Michael Hiltzik: When politicians feather their own nests
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It’s easy to grasp how city officials in the municipality of Bell have lined their pockets with preposterously high salaries, and easy to feel the Bell taxpayers’ outrage.
But how different is that from a prospective California governor proposing an enormous tax break that might save her millions of dollars a year in state income tax?
As my Sunday column reports, Meg Whitman, the billionaire former chief executive of EBay, proposes to eliminate the state tax on capital gains. That tax, like the state tax on all other income, tops out at 10.3% for income exceeding $1 million.
The Whitman campaign refused to tell me this week what percentage of Whitman’s income derives from capital gains (which can be defined as profits on stock, bond, real estate and other such investments). Whitman has thus far refused to make public her tax returns, which might hold a clue.
But given the share of her assets represented by equity investment partnerships, stock options and other instruments in which market appreciation, rather than interest or dividends, is the goal -- click here for Whitman’s Form 700, the statement of economic interests required by state law -- the technical term must be ‘plenty.’ Capital gains might even represent the majority of her income in some years.
It would be churlish to suggest that Whitman deliberately fashioned her tax policy to benefit herself, the way a bank robber deliberately plots how to get in and out of a targeted vault.
But given that her campaign is unable to offer a credible explanation of why exempting this category of income from tax, as opposed to the wages and salaries that working people earn by the sweat of their labor, makes sense economically or as a matter of fairness, how should we view it? As a reflection of a culture of entitlement endemic among wealthy ex-CEOs? As a blind spot unsurprising in a candidate who has never before now shown the slightest interest in politics, even to the point of consistently failing to vote over the years?
Let’s not forget that the tax on capital gains has in some years brought in more than $10 billion in revenue to the state. Every dollar that Whitman exempts herself and her fellow investors from paying is a dollar that has to be made up from another source -- higher sales tax on your staples and necessities, higher tax on your hourly wages, a higher fee for you to get into a state park, another of your kids’ schoolteachers fired, another day of closure for state offices and even your local library.
This is Whitman’s ‘new California’? Sounds expensive ... for the rest of us.
The column begins below.
Is it too much to ask that the best-financed statewide political campaign in the country — maybe in U.S. history — get things right about a central tenet of its electoral platform?The question arises from GOP gubernatorial candidate Meg Whitman’s new glossy campaign brochure, titled “Creating Jobs for a New California.” In it she proposes killing the state tax on capital gains. “California is one of a few states in the country that taxes capital gains at a higher rate than traditional income,” the booklet states.Sorry, but that’s not remotely true.California taxes capital gains — profits from investments in stocks, bonds, real estate or businesses — at exactly the same rate as any other income, whether it’s wages, dividends or your prize from Publishers Clearing House.The Whitman campaign’s policy director, Richard Costigan, tried to tell me that the booklet’s language meant the same thing as a phrase appearing in an earlier Whitman brochure, which said that California was one of a few states that “doesn’t tax capital gains at a lower rate than traditional income.”But that’s not accurate, either. First, as my son the PhD candidate points out, “not lower” is not synonymous with “higher.”
Read the whole column.--Michael Hiltzik