No matter how high taxes are increased, it’s never enough for public officials and bureaucrats who live off taxpayer funded paychecks. According to these people, there is always one more dollar that is needed to make government “whole.” And being made “whole” in California means maintaining the highest paid government employees in all 50 states.
So it should come as no surprise that the tax-and-spend interests have already begun banging the drum and shaking the tambourine on behalf of extending Proposition 30, the “temporary” tax increase approved by voters in 2012. Proposition 30 imposed the highest income tax rate in America. It also bumped up the sales tax – a tax that hits lower income families particularly hard — to tops in the nation.
The sales tax component of Proposition 30 is set to expire at the end of 2016 and the higher income tax rate will sunset in 2018, so those who feed off taxes are starting to panic.
During the last year, some lawmakers resisted putting Proposition 2 on the November ballot because it required the establishment of a rainy day fund to tide government over through lean times. These Sacramento politicians were concerned that if it passed, and the state had money in the bank, it would be more difficult to make the case that the Proposition 30 taxes should be made permanent.
State schools chief Tom Torlakson came out for the extension of Proposition 30 long ago, and we are now seeing the head of one of the state’s two major teachers unions, the California Federation of Teachers, calling for its continuation while maintaining it is not enough.
Of course, it’s never enough.
Writing in the Sacramento Bee, teachers union president Joshua Pechthalt attempts to make the case that the temporary tax hike should be extended. He justifies his position by claiming California is thriving and upper income individuals, unfazed by the higher taxes, are happy to stay and pay.
Not so fast.
While Pechthalt believes things are fine now that our economy is supposedly in a “recovery,” working families aren’t seeing it. Our unemployment rate is the third highest in the nation and the US Census puts our supplemental poverty ranking at worst in the country.
Pechthalt’s evidence that Proposition 30 has not impacted high income individuals seems to be that wealthier communities, like Beverly Hills, have not become ghost towns.
Objective real estate reports from Nevada and other low or no income tax states make it clear that California has indeed lost many upper income taxpayers because of Proposition 30. The Wall Street Journal reported that “many Californians have arrived [in Nevada] in the wake of Proposition 30. Passed at the end of 2012, the measure hiked personal income and sales taxes.” The San Francisco Chronicle published a piece in January of this year entitled “State leaders closely watch migrating millionaires” noting that “whether you sympathize or not, millionaires’ migrating out of California has serious consequences to the state’s bottom line and is something state leaders are watching closely.”
The other problem with the union leader’s thesis is that we simply don’t know how many of California’s high earners decided to absorb the confiscatory tax rates for a couple of years knowing that they would eventually expire. If made permanent, the existing millionaire out-migration could very well turn into a torrent.
So, instead of asking whether we should make Proposition 30’s temporary tax hikes permanent, a better question would be whether those tax hikes were needed at all or, better yet, did they inflict more harm than good? There is compelling evidence that California would today be grabbing a bigger slice of the national economic recovery had it not passed Proposition 30 at all.