Friday, December 2, 2011

Unacceptable Tax Hikes in California

A few days ago, I read Richard Rider's detailed post about how truly awful the California tax burden is.  A quick refresher.
California has the 3rd worst state income tax in the nation. 9.3% tax bracket starts at $46,766 for people filing as individuals. 10.3% tax starts at $1,000,000 (election likely later this year to again raise these rates)

Highest state sales tax rate in the nation. 7.25% (as of 1 July). 7% is next highest (does not include local sales taxes) Table #15.

California corporate income tax rate (8.84%) is the highest west of the Mississippi (our economic competitors) except for Alaska.
Table #8 — we are 8th highest nationwide.
So imagine my surprise disgust, when I picked up this morning's paper to see this headline (article not yet available on line).


Not only is this a tax the rich scheme, but everyone will suffer with a half-cent sales tax increase. Apparently not content to be merely third worst in the nation for income tax rates, state politicians appear to want to be number one in both income taxation and sales taxation.  Further tax increases are proposed:
  • Additional 1.0% for filers over $250,000 income.
  • Additional 1.5% for filers over $300,000 income.
  • Additional 2.0% for filers over $500,000 income.
Meanwhile California continues to lag in job creation.  Who is going to have the money to invest in new jobs?  For example, a single small business owner who makes $1.5 million per year would see a tax increase of $23,500.  That is the entire salary of one minimum wage worker, and it is small business owners who are usually the millionaires who create jobs. 

The sales tax is only going to hurt businesses as well, as all consumers will get less for their money and will end up spending less.  The end result is always that such increases end up generating less revenue than static analysis would indicate.

Meanwhile, Governor Brown and the legislature have done nothing to reform California pensions.  So here are my demands regarding state employees and their pensions before such a proposal should even make the ballot.  The Governor has proposed pension reform, but has not delivered.  Any tax hike is dead on arrival until more cuts are implemented, starting with pension reform.  Some key issues:
Brown wants to ask voters to increase the retirement age for future state and local government workers and require all employees to contribute at least half of their annual pension costs. And that's just for starters.
Some other reform proposals can be found here.
  • Anti-spiking provisions, including a tighter definition of “base pay” to eliminate all the abusive overtime and non-recurring and special pay features that bloat pensions, plus a three-year averaging process which is conventional in many other states.
  • No more retroactive benefits increases -- a hot button for pension reformers, because such ‘retros’ never actually “attract and retain employees” which has been the traditional baloney we’ve been fed for years about those giveaways. SB 400 in California was the millennial poster child for the failure of this selfish gambit which has since been discredited by the professional associations. . . .
  • No more employer pension-contribution holidays. Just look at Illinois for proof positive on this one. When politicians cut corners in pension funding, the results are predictably disastrous. Californians need only look at CalSTRS, the state teacher’s system, for a classic example of the systematic failure of legislative underfunding.
  • Felons would be ineligible for public pensions related to their government employment. This feature will win votes every time after Bell, Calif.’s compensation scandals.
  • No more “air time," or purchasing service credits for time never worked in the first place.
Further, the state needs to implement a pay freeze, like the federal government has done, for all state  employees.  The state has a long way to go before they should be asking the tax payers for more money.  This ballot measure will be spark another surge in activism by those sympathetic to tea party goals in this state.

1 comment:

  1. I welcome a tax fight here in California...because it will be sent down in flames. I half suspect Brown knows this and is just going through the motions because he can't start cuts until he's tried this first. He's definitely a wildcard.

    Your list is SUPERB