Don’t Tax Me, Tax The Rich Guy Behind the Tree
A key reason for the periodic feast and famine in state income tax collections is that most of the taxes are paid by wealthy Californians.
In the 2008 tax year, the most recent one for which the state has complete statistics, the 118,349 Californians with income of $500,000 or more contributed $16.9 billion — almost 41 percent of the $41.7 billion collected.
The 4,774 Californians with income of $5 million or more paid just under $7 billion in taxes. That’s nearly 17 percent of total taxes paid in 2008, an average tax payment of $1.5 million for each of the 4,774 filers.
More of the taxable income of these wealthy Californians is derived from investments, which means it has more variables such as sales of real estate or stocks.
Any number of studies have noted this skewing toward the wealthy and urged the state to become less reliant on high-income earners.
Problem is, taxing rich people polls well.
Comes now the California Federation of Teachers, proponent of the California Funding Restoration Act of 2012.
It doesn’t restore funding to all state entities that have seen spending reductions over the last few years.
In fact, it raises taxes on wealthy Californians and sends 60 percent of the revenue to places that employ teachers like public schools, community colleges, the University of California and the state university system. Sixty percent of the 60 percent goes to public schools with the remaining entities each receiving 13.3 percent.
Of the remaining 40 percent of the total revenue, 25 percent goes to local programs to aid seniors, children, the disabled and preventative health care.
Another 10 percent goes to public safety and the remaining 5 percent to maintain roads and bridges.
This money comes from sharply increasing taxes on the 42,517 persons – out of 14.8 million taxpayers — with incomes of over $1 million.
Under the federation of teachers plan, the 26,331 Californians with income between $1 million and $2 million would pay an additional 3 percent on that portion over $1 million.
The 16,186 Californians with adjustable incomes over $2 million would pay 5 percent more.
In justification, the proposed initiative says:
“Study after study has found that the rich have gotten much richer over the past 30 years and now own an unprecedented share of California income.
“Over the last two decades, the average income of the top 1 percent of Californians increased by 50 percent, after adjusting for inflation, while the average income of the middle fifth fell by 15 percent.”
In 2008, those 16,186 Californians with income over $2 million, at a tax rate of 10.3 percent, paid $11.4 billion in taxes, roughly 25 percent of all taxes paid on income of $118 billion.
Starting in the 2012 tax year, at the new 15.3 percent rate, the state’s take would be nearly $18 billion.
Filed under: Budget and Economy
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