Orange County’s Burden : Taxes paid by the county’s residents are among the highest in the state. Are we willing--and able--to pay more?

Rich Holland thinks Orange County residents are taxed to the brink. “The tax burden is always on my mind, and I’m thinking of relocating because of it,” said Holland, 39, who lives in Aliso Viejo and edits an outdoors publication.

John Cazier of Corona del Mar thinks the opposite. “Orange County is taxed moderately. It’s on the lower end of the scale,” the retired business executive said, adding that paying higher fees is the least residents can do to help the county out of bankruptcy.

That is just what county Chief Executive Officer William J. Popejoy has proposed: a half-cent sales tax increase to help mend the fiscal crisis.

The recommendation--which county supervisors must decide whether to put before voters--has intensified debate over just how much of the burden of digging out should fall on ordinary citizens and whether Orange County residents are already overtaxed.

An analysis by The Times shows that Orange County’s tax bite is among the biggest in the state and significantly more than that in neighboring counties.

The average Orange County resident paid $2,422--10% of his or her income--in state and local taxes in 1992, the latest year for which figures are available on property, sales and personal income taxes, motor vehicle registration and other fees.

That compared with a statewide average of $2,026 per capita in state and local taxes, or 9.61% of residents’ income, putting Orange County second only to Santa Clara among the state’s eight biggest counties.

Many factors account for that heavy load. One is the progressive nature of the state income tax system: Orange County residents pay more because they earn more. Property taxes are higher because homes are more expensive and because much of the construction in the county is newer, meaning there are more special district fees.

Although the sales tax rate in Orange County has been lower than that in Los Angeles County--and lower than the statewide average--county residents have paid more in sales taxes per capita because they buy more.

“We’ve made shopping such an art form here,” said Mark Baldassare, chairman of UC Irvine’s urban and regional planning department, citing the county’s posh retail centers and its image as a mecca for mall-goers.

Senate President Pro Tem Bill Lockyer (D-Hayward) recently instructed his staff to study Orange County’s tax situation. The results of that review, too, show that local citizens indeed pay more than residents of most other California counties. But they also earn more, leaving them, on average, with more disposable income even after paying their higher taxes.

A separate analysis conducted for The Times by the Tax Foundation in Washington, D.C., found Orange County’s total tax burden to be nearly 20% higher than the national average, though lower than places such as King County (Seattle), Wash., and Nassau County, N.Y.

The Tax Foundation’s study was based on 1994 estimates of all federal, state and local taxes and user fees, including excise, utility and corporate income taxes. The Times’ study did not include all of that data because it is not reported by county, nor did it include utility taxes levied by individual cities.

UCI’s Baldassare, in a survey conducted for The Times in late January, found that a slim majority of the county’s largely Republican residents favored raising taxes to help public schools survive the county’s fiscal problems. The survey did not ask people what they thought about their current level of taxation.

Last week, a survey of county residents conducted by Field Research Corp. for Charles Schwab & Co. found that a majority favored raising the sales tax for as long as two years if the new revenue benefited schools or law enforcement. Popejoy’s plan would boost the tax rate for 10 years, with the county getting the revenue.

Baldassare said he has never seen an analysis of the county’s tax burden but believes perceptions cut both ways.

“I think there truly is a lot of confusion about how our tax burden compares with other areas,” he said. “Every time tax issues come up, you hear arguments on both sides--that the tax burden isn’t so great and that we are overtaxed and can’t stand any more taxes.

“If Orange County residents hear that they are paying more than elsewhere in the state, their first reaction is to say, ‘Do we really need to pay more?’ So they’re going to be more skeptical.”

Outside Orange County, analysts say, the perception is decidedly skewed toward the view that county residents don’t pay as much as they should, given their wealth. That bias may be particularly strong in Sacramento, where Gov. Pete Wilson and several legislators have indicated that the county is rich enough to solve its fiscal problems without state aid.

“There’s a general reputation of Orange County as a place where there’s very little government and little taxes,” said the Senate’s Lockyer, who has favored state aid for Orange County.

In fact, he said, “the Orange County aggregate tax burden is higher than most people thought.” But like other legislators, particularly Democrats, Lockyer emphasized the fact that people in Orange County also earn much more than the state average.

“While Orange County’s tax rate is significant,” he said, “there is additional local capacity to contribute to the fiscal solution.”

Certainly there is no dispute about Orange County’s relative wealth. Its income per capita of $24,200 in 1992 was the sixth highest among the 58 counties in California and the highest in Southern California--about $3,000 more than in Los Angeles County. But that also means Orange County bears a proportionately higher state income tax burden.

Consider Stuart and Ronda Einbinder of Orange. He is a lawyer, and she works part time as a marketing coordinator for a hospital. Last year, they reported a combined adjusted gross income of about $85,000. That put them in the 9.3% income tax bracket under California’s graduated system, which starts at 1% and peaks at 11%.

The Einbinders paid state income tax of about $4,700. By comparison, a couple earning half as much as the Einbinders would pay just a fourth as much in state income tax.

Stuart Einbinder, 31, said he has no complaints about the graduated tax system: “I think people who make more should carry a bigger load.” Even so, Einbinder said he thinks a tax increase should be a last resort. And when he was told how Orange County’s tax burden compares with that of other counties, he responded, “That does seem unfair.”

But what is fair? When is a tax burden too high?

Sherry Bebitch Jeffe, a senior associate at the Center for Politics and Economics at Claremont Graduate School, said the data provides some objective comparisons but does not address the question of fairness, which has more to do with ideology and politics than with economics.

“All of these figures feed the debate politically,” she said. “Orange County will look at it and say, ‘We’re already paying our fair share.’ ”

Rich Holland of Aliso Viejo, a community of 20,000 in South County, has never calculated his tax burden. But he took one look at his property tax bill and concluded, “I’m taxed extremely high.”

Holland and his family paid about $3,500 in property tax this year for their three-bedroom condominium, or about 2% of the assessed value of the 5-year-old home.

That’s double the 1% property tax rate that was mandated by the passage of Proposition 13 in 1978. How so? The Hollands pay more because they live in a newish community indebted for tens of millions of dollars in Mello-Roos fees, which are paid by residents on top of their property taxes to finance infrastructure development.

Because of the preponderance of Mello-Roos and other special assessments--such as fees for schools and street lighting, which are tacked onto property bills--Orange County’s effective property tax rate is higher than that in Los Angeles County, according to the State Board of Equalization.

And Orange County’s relative newness also means there are proportionately more properties assessed at current market prices than in older areas such as Los Angeles, census data confirms. As a result, for 1992 the property tax paid per capita in Orange County was $737, or 3.05% of income. That compared with $568, or 2.67%, for Los Angeles.

Orange County Supervisor Marian Bergeson said she has always thought her constituents are heavily taxed.

That the county carries a heavy load, she said, is in itself bad enough. But what it gets back from the state for operating revenue, she said, is disproportionately small.

“We’re a donor county,” she said.

That is true largely because of Proposition 13 and Orange County’s fiscally conservative attitudes. Historically, the county has assessed low property taxes. When Proposition 13 passed in 1978, the landmark measure not only prohibited counties from raising property taxes, it also locked in what county governments got back from the state based on pre-Proposition 13 rates.

For the 1993-94 fiscal year, Orange County received for general operating revenue 5.7% of the property taxes assessed to its residents. That was the lowest among all of the state’s 58 counties, which averaged a property tax return rate of 20%.

“Orange County is being penalized because it was more frugal before Proposition 13,” said Jeff Reynolds, chief of research at the State Board of Equalization in Sacramento.

Statewide, about 20% of 1992-93 sales tax dollars were returned to cities and counties. Orange County’s cut was proportionate, but nearly all of the money went to cities rather than the county’s government.

The main reason is that, compared with other counties, Orange has very few unincorporated areas, where a chunk of sales and hotel taxes collected go straight to the county.

For 1992-93, Orange County’s government received about $6 million from sales and hotel taxes. That compared with $37 million for Los Angeles County, $13 million for Riverside County and more than $8 million for San Bernardino County, state figures show.

Orange County officials have estimated that a half-cent sales tax increase would bring in about $137 million annually, which could be used to back about $1 billion in new bonds for refinancing the county’s debt. It would require approval by four of the five county supervisors to put the proposal before voters, and then would need simple majority approval.

Reed Royalty, executive vice president of the Orange County Taxpayers Assn., said he was distressed at learning of Orange County’s relatively high level of taxes. “I’d hate to see it go higher,” he said.

He conceded, though, that county residents may feel they have no choice.

Cazier, the retired businessman from Corona del Mar, said the county’s relatively high disposable income is the most significant factor in the debate.

“If you only have $1, it’s pretty precious,” he said. But Orange County is not facing a situation in which higher taxes would mean less food on most people’s dinner tables, Cazier said.

“A half-cent sales tax is the least we can do to come out of bankruptcy,” he said.

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A Big Tax Bite

Orange County residents carry one of the state’s heaviest loads when their property, state income and sales taxes per capita are figured as a percentage of personal income. Rankings of the state’s largest counties--those with at least 1 million residents--based on figures for 1992, the latest year for complete recent data is available:

Property Tax

Assessment % of personal County per capita income Riverside $588 3.37 Orange 737 3.05 San Bernardino 495 3.02 Santa Clara 749 2.93 San Diego 577 2.86 Alameda 624 2.71 Los Angeles 568 2.67 Sacramento 460 2.32 Statewide 595 2.82

*

State Income Tax

Assessment % of personal County per capita income Santa Clara $790 3.09 Orange 613 2.53 Los Angeles 507 2.39 Alameda 533 2.36 San Diego 399 1.98 Sacramento 390 1.97 San Bernardino 258 1.57 Riverside 271 1.55 Statewide 508 2.41

*

Sales Tax

Assessment % of personal County per capita income Santa Clara $959 3.75 Alameda 832 3.68 Sacramento 710 3.58 San Bernardino 564 3.43 Orange 812 3.36 Los Angeles 675 3.17 Riverside 547 3.14 San Diego 629 3.12 Statewide 686 3.26

Sources: State Board of Equalization, controller’s office, Franchise Tax Board, Department of Finance, U.S. Department of Commerce

Researched by DON LEE/Los Angeles Times

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Carrying a Heavy Load

Orange County’s state and local tax burden is among the biggest of the state’s eight largest counties. In 1992, the most recent year for which complete information is available, local residents paid a dime in taxes for every dollar of income per capita.

State, Local Taxes

State, Local taxes State, County % of income County Income per capita Taxes per capita* Per capita Santa Clara $25,550 $2,759 10.8 Alameda 22,605 2,332 10.3 Orange 24,199 2,422 10.0 San Bernardino 16,420 1,564 9.5 Riverside 17,431 1,650 9.5 Los Angeles 21,259 1,976 9.3 San Diego 20,144 1,833 9.1 Sacramento 19,833 1,779 9.0 Statewide 21,072 2,026 9.6

* Includes property, sales and personal income taxes, motor vehicle registration and major county user fees; excludes cigarette, fuel and alcoholic beverage taxes.

The Tax Bite for 1994

Estimates of federal, state and local taxes and fees for 1994 place Orange County near the top of the list among residents of California’s eight largest counties.

County: Amount

Santa Clara: $10,170 Orange: 9,051 Alameda: 8,764 Los Angeles: 8,375 Sacramento: 7,975 San Diego: 7,786 Riverside: 6,483 San Bernardino: 6,405 Statewide: $8,114

Sources: Tax Foundation; state departments of finance, motor vehicles; controller’s office; Board of Equalization; Franchise Tax Board; U.S. Department of Commerce

Researched by DON LEE / Los Angeles Times