California’s Tax Rates

Lenny Goldberg attacks the tax cut proposed by the Governor’s Task Force on California Tax Reform and Reduction (“Wilson Knits a Tax Cover Out of Whole Cloth,” Column Left, Jan. 6) by arguing that this is a tax cut for the rich; and that California businesses do not really pay higher taxes than businesses in other states. He is wrong on both counts.

First, under current law, the taxpayers in the upper tax brackets are scheduled to have their tax rates lowered to 9.3% on Jan. 1, 1996. The task force proposal would delay lowering the upper brackets tax rate to 9.3% sometime in 1997. Furthermore, the current law does not call for any other tax bracket to be reduced. The task force proposal will reduce them all.

Goldberg complains that the top 4.2% of the population will get 40% of the tax benefits of the across-the-board tax cut, ignoring the fact that their taxes are supposed to be reduced under current law as a result of the 1991 state budget compromise. He does not tell us that this same group pays 50% of all income tax collected in the state.

Goldberg uses a KPMG Peat Marwick study that is riddled with flaws to argue business taxes are low in California. Two examples: The study created hypothetical firms with abnormally low profits--in the range of only 2%--so the tax burden is heavily weighted toward property tax, which is lower in California than some states, and away from income tax. A hypothetical manufacturing firm in the KPMG study has an unbelievably low utility bill of only $20,000 a year, understating the utility tax burden.

California is a high tax state. The proposed tax cuts would benefit the California economy and its residents and should be adopted.

JOEL FOX, President

Howard Jarvis Taxpayers Assn.

Los Angeles