Overtaxed? Check numbers

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The Republican mantra in the Capitol is that Californians already are overtaxed and especially should not be taxed higher during a recession.

They shouldn’t be weighed down with a 1-cent sales tax hike -- as advocated by Republican Gov. Arnold Schwarzenegger -- to help close a $15.2-billion deficit and balance a very tardy state budget.

“We need to avoid tax increases because we already are among the highest-tax states in the country,” Assemblyman Chuck Devore (R-Irvine) argued during debate Tuesday over a cut-and-borrow GOP budget proposal that the Assembly overwhelmingly rejected on a party-line vote.


Yes, but --

Numbers get bandied all over town, especially in legislative chambers. Choose those to your liking.

California’s state and local tax burden ranks sixth in the nation, according to the Tax Foundation, a nonpartisan research group based in Washington, D.C.

The burden has bounced around that No. 6 mark most of this decade after hitting No. 2 in 2001. It was No. 9 in both 1990 and 1980. So not a lot has changed over the years.

But viewed from a different angle, California’s state and local tax burden is closer to average nationally. We rank 18th in total taxes and fees based on a percentage of personal income, according to the nonpartisan, but left-leaning, California Budget Project in Sacramento. The tax and fee bite is 16.5%.

For solely taxes, it’s 11.2%. On that, we rank No. 16 among the states.

Basing the rankings on personal income “reflects the ability of the state as a whole to pay,” contends Jean Ross, executive director of the organization.

California has the nation’s highest state income tax rate: 10.3% of taxable income exceeding $1 million. Up to that stratospheric level, the rate is 9.3% on family incomes above about $100,000.


But we’ve also got some of the lowest rates. A family of four generally doesn’t pay any tax on income until it reaches almost $50,000.

California’s state sales tax of 7.25% is the country’s highest. But we exempt a lot: food, prescription drugs and most services.

The U.S. Census Bureau ranks California’s property tax No. 20 based on “collections per household.” But that’s a poor measurement. Better is one by MSN Money, which measures property taxes based on a percentage of home value. By that standard, California ranks 45th out of 50 states.

You also hear a lot in legislative debate about California’s teachers and other government employees being near or at the top of the salary scales nationally. That’s true. But our housing costs also are up there.

This is the most expensive state to buy a house and its rents are the second highest, according to the U.S. Census Bureau.

State spending per $100 of personal income took a big jump -- from $7.31 to $8.57 -- after voters passed Proposition 13 in 1978 and Sacramento foolishly locked itself into compensating schools and local governments for their property tax losses. That spending-per-$100 figure reached $9.58 last year and includes another local government bailout.


When Schwarzenegger fulfilled a campaign promise and sharply cut the vehicle license fee five years ago, that action ordinarily would have reduced revenue to local governments because they had been the fee’s beneficiaries. But the new governor heroically agreed to send the locals the money anyway out of the state general fund. That payment now is up to $6 billion annually. So a $6-billion tax cut also is a $6-billion state expenditure.

Another state expense is paying off the $15-billion in bonds Schwarzenegger talked voters into approving in 2004 to cover daily expenses. The last of that borrowed money was recently spent, but the state will be paying back the bond holders at a $1.5-billion-a-year clip for a long time.

That borrowed $15-billion counts as part of the 34% increase in general fund revenue over the last five years. But that’s gone, and don’t confuse it with taxes.

Sacramento’s a big spender? Maybe. General Fund spending has risen roughly 33% in the last five years, but inflation and population growth account for 24%.

None of this justifies a tax increase in the view of Republican lawmakers, especially Assembly members. Referring to the government and taxpayers, Devore says: “How much blood can a parasite suck out of the host without killing it?”

Republicans cite a state Board of Equalization study that shows Schwarzenegger’s proposed $4-billion sales tax increase could cost nearly 38,000 private jobs.


But longtime economist Steven Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy, contends that “tax increases are good for the economy” because they allow government to invest in a better quality of life. And that attracts skilled workers and businesses.

“You come to California if you can afford a house,” he says, “and then your No. 1 bitch is either about schools or transportation. You worry about where your kids can go to school and whether you can get to work within an hour.”

I’ve always subscribed to the credo of Supreme Court Justice Oliver Wendell Holmes: “Taxes are what we pay for civilized society.”

Much less famous is the reported response of Holmes’ law clerk: “I’ve got about as much civilized society as I can afford.”

In Sacramento, Democrats side with Holmes, Republicans with the law clerk. And we have gridlock.




Late state budget: Day 73

California can’t pay its bills. The fiscal year began July 1.

Wednesday: No movement was reported.