number have figured a way to deceive the welfare system, which is a stain on the real workers. Because the system could easily be thwarted, with stolen ID, the elderly and the sick lose their major assistance to the scroungers. When we cannot truly look after our troops returning from the warzones and still have millions of homeless without hope, then why are we either bringing in millions of legal immigrants, other than highly skilled workers that are always welcome?

Why is not illegal entry a Felony? CAN ANYBODY ANSWER THAT QUESTION?

IS CALIFORNIA TAXPAYERS COMMITTED TO SUBSIDIZE ILLEGAL IMMIGRANTS FOREVER?

BEFORE ANY PASSAGE OF IMMIGRATION REFORM FINDS ITS WAY THROUGH THE CONGRESS, TWO BILLS ARE A NECESSITY TO EVENTUALLY STOP THE INGRESS OF ANY MORE FLOWS OF ILLEGAL IMMIGRANTS. 1. THE LEGAL WORKFORCE ACT CONTAINING MANDATORY E-VERIFY AND HALT ILLEGAL ALIENS TAKING JOBS AND HOLDING EMPLOYERS ACCOUNTABLE. 2. A SIMPLE AMENDMENT TO END THE BIRTHRIGHT CITIZENSHIP BILL TO STEM THE INFLOW OF SMUGGLED BABIES EITHER UNBORN OR AS AN INFANT, INTO THE UNITED STATES TO GAIN INTENTIONAL RIGHTS TO BE A CITIZEN AND A MASSIVE FINANCIAL BURDENING THE U.S. TAXPAYER. 3. THE REINTRODUCTION OF FORMER PRESIDENT BUSH 2006 SECURE FENCE ACT IN ITS ENTIRETY. THIS IS A DOUBLE PARALLEL FENCE STRETCHING ALONG THE BORDER OF THE U.S STATES AND ITS SOUTHERN NEIGHBOR. AMERICA MUST REDUCE SANCTUARY CITIES, CHAIN MIGRATION AND THE ILLEGAL ALIEN INVASION. 4. A GOVERNMENT ISSUED PICTURE ID CARD, WHICH CONTAINS INFORMATION TO USE IN PROVING WHO YOU ARE?

Posted by Guest Dave Francis on Nov. 16, 2012 @ 11:26 am