Bill Would Worsen CA High-Tax Status

Editor’s Note: This is an open letter from San Diego Tax Fighters President Richard Rider regarding a new bill making its way through the state Capitol:

MAY 11, 2011

By RICHARD RIDER

We oppose SB653 – and for good reason. This measure would dramatically expand the taxing powers of local governments (including local income taxes) and open the floodgates to new taxes and higher taxes throughout the state.  I’m sure many others will contact you on the many problems with this bill.

While it has many huge flaws, for us, the biggest flaw is the presumption that Californians are somehow undertaxed.  Not according to all objective criteria – criteria that businesses consider before they locate elsewhere.

But before we detail that fact, let us suggest that we might have a reasonable discussion on increasing local taxing authority if it were REVENUE NEUTRAL.  That is, local tax increases would be offset by commensurate state tax DECREASES.  But that’s not the plan.  The state ruling faction will, if anything, RAISE state taxes (if the politicians can get voter approval) and fees to feed the gaping maw in Sacramento.

Now, as to California’s tax (and spending) situation vs. our economic competition in the other states:  Here’s an updated factsheet that we maintain, complete with reference URL’s to back up the factoids.   The news is not good for California’s taxpayers and economy.

Breaking Bad:  California vs. the Other States

Here’s a depressing but documented comparison of California taxes and economic climate with the rest of the states.  The news is breaking bad, and getting worse (I keep updating this fact sheet):

California has the 3^rd worst state income tax in the nation.  9.3% tax bracket starts at $46,766 for people filing as individuals.   10.3% tax starts at $1,000,000 (election later this year to again raise these rates).

By far the highest state sales tax rate in the nation.  8.25%.  7% is next highest (does not include local sales taxes) Table #15.

California corporate income tax rate (8.84%) is the highest west of the Mississippi (our economic competitors) except for Alaska. Table #8   — we are 8^th highest nationwide.

California’s 2011 Business Tax Climate ranks 2^nd worst in the nation.

Fourth highest capital gains tax 9.3%

Highest gasoline tax (averaging 66.1 cents/gallon) in the nation, (January, 2011)  (also highest diesel tax – 76 cents/gallon).

California is ranked 14^th highest in per capita property taxes (including commercial) – the only major tax where we are not in the worst ten states.  But CA property taxes per home were the 10^th highest in the nation in 2008.

One of the highest state vehicle license car taxes. 1.15% per year on value of vehicle, up from 0.65% in 2008.

California’s 2011 “Tax Freedom Day” (the day the average taxpayer stops working for government and starts working for himself) is the 6^th worst date in the nation – up from 28^th worst in 1994, but down from 4^th worst in 2009.  CA “improved” only because of our state’s soaring unemployment rate – the new tax dodge!

In 2009, 24 states raised their taxes at least 1% to collect $28.6 billion.  California’s taxes went up about $11 billion – thus we were responsible for about 38.5% of all the state tax increases in the nation.   

California has the 2^nd highest state unemployment rate.  (March, 2011)   12.0%.  National unemployment rate 8.8%.

California needlessly licenses more occupations than any state – 177.  Second worst state is Connecticut at 155.  The average for the states is 92.

For the 2007-08 school year, the Los Angeles Unified School District spent $29,780 per student.  The district also has the country’s second lowest graduation rate of 40.6%.

CA public school teachers the 2^nd highest paid in the nation after NY.  The average 2008-09 CA educator salary was $68,093 – 5.7% higher than the previous year’s $64,424 average.  Page 21, table C-18

1 in 5 in Los Angeles County receiving public aid.

California has 12% of the nation’s population, but 36% of the country’s TANF (“Temporary” Assistance for Needy Families) welfare recipients – more than the next 7 states combined.  Unlike other states, this “temporary” assistance becomes much more permanent in CA.

California prison guards highest paid in the nation.

For every dollar California pays to D.C., we get back 78 cents. We rank 43^rd worst.

California is the worst ranked state for tax administration – another anti-business factor.

California now has the lowest bond ratings of any state, edging out Louisiana.

The American Tort Reform Association ranks CA the second worst “judicial hellhole” – extremely anti-business.

America’s top 500 CEO’s rank California “the worst place in which to do business” for the 7^th straight year (5/2011). (It’s worth reading the short article, and especially the part about California.)

California, a destitute state, still gives away college education at fire sale prices.  Our community college tuition is by far the lowest in the nation.  How low?  Nationwide, the average community college tuition is about higher than California CC’s.  This ridiculously low California tuition devalues education to students – resulting in a 30+% drop rate for class completion.  In addition, 2/3 of California CC students pay no tuition at all – filling out a simple unverified “hardship” form that exempts them from any tuition payment, or receiving grants and tax credits for their full tuition.

On top of that, California offers thousands of absolutely free adult continuing education classes – a sop to the upper middle class.  In San Diego, over 1,000 classes for everything from baking pastries to ballroom dancing are offered totally at taxpayer expense.

Protests about increased UC student fees ignore one crucial point — all poor and most middle class students don’t pay the “fees” (our state’s euphemism for tuition).  There are no fees for California families with under $70K income ($80K starting in 9/2011).  Moreover, Pell Grants and federal tuition tax credits cover the total 2009-10 fee increases for nearly 3/4 of all undergraduates with household incomes below $180K.

California residential electricity costs an average of 30.1% more than the national average.  For industrial use, CA electricity is 60.8% higher than the national average (June, 2010).

It costs 38% more to build solar panels in California than in Tennessee – which is why European corporations have invested $2.3 billion in two Tennessee manufacturing plants to build solar panels for our state.

Consider California’s net domestic migration (migration between states).  From April, 2000 through June, 2008 (8 years, 2 months) California has lost a NET 1.4 million people. The departures slowed in 2008 only because people couldn’t sell their homes.  In 2010 we lost “only” 72,000 net people to domestic migration. Again, note that this is NET loss – more people departing that arriving from other states.

These are not welfare kings and queens departing.  They are the young, the educated, the productive, the ambitious, the wealthy (such as Tiger Woods) – and retirees seeking to make their pensions provide more bang for the buck. Some of these departing seniors are retired state and local government employees fleeing the state that provides them with their opulent pensions – in order to avoid the high taxes that these same employees pushed so hard through their unions.  And once they move out of California, our state can no longer tax their California-paid pensions.

As taxes rise and jobs disappear, we lose our tax base, continuing California’s state and local fiscal death spiral.  This downward spiral must stop NOW.

In short, SB653 will be a disaster – and is uncalled for.  Our opposition is vehement in this matter.

There is one TINY redeeming factor with this bill – if passed, it will kill forever any further discussion of statewide tax increases – or (bogus) extensions to currently expiring “temporary” state tax increases.  But since such extensions will get pounded at the polls anyway, I doubt that thought will serve to deter our geniuses running the state.

Legislators, it’s time for you to prove to Californians that sanity occasionally surfaces in the state capitol – kill this bill. We are not hopeful that such sanity will prevail, but you need to know the harm that you are about to do – if you care.