Showing posts with label tax. Show all posts
Showing posts with label tax. Show all posts

Thursday, January 23, 2014

California Gasoline Taxes Remain Highest in the United States


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Saturday, July 14, 2012

California Proposition 30: Governor Jerry Brown's Big-Government Tax Hike

California Governor Jerry Brown, in partnership with public-sector unions such as the California Teachers Association (CTA), the California Federation of Teachers (CFT) and the Service Employee International Union (SEIU) proposes big tax hikes on a small number of Californians in order to close a multi-billion dollar budget hole.  Despite the budget hole, threats to public safety, and threats to close public schools for weeks, the California Legislature continues to block prudent comprehensive public-pension reforms, to fund tuition benefits for children of undocumented workers, and to fund a not-so-"high-speed" rail line between Merced and Bakersfield.  The California Legislature has NO SPENDING PRIORITIES.

The latest incarnation of the Governor's plan will appear on the November 2012 ballot in California as Proposition 30.

California already has some of the highest state taxes in the United States.  Those earning over $48,000 incur a 9.3% state tax rate--California's second-highest rate, which by itself is already the fourth highest in the nation even without any tax hikes.  Only the top tax rates in Hawaii, California, and Oregon are higher.

If passed, Proposition 30 would burden California the nation’s first, second, third, and fifth highest marginal state tax rates!  The following chart compares California's current state income tax rates and proposed increases against the highest income tax rates in other states.  Billed by the Governor and his allies as a "temporary" tax hike, these rates would be in effect for seven years.  The income tax increases fall exclusively on the top 2-3% of taxpayers who already pay roughly half (or more) of California's entire tax bill.


In order to appear "fair" and "broad-based", Proposition 30 also increases California’s state sales tax, already the nation’s highest. The following chart compares California’s state sales tax rate to the other 49 states.


Despite all of Governor Brown's talk of tax fairness, Proposition 30 circumvents the Legislature’s 2/3rd requirement to raise taxes. In fact, Proposition 30 is “electioneered” by Governor Jerry Brown and his allies to only require a simple majority to pass. Proposition 30 asks the 50% of California voters--who pay little or no state income tax--to pass a big tax increase on the top 2-3% of California taxpayers, who already pay roughly 50% of ALL state income taxes. Proposition 30 is an abuse of the so-called “democratic process”, especially for so-called Democrats. Is this what “democracy” looks like?

Proposition 30 asks California voters for a four-year, 0.25% rate increase to the state sales tax, which equates to a 3.4% rate increase. The sales tax hike applies to ALL Californians. Proposition 30 also asks voters for a seven-year increase on only the top 2-3% of income taxpayers.  This equates to a 9.7% to 24.4% rate increase for the taxpayers who ALREADY pay the highest effective tax rate and roughly 50% of all state income tax.

In 2009, the average tax liability for every California taxpayer was about $2,655.  However, averages usually hide some important details.  For example, the average human being has one testicle and one ovary.  The bottom 50% of taxpayers (and possible voters) pays between $0 and $500 in TOTAL California income tax.  Meanwhile, Governor Brown's tax increase targets the top 2-3% of taxpayers who earn $250,000 or more ever year, despite that they ALREADY pay the highest effective tax rates.  These taxpayers also already pay between $9,000 and $1.3 million.


 The primary reason that California income tax revenues collapsed during the financial crisis is that INCOMES collapsed for ALL Californians, but especially for those at the top. The following chart shows the incomes and income taxes collected in 2007 (before the financial crash) and in 2009 (after the financial crash).  Why the big swings in income and taxes for those making over $1 million?  Unlike the federal tax system, California treats capital gains exactly like ordinary earned income.  The California Legislature loves all the extra revenue generated from stock market and real estate gains.  Unfortunately, this over-reliance means huge decreases during market crashes.  The subprime crisis causes simultaneous crashes is BOTH real estate and on Wall Street.  The California Legislative Analysts Office (LAO) has long recognized this problem as a cause for California's revenue volatility.

Despite that top taxpayers still  pay the highest marginal tax rates, Proposition 30 wants to increase those rates even more, leaving California even MORE VULNERABLE to future market swings. 

California ALREADY suffers from its high taxation. The result is that California suffers from a poor business tax climate that drives away jobs and causes are above-average unemployment.  Many Democrats within the California government refuse to believe that high taxes have any effect on California's economy, despite ample evidence to the contrary.  Why have California's tax revenues dropped?  It is NOT because tax rates are too low.  The fundamental problem is that California's private-sector economy is stagnating while government expenditures have increased.  Simply raising taxes, even if it is limited to the top 2-3%, will NOT fix what ails California.






California currently has the nation’s 3rd-worst unemployment rate, beating out only Rhode Island and Nevada.

 Naturally, the public-employee unions are bankrolling Proposition 30 and have spent over $31.6 MILLION as of November 3, 2012.


 Many of these groups are also recognized as the biggest spenders in California politics, according to a March 2010 report by the California Fair Political Practices Commission.  The California Teachers Association (CTA) has spent $10.7 MILLION on Proposition 30 so far and the Service Employees International Union (SEIU) has spent over $11.1 MILLION as of 11/3/2012.  The spending will likely be even higher by the time the election is over.
What kind of access does that kind of money buy? Just ask California Governor Jerry Brown, who has private town-hall meetings with California's public-sector unions.  Even career Democrats such as Willie Brown (no relation)--California's longest-serving Assembly Speaker and former Mayor of San Francisco--recognize that Governor Brown is a prisoner of the teachers unions. These are the same unions that are bankrolling his tax hike and likely will be out campaigning for it before November.


Meanwhile, the amount of money that the State of California spends continues to grow.  State spending is up 23% since 2000, even accounting for inflation.


Political columnist Dan Walters asks some very good questions about Proposition 30.
Why should we pay more ...
  • when we already have one of the nation's highest tax burdens,
  • when the Legislature is handing out raises to its staff,
  • when politicians haven't curbed rapidly increasing pension costs,
  • when they're wasting billions on prisons, 
  • when they've shunned a spending limit,
  • when they're spending tens of millions on illegal immigrants' college educations, and 
  • most importantly – when the state is mired in recession and 2 million-plus are jobless?
Fellow Californians, I urge you to VOTE NO on PROPOSITION 30!  It's bad tax policy and an abuse of the democratic system.
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Tuesday, May 22, 2012

California Higher Education: Not Enough Support from Taxpayers or Not Charging Enough Tuition?

There are plenty of complaints about the fast-rising costs of tuition and fees at California's many fine public institutions of higher education.  Due to crumbling tax revenues and annual multi-billion dollar budget cuts, California has imposed massive increases on tuition and fees for in-state students.  Due to budget cuts, there are fewer slots available in required classes, lengthening the time required to graduate.

I have a crazy and controversial question:  Is the problem a lack of funding at these institutions due to a decrease in tax revenues or are California's public institutions of higher education simply not charging enough tuition and fees? I recently came across a benchmark study by Washington State, by a group called the Washington Higher Education Coordinating Board.  The study lists the cost of in-state tuition for students for 47 states across the United States by type of institution.

Flagship Universities and Colleges

California boasts some of the world's best public universities.  The University of California Berkeley (UC Berkeley) is affiliated with more Nobel Prizes than most nations.  Despite some of the nation's highest cost-of-living expenses, expensive real estate, high taxes, and high housing costs, the in-state tuition for California residents at one of these world-class facilities ranks 14th highest in the nation--above the national average, but nearly 35% less than Pennsylvania--the nation's highest.


Comprehensive Colleges and Universities

While California has a few world-renowned public universities, it also has a broad network of excellent mainstream colleges and universities.  Despite high living costs and a whopping 26.2% increase from the prior year, California had only the nation's 35th highest (12th lowest) tuition  and fees for residents attending these facilities.  The 26.2% increase was the 2nd biggest year-to-year increase, second only to Georgia.  California residents tend to remember the massive increase and likely don't know the great value they receive in reduced tuition compared to residents in other states.


Community Colleges

Besides its flagship universities and comprehensive colleges and universities, California also enjoys a vast network of community colleges.  These facilities often provide needed vocational training and skills building necessary to become successful in today's job market.  They also offer a way for low-income students to pass required classes before transferring to one of California's mainstream facilities.  Where do tuition and fees ranks for California residents?  California has the nation's lowest-cost tuition and fees for residents studying at community colleges even after a 30% year-to-year increase--the third fastest increase after Georgia and West Virginia.


How does California maintain such low tuition and fees for residents?  Because the costs of public higher education is subsidized by California taxpayers.


To combat the funding shortfalls and the increases in tuition and fees, Governor Jerry Brown and various teachers unions propose to increase California's already high income taxes on upper-income taxpayers and to raise the state sales tax for all Californian's--already the nation's highest.




The question remains: Do we impose even higher taxes on California taxpayers to further subsidize our public institutions of higher learner or--given the evidence that California's public institutions are generally  priced below the national average--do we allow additional increases to tuition and fees?

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Tuesday, December 6, 2011

Examining Governor Jerry Brown's Proposed Tax Increases

(Updated 27-MAR-2012)

NOTE:  This analysis is for Governor Brown's initial tax hike proposal.  Due to political infighting with the California Federation of Teachers (CFT), Governor Brown has modified his proposal to be more like the CFT's so-called "Millionaires Tax."  Essentially, the new plan has a smaller increase on sales tax revenues, has significant additional income tax increases on upper-income taxpayers, and extends the "temporary" increase to seven years.  A new analysis is in the works but all of the arguments against the increase still hold true. 

It looks like California Governor Jerry Brown is out with his proposed "fix" for California's budget shortfall.  Turning to his exhaustive play book of--how shall I say this politely?--one play, the Governor proposes tax hikes.  And this is from a Governor who sold the electorate on his vast political experience.

First, some background information.  California already has the nation's second-highest marginal tax rate of 10.3%, second only to Hawaii, at 11%.  Even California's 2nd top income tax rate is the nation's 4th highest, after Hawaii, California's top bracket, and Oregon.  California's 2nd top bracket starts at $48,000 in income for single taxpayers.


To fix the multi-billion dollar shortfall, Governor Brown proposes creating new state tax brackets and to increase taxes on those brackets by up to 21.5%.  The Governor's proposal would add the following new brackets.  The dollar brackets shown are for single tax filers; brackets for married filing jointly are doubled.
  • Tax rates for those making less than $250,000 remain the same.  California would keep it's current 9.3% rate for those making more than $47,000.
  • Income between $250,000 and $300,000 are taxed at 10.3%, which is the same rate currently charged for those making more than $1,000,000.
  • Income between $300,000 and $500,000 are taxed at 10.8%.
  • Income between $500,000 and $1,000,000 are taxed at 11.3%, which exceeds the highest marginal tax rate from any other state in the nation.
  • Thanks to California's Proposition 63, those earning more than $1,000,000 are charged an extra 1% to fund mental health services--proving I guess that you must be INSANE to be a millionaire and have your tax residence in California.
  • Unlike the federal government and many of its economic competitors, California treats capital gains exactly like ordinary income and taxes capital gains at the maximum applicable tax rate.  This means that California's budget greatly depends on stock market and real-estate returns on upper-income taxpayers.  The result is a watershed of revenue in good times and a drought during downturns.

The following chart helps to better compare the increased tax rates against those of other states.  (NOTE:  Oregon dropped their top rate from 11% to 9.9%)


The Governor purposely did not increase tax rates on lower incomes, perhaps in a nod to tax fairness.  After all, those making more than $300,000 only currently pay more than eight times more total tax and have an eight times higher average effective tax rate than the vast majority of other Californians.  The only thing lacking from the 1.9% of taxpayers is the votes at the ballot box to prevent more exploitation by the majority.


Those in upper brackets not only pay a higher effective tax rate, they also obvious pay far more in absolute dollars.  Those fortunate 42,517 taxpayers with incomes of $1 million or more paid an average of $304,553 in California income taxes with an effective tax rate of 8.97%.



In all fairness, all taxpayers, especially those at the lower-end of the income spectrum, will be hit by Governor Brown's proposed sales tax increase.  California ALREADY has the nation's highest sales tax rate.  Governor Brown will enshrine our first place finish by adding another 0.5% on top, not including the additional taxes charged by various California counties and cities.  This amounts to a 6% increase over current tax law.

Governor Brown's tax increase proposal will likely be popular with the two biggest spenders in California politics, the California Teachers Association (CTA) and the California State Council of Service Employees (SEIU).  Both are significant donors to the Governor's political party.  Furthermore, even fellow Democrats acknowledge that Governor Brown must kowtow to the teacher's union.


The bulk of any tax revenues is earmarked for education, which is already one of the biggest recipients of taxpayer dollars.

The big questions remain.  How will these proposed tax increases affect California's already damaged business climate--you know, the source for all that tax revenue.  California currently ranks at or near the bottom of various surveys, from multiple independent sources, for multiple years.




California's poor business climate and high taxation resulted in a net migration out of California.  According to the L.A. Times, the percentage of people from other U.S. states is the lowest it has been in a hundred years!  Because California's tax revenues are so dependent on very few, high-income taxpayers, small changes in taxpayer population can have dramatic effects on tax revenues.  Over 50% of income taxes come from less than 2% of the population.


Political columnist Dan Walters has a great summary message for those that oppose the tax increases.
Why should we pay more ...
  • when we already have one of the nation's highest tax burdens,
  • when the Legislature is handing out raises to its staff,
  • when politicians haven't curbed rapidly increasing pension costs,
  • when they're wasting billions on prisons, 
  • when they've shunned a spending limit,
  • when they've squandered money on a hapless bullet train project and unworkable computer systems, 
  • when they're spending tens of millions on illegal immigrants' college educations, and 
  • most importantly – when the state is mired in recession and 2 million-plus are jobless?
Well said, Mr. Walters!

Who's bankrolling the initiative?


Brown, Teachers, Business And Public Safety, Californians To Protect Schools, Universities And Public Safety, A Ballot Measure Committee Supported by Governor Jerry
www.electiontrack.com/lookup.php?committee=1343257

(as of 13-FEB-2012)



See also ...




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Wednesday, September 21, 2011

"Most of Us" Recognize Divisive Rhetoric When We See It



Elizabeth Warren, Candidate for Senate, Massachusetts 2012
"I hear all this, you know, 'Well, this is class warfare, this is whatever.' No. There is nobody in this country who got rich on his own -- nobody.
"You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory -- and hire someone to protect against this -- because of the work the rest of us did.
"Now look, you built a factory and it turned into something terrific, or a great idea. God bless--keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along."
I agree very much in principle with Elizabeth Warren's passion, but I'm sorry, Ms. Warren, your comments DO INDEED sound like "class warfare."

Who paid to build the roads?  You say, "the rest of us."  I say, "most of us, including ME!"  In fact, some of us paid MANY TIMES MORE for those very same roads than did the majority of Americans.

Who paid to educate my workers?  You say, "the rest of us."  I say, "most of us, including ME!"  In fact, some of us paid MANY TIMES MORE to educate my workers and my children than did the majority of Americans.  At my company, we provide fairly expensive training for employees after they come on board so that they can be productive, internationally competitive, that my company can be successful, and that all of us can be happy, productive taxpayers.  My employees and I volunteer at local public and private schools to enhance math, science, and technology classes.  Yet, some failed politicians vilify us for not paying or doing our "fair share" (which mysteriously has never been explicitly defined).

Who paid for police and fire protection services?  You say, "the rest of us."  I say, "most of us, including ME!"  If fact, some of us paid MANY TIMES MORE for the very same police and fire protection service than did the majority of Americans.

If you look at the FACTS--not the feel good rhetorical bullshiloney from certain Progressives--the MAJORITY of upper-income taxpayers pay their "fair share" of taxes and more.  In 2002, 2003, 2004, 2005, 2006, 2007, and 2008, federal, and state taxes were my single largest expense item--greater than my mortgage payment, insurance, food, and car payment COMBINED.

Don't take my word for it.  Check for yourself.  The data is readily available to all.  You can start your education here.


Never mind that President Obama's "Buffett Test" tax plan is a side-show and a distracts from needed, real tax reform.  Never mind that an estimated 46% of households will PAY ZERO INCOME TAX in 2011.  Never mind that taxpayers paid $4.2 BILLION in tax incentives to people who are in the United State illegally.

Every taxpayer I know would actually agree to pay more IF (and it's a very significant IF) we actually believed that giving more money and more power to the state and federal governments would actually help solve the problem. Most taxpayers are appalled at the dysfunction, corruption, and absolute lack of leadership in our state houses and in Washington, D.C.

I'm sorry, Ms. Warren, but "most of us" recognize your statement as yet more divisive rhetoric.

See also ...

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