More taxes on California’s top income earners is bad economics

California’s budget is in a constant state of peril or, perhaps more accurately, a budgetary inferno, due to “years of failing to match spending with tax revenues as budget gimmicks instead of honest budgeting became the norm,” as Gov. Jerry Brown accurately noted in his recent Open Letter to the People of California. Ironically Brown’s new proposal to raise tax revenue employs the same old approach to extract additional dollars from Californians rather than make tough, structural reforms and better steward existing resources.

It’s has become almost cliché to say “California does not have a revenue problem, it has a spending problem,” but the underlying issue is much more fragile than that. The state has a preferred source of money – high-income earners – but if Brown is successful in raising taxes on the state’s wealthiest residents, he runs the risk of milking the source dry. He also rests his hopes for the state’s long-term fiscal solvency on the most volatile incomes.

With great fanfare Gov. Brown this week announced his latest quick fix to save the state from further financial ruin with the predictable solution of a ballot initiative next year to raise taxes on residents of the Golden State. The proposal aims to raise $7 billion a year over five years by boosting the state sales tax for everyone and the income tax on people who make over $250,000 a year. The state may face a budget shortfall of $13 billion in fiscal 2012. This week’s the state controller’s office also announced that state revenue is $1 billion less than predicted.

Increasing the sales tax, even modestly, hits consumers in all income brackets, many already reeling from the lagging economy. And raising taxes on the highest-income earners is even riskier business because it further concentrates the source of state income. The top 1 percent of income earners in California already account for nearly one-half of all revenue. And according to the state’s nonpartisan Legislative Analyst Office, the portion of state taxes paid by that income bracket has fluctuated “from just above 30 percent in the early 1990s to nearly 50 percent in 2000 at the height of the tech boom.”

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(Brian Calle is an Opinion Columnist and Blogger for the Orange County Register. His blog is called Uncommon Ground.)

Comments

  1. It’s there own fault for electing Brown! Just give California to the Mexicans and be done with it. I won’t bail their liberal loon azzes out!

  2. Spyder dalton says

    They want to keep subsidizing illegal immigrants to the tune of 16 billion a year and they seem to have enough money to keep building thousands of miles of sound walls with fancy designs in them but no money for police? The hell with Brown. Recall this fool and take CA back from the socialist destructionists…

  3. Vote no on all tax increases!

    • You are so right! Let’s see the deep cuts first. The sound walls should be the first to go! When there are no more wealthy folks to tax, who’s next?

  4. Jerry is one of the enemy, its been ” Spend and Tax”, all along……California’s government has been controlled by the Democrats for as long as I can remember, and every year the state debt just gets worse. They run more business out of the state, with idiot laws………Give aways to illegal aliens, and enviromental laws that put the farmers out of business………..but we do have manditory gay studies in our grammer schools, even though the schools can’t seem to teach our kids to read and write..

  5. – Moonbeam Brown & DemonRat congress in CA are jobs killers exactly Obumer, dingy Harry, Pelosi, Schumer, Frank, Dodd…. killed jobs in our nation since January 2007 (the year Democrap party controlled Congress).
    – DemonRAT party only know one way to get money for their SPENDING SPREE is TAXES, TAXES, TAXES…. & they NEVER FEEL TAXES ENOUGH on hard working Americans.
    – Vote NO on all TAX increases!

  6. Brown needs to be recalled just like Gray Davis. He is a worthless piece of crap and is destroying our state more than any other governor.

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