I guess sometimes it takes the spectre of impending insolvency to finally see the light.
Full article here (it’s an editorial, but with quotes)
One excerpt, with a quote from Karen Bass, State Democratic Speaker:
It remains unclear how much Ms. Bass will fight for the commission’s recommendations. Underscoring the political sensitivity of tax reform, she has been cautious in recent public comments, emphasizing that she is “open-minded” about supporting the recommendations herself. She told me she didn’t like the idea of a “flat tax” if it meant raising the tax burden on poorer and middle-class Californians. But she also said she worried about the state’s heavy reliance on about 144,000 wealthy people to pay half of all income taxes for a state with a population of 38 million. “It’s a crazy statistic,” she said.
Which means, if she’s honest, that she opposes a flat tax. Because that IS what a flat tax means, and precisely why it’s popular with the Right. It’s nothing more than yet another attempt to screw the common people for the benefit of the wealthy.
Extremely progressive tax rates create extremely volatile revenue streams, for reasons discussed below in item 2.
Unfortunately, government spending rarely, if ever, bakes in new spending that doesn’t go away when revenue falls. In fact, most government spending - with COLAs, union pension contributions that always get pushed into out years, etc. - usually bake in an ever-ratcheting, monotonic increase in spending.
Higher earners rarely earn consistent ‘wages’ in the classic sense of the word. Their income is usually much more variable - tied to sales commissions, capital gains, company performance and the direct failure and success of entrepreneurialism. Hence the volatility as described above.
But ironically, government policy changes - new regulation, trade barriers, taxes, licensing requirements, etc. - directly affect high earners wages much more rapidly and in shorter-feedback loops than lower, middle-class wage earners.
For example, if California suddenly imposes new regulation on professional service providers (financial planners, doctors, consultants) that makes their job more burdensome, they can just pull up stakes and move to Incline Village, NV and make their home there. In fact, there is indeed an ‘Incline Village Effect’ discussed often in California as that village continues to grow in high-earner population as they flee California.
So increased pressure by the government on the high end of the income scale actually produces more rapid, and negative, effects on the collection of revenue than it would with a broad, smaller rate increase across the total population. 1,000 factory workers who average $60,000 per year at the NUMMI plant in the East Bay aren’t going to pull up stakes and move to Incline Village. But 10 professionals making $6,000,000 per year each, might. And apparently, they are.
And if we don’t tax them, it doesn’t do us any good if they stay. Not that taxes have that much effect either way; if they did the wealthy would all move to some low-or-no tax Third World hellhole.
If California, and America want to keep solvent, they need to tax the rich because the rich have most of the nation’s money.
Nobody is suggesting you don’t tax them, only that you don’t tax them as much. They’d still be giving you more money than they get back from the government, so you’d still be benefitting from their presence.
Right, because silicon valley and Hollywood are going to move to Texas. :rolleyes:
I am against confiscatory taxes but my guess is that the statistic above (50% of income taxes coming from <1% of the population is the result of a skew in income and not necessarily a steeply progressive tax structure or a confiscatory level of taxation.
I knew a guy that owned an Acura dealership in Los Angeles and he made a mint. If he left town, someone else would make that same money in his place. Perhaps THEY are benefiting from their presence. Maybe they are making their money from society rather than society making its money by “stealing” money from them.
There is some truth that jobs will move to states with lower tax burdens. The problem is that those states tend to rank at the bottom of any sort of measurement of “goodness” (for lack of better term). Then the Federal govt spends money to rectify the problems. In other words. states with high tax rates tend to be net exporters of revenue to states with low rates.
I hate to say it, but this may be the time for a blue state revolt. We could cut all Federal spending on roads, education, welfare, etc. and let states like California, Massachusetts, and New York fund it themselves from the money they wouldn’t send to Washington. In short, call the Red States’ bluff.
That would make sense if the sort of people who believe in progressive taxation and social services could get comfortable with the fact that the people most liklely to suffer from calling the Red State bluff would be the poorest people in that state.
[[ The problem is that those states tend to rank at the bottom of any sort of measurement of “goodness” (for lack of better term). Then the Federal govt spends money to rectify the problems.]]
Well, Alaska and Texas get around this by generating oil and gas revenue. They don’t need to tax income because they can export the cost of their social services top people who buy their oil and gas. For example, Alaskans made so much money from their oil and gas revenue that they paid out a $3200 dividend to Alaskans last year.
Wow…that sounds pretty bad. Bad until you realize that California has a huge income inequality and one that has been growing for decades.
Lots more at the link and the trend is remarkable and cannot be missed. Granted it is dated but the best I could find on a short search. I am willing to bet the trends have continued.
So no wonder the wealthiest represent the biggest share of taxes paid. That is simply because they have most of the money…by far.
I never cease to be amazed at the knee-jerk reaction at how this is somehow unfair.
If you want to stop the volatility you mentioned the answer is not a flat tax which falls harder on the poor. The answer is to increase income equality. Smooth out the distribution of wealth and you smooth out your economic bumps.
I am not saying that is done via a Robin Hood system of just taking from the rich and giving to the poor. Certainly there are lots of ways to argue how to best address income inequality. Part of that though is keeping a progressive income tax rate in place and not substituting a flat tax which, if anything, I think would exacerbate the problem.
Interesting. The usual cry from the flat tax brigade is that simplifying the tax code will force the rich to pay more taxes, since they won’t be able to squirrel away their income in loopholes and tax shelters. Now the cry is that it will allow the rich to pay less tax, and keep them from fleeing to Guam or something.