Thursday, August 27, 2009

Higher Taxes for Californians

How are those higher taxes working out for Californians? Not good, and for more bad news, taxes are going even higher, which will only exacerbate our budget problems. But don't higher taxes balance budgets? Not when people can vote with their feet. In 2004 Californians passed a so called "millionaires tax" that imposed an additional 1% tax on incomes above $1 million per year. From the a 2008 article:

A recent survey from TNS Research, an international business research firm, found the California counties of Los Angeles, Orange and San Diego had the first, fourth and sixth highest number of millionaires in the country. However, even as the national population of millionaire households grew by 5.9 percent in 2007, Los Angeles County lost about 7,000 of these households. Orange and San Diego Counties lost millionaire households as well.
Meanwhile the LA Times gives us this headline:

Even higher taxes coming for Californians

While Californians are still feeling the sting of income and sales tax hikes signed into law earlier this year, now comes news that state tax authorities plan to take a little more from their pockets.

For only the second time in 30 years, the tax board is lowering the point where each tax bracket begins, bumping many people into a higher category. At the same time, officials are cutting back some deductions. Everyone will pay more, even people whose bracket or income doesn't change.
There is no doubt that this will worsen our economic situation in California and in turn, further hurt the state budget. Further, what an outrage, after all the extra taxes we have to pay (even a tax on that cash for your clunker) because this state won't reign in spending.

You scholarly types can read 71 pages of regression analysis and other mathy stuff from the Cato institute that leads to a conclusion we already new:

The analysis reveals that higher marginal tax rates had a negative impact on economic growth in the states. The analysis also shows that greater regressivity had a positive impact on economic growth. States that held the rate of growth in revenue below the rate of growth in income achieved higher rates of economic growth.

But this below is a lot more entertaining. It answers the question of what's your average small business owner/millionaire to do?