State Revenue Falling Behind Estimates Thanks to Excessive Taxation

Betty YeeState Controller Betty Yee’s just-released July Cash Report shows state personal income tax revenue falling behind estimates by 6.9 percent, or $323 million lower than projections. While some will argue that one month does not make a trend, these figures are significant because they represent revenue in the first month of the new state budget, a budget that is based on much higher income estimates.

Should these below projection income tax revenues really be a surprise to anyone with even a minimal understanding of basic economics? Economists tell us that if you want less of something, tax it more, and California has the highest marginal income tax rates in all 50 states.

When upper income individuals were slammed with tax rates on steroids as a result of Proposition 30, approved by voters in 2012, they had little immediate choice but to pay, and the tax revenue poured in. (It should be noted that the tax, approved in November, was retroactive for the entirety of 2012 so there was an almost instantaneous infusion of cash into state coffers.) Still, many compelled to pay these higher taxes took some comfort in knowing the exorbitant tax rates were scheduled to end in 2018.

However, lawmakers viewed this extra revenue as the new normal and they partied on in Sacramento with ever higher state budgets — they have increased spending by 42 percent in the last five years and there is no end to the spending spree in sight.

While the Sacramento politicians are loath to give up this additional cash next year as scheduled, the report from the Controller’s Office shows that the negative consequences of higher taxes, like proverbial chickens, are coming home to roost.

Most high income individuals are savvy and, given time, those penalized with a confiscatory level of taxation will respond by using legal methods that allow them to keep more of their own money. I personally know a veterinarian who cut his salary while retaining the unpaid wages in the business, a small animal hospital, he owns.

Sadly, over time, other successful individuals have packed up and left the state. This helps to explain the exodus of businesses, and the jobs they create, to other areas of the country with a more attractive tax climate.

A recently released study by Spectrum Locations Solutions estimates that over the last seven years, 9,000 business have either divested in California, or, while maintaining their headquarters here, have chosen to expand elsewhere.

“Gov. Jerry Brown’s office routinely denies that business departures is a serious issue,” says Joseph Vranich, a site selection consultant, who prepared the report. Brown’s denials are consistent with State Senate and Assembly leaders who see no down side to ever higher taxes.

Of course those businesses leaving the state are not just fleeing higher income taxes, high taxes in almost every other category are a factor, as are the costs of suffocating regulations.

But for those paying the ultra-high income tax rates, no relief is in sight. California government employee unions, who represent the highest paid public workers in all 50 states, are fielding a ballot measure – Proposition 55 – that will extend the Proposition 30 tax increases for another 13 years.

There is little doubt that just the threat of extending these hyper income taxes, will spur more high earners, to depart. If Proposition 55 passes this November, there will be consequences for the California taxpayers who remain. When Sacramento runs out of higher income individuals to tax, they are certain to shift their attention to those of more modest means.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

This piece was originally published by HJTA.org

Michelle Steel’s Chance

After the 2012 presidential election, politicians, pundits and pollsters were obsessing over the staggering 71 percent of the Hispanic vote that President Obama received. What many ignored was the fact that there was an even more incredible figure about a racial group that had, until recently, voted Republican. That group is Asian Americans, giving Obama 73 percent of their vote on Election Day.

In Orange County, Republicans are trying to change that. One of those Republicans trying to change this status quo is Michelle Steel, currently the highest-ranking Republican constitutional officer in California and candidate for Orange County’s Second Supervisorial District.

Born in South Korea, Steel came to the United States and received degrees from Pepperdine and USC. While studying at Pepperdine, she met Shawn Steel while taking tennis lessons at the Ambassador Hotel. He noticed her because “she looked like she could really hit that ball and slam it well.” Soon after that first encounter at the tennis courts, they started dating.  Her now-husband, Shawn Steel is a former Chairman of the California Republican Party and currently serves as California’s Republican National Committeeman. Married in 1981, they settled in Palos Verdes and, then, Orange County with their two children, Cheyenne and Siobhan.

While in college, Steel worked at her mother’s clothing store. She had to support her mother, who didn’t speak English. And because her parents were hard-working small business owners, Steel has “always been about family values, smaller government and not accepting government handouts. I’m a first generation immigrant, and as a first generation immigrant, I had to be a Republican.” These conservative values would be put into great effect as CA government policies often attempt to abuse small business owners.

Steel’s mother encountered these abusive policies and regulations when she owned her clothing shop. The Board of Equalization accused her of cheating the state out of her taxes, and knowing that it would be impossible for her to fight the government and win, Steel explained, “My mom paid the taxes she didn’t owe, along with the penalty and interest on top of it.” Seeing this direct abuse by the government, Steel became actively interested in politics. “I can’t just sit at home and be a housewife. I wanted to be a bridge” between the people and their representatives in government.

At first, Shawn tried to keep her from going into politics, attempting to protect her. But he could not hold back her desire to help small business owners and implement the conservative values her experiences have instilled in her.

Her first political position was an appointment by then-mayor of Los Angeles, Richard Riordan, to the Los Angeles Fire Commission. And in the years following, she secured positions on multiple national boards including the President’s Advisory Commission on Asian Americans and Pacific Islanders.

After she was elected to the Board of Equalization, which is the state agency in charge of taxation, she saved California taxpayers $42 million in 2007 alone. Last year, she returned over $200 million back to the taxpayers through her efforts at BOE. Representing more than 8 million people — a quarter of California’s population — she has stood in defense of the taxpayer when it comes to pocketbook issues and has tried to save the people of California from abusive taxation by the government. Her experience on the BOE would be a worthy asset to her as supervisor because, as Steel points out, she “works with taxpayers. I work with them individually. Looking at the budget, I know how to save.”

This contrasts with her opponent, Assemblyman Allan Mansoor, who Steel claims “has always been about public offices and never really worked in the private sector.” Because of her prior experience, Steel knows “how the private sector is trying to survive” under the weight of California’s massive amount of taxes and regulation. Assemblyman Mansoor, who has held elective office for the past 12 years, “was the one who raised taxes” on his fellow Californians according to Steel.

As the country’s highest-ranking Korean American elected official and the highest-ranking Republican woman in California, Steel knows how to reach out to both women and minorities, two groups with which Republicans need to make serious inroads. “The Republican Party is changing. We need to learn how to relay our message because we are not really good at that,” as exhibited in recent elections. Her endorsements from countless Republican officials, conservative organizations, and community leaders demonstrate the confidence people have in her and what she is capable of accomplishing for her constituents.

Steel’s life story, her conservative beliefs, and her appeal to both women and minorities represent a bright light in, what could be, a fading future for the Republican Party. Hopefully, voters will see that and elect Michelle Steel, the taxpayer’s advocate, as Orange County Supervisor.

Tyler Warman is a junior attending Hillsdale College, where he studies politics and classical education. Tyler can be reached at [email protected]