TWINKIE CALIFORNIA

By Chriss Street

California state tax collection for the month of February reminded me of a Twinkie; golden sweet on the outside, mushy in the center and definitely not very healthy any more.  Voters thought they were forcing the rich pay more to fund local schools by passing Proposition 30 in November.  

The initiative did raise the income tax rate on millionaires, but it also raised the sales tax rate on all Californians.  Last month, personal income tax collections slumped by 19% as those devious rich folk seem to have worked with their high priced accountants to move their business affairs to lower tax states.  Unfortunately for the middle class and poor, there was nothing sweet about having to pay higher sales taxes to bail out the Golden State.

Prop 30 drove up the personal income tax rate on millionaire Californians to 13.3%, higher than any other state in the nation.  California expected to net $5 to $7 billion a year by increasing the tax rate on the households that make more than $250,000 a year, who were already paying 62% percent of state’s income taxes, according to 2010 tax returns.  The top 2% of earners in the same year, households earning more than $450,000, were paying 46% of the taxes.  And those earning more than $1 million – just 34,000 of the state’s 14 million taxpayers – paid 25% of the entire states’ income taxes.

During the Prop 30 campaign, the Howard Jarvis Tax-Payers Association  and other opponents warned that because there is an inverse relationship between rates of personal income taxation, raising tax rates would strangle investment incentives and the volume of tax collection would fall.   Last month’s 19% drop in personal income taxes collected last month should not have been a surprise.

When combined with the Federal tax increases at the end of last year, the tax bite on the ultra-rich Californians balloons to 51.9%.  That is before the fact that the state also has the highest sales tax at 7.5% and 2^nd highest gasoline tax at $.67 per gallon.

As Tiger Woods drained a 19-foot putt Sunday to clinch winning $1.5 million at the Cadillac Championship in Florida, it had to be on his mind that by moving from Taxafornia to tax-free Florida he had just saved himself a sweet $100,000.

CHRISS STREET & PAUL PRESTON
Present
“The American Exceptionalism Radio Talk Show”
Streaming Live Monday through Friday at 7-10 PM
Click here to listen:  http://www.ustream.tv/channel/american-eceptionalism-news

Stay Connected on our Websites:  www.aexnn.com and www.agenda21radio.com