Today’s topic: Big-picture time: Are Californians paying too much or too little in taxes? Are there any tasks the state does or services it provides that should stop? What other state do you believe has the proper model for California to follow?
Close the loopholes and let taxpayers see how their money is spent
Point: Emily Rusch
CalPIRG does not have a position on what the proper tax rates or size of government should be. We as a state must continually evaluate what our needs are, fairly decide how much we collectively are willing to pay for meeting those needs and create a budget that reflects those judgments. Proposition 1A isn’t really about the size of government or tax bills either. It’s about how we budget, whatever the size of government. In particular, it would ensure that spending aligns more closely with revenues and that the state maintains a rainy-day fund during good times so cutbacks won’t happen during downturns.
Consistent with that view, we believe that burdens should be fairly shared, revenues should be adjusted to changing needs and spending should be transparent and accountable.
* Corporations and individuals should pay their full tax share. CalPIRG recently released a report that showed that many of the largest corporations in our country hide profits made in the United States in offshore shell companies and sham headquarters to avoid paying billions in federal taxes. California companies similarly take advantage of loopholes to lower their state taxes. I remember reading data from you, Jean, that 72.8% of corporations doing business in the state, including many profitable ones, paid just the minimum franchise tax of $800 in 2001. That’s unfair to the rest of us individuals and companies who end up shouldering the burden. Eliminating tax loopholes that lead to wide discrepancies in taxes paid by corporations and individuals of similar means can take us a long way toward budgets we can feel better about.
* We should not hamper our ability to adjust revenue as California’s needs change. Colorado did this with disastrous results. In 1992, Colorado voters passed a measure that strictly limited their government’s revenue increases. When schools and other services fell apart, voters suspended most of the revenue limits. Proposition 1A should not be confused with those measures. It would place no restrictions on California raising new revenue to meet changing needs.
* California taxpayers should have access to data on how their tax dollars are spent. Back in 2007, I helped Good Jobs First release a report that found that California is behind other states in disclosing where tax dollars go. For example, California fails to provide any public information about financial and tax subsidies given to private entities. In contrast, Illinois provides taxpayers with an online database, searchable by vendor, with information about promised and actual job benefits. Companies that fail to deliver promised benefits must return the subsidies they receive. The good news is that two California legislators, Assemblyman Kevin de Leon (D- Los Angeles) and Sen. Bob Huff (R- Glendora), have introduced " Google government” bills to give Californians a portal to view public expenditures. Part of restoring sanity to California’s budget must include creating mechanisms to enhance transparency and accountability.
Emily Rusch is the state director of CalPIRG, a nonprofit, nonpartisan public interest advocacy organization.
The myths of California’s tax systems
Counterpoint: Jean Ross
The late Supreme Court Justice Oliver Wendell Holmes once remarked that “taxes are what we pay for a civilized society.” While no one honestly likes to pay taxes, they are the collective price we pay for public goods and services. State and local taxes support our public schools, streets and highways, public hospitals that form the backbone of the state’s trauma-care system, parks and beaches, the public health infrastructure that ensures that our food is safe to eat and our water is safe to drink (and that delivers water to homes across California), as well as a range of other services. While the primary purpose of a tax system is to raise the money needed to support public services, tax policy can also serve as an end in itself, providing incentives for taxpayers to engage in desired activities or providing cash assistance to certain individuals.
Unfortunately, many debates over state tax policy are the product of the “fact free” environment that often clouds Sacramento. Let’s take a look at the facts (links to source materials are available on our blog at californiabudgetbites.org):
* Low-, not high-, income Californians pay the largest share of their income in state and local taxes. That imbalance was significantly exacerbated by the temporary tax increases included as part of the February budget agreement.
* California is a moderate, not high-, tax state when all state and local taxes and fees are taken into account. California has moderately high state taxes but low local property taxes because of the effect of Proposition 13 on local property tax collections.
* High-income Californians aren’t leaving the state because of higher taxes. In fact, the number of millionaire taxpayers is growing at a rate that far exceeds the increase in the number of personal income taxpayers as a whole.
* Over the past 15 years, lawmakers have enacted tax cuts that will cost the state nearly $12 billion in 2008-09. That’s a larger loss than the $11 billion 2009-10 temporary increase in state tax revenues included in the February budget agreement.
* The often maligned “volatility” of the state’s personal income tax is actually a good thing. It’s a result of California’s progressive income tax system, which requires those with more income to pay a higher percentage of their income in tax than those with less income.
Governments, like all organizations, should always strive to do things better and more efficiently. Unfortunately, among the casualties of California’s recurring budget crises are investments in information technology, data systems and program evaluations, which would ensure efficient and high-quality public services.
Jean Ross is the executive director of the California Budget Project, a Sacramento-based nonprofit, nonpartisan public policy research group.