We have just moved up from 5th to 4th in a ranking of all 50 states by the Washington, DC–based Tax Foundation but, for average folks, this is not good news. California leads 46 other states in per capita tax burden, a dubious honor that helps to explain the state’s dismal economy.
California has the highest state sales tax in the nation, we are tied for first in gasoline tax, our income tax rate is second, and even with Proposition 13, we rank closer to the top than the bottom in property taxes.
But for Jerry Brown and Molly Munger, each a backer of one of the dueling tax increase measures on the November ballot, being number 4 is not good enough. Brown with his Proposition 30 wants to increase sales and income taxes to the tune $6 billion annually. Munger and her Proposition 38 would increase income taxes by $10 billion a year. After the votes are counted on November 6th, each would like to be able to raise one of those giant foam fingers, popular at athletic events, used to project the message that “We are number one!”
California’s unemployment rate is nearly a third higher than the national average. Those with jobs labor to pay the state’s high taxes while making no progress in their personal incomes. The Sacramento Business Journal reports that from 2006 through 2011, Californians’ disposable income did not keep up with inflation, ranking us 49th in the nation in income growth.
So while the governor, supported by his public employee union allies, and Molly Munger, using her personal fortune, are working to increase the tax burden, let’s have a look at Sacramento’s spending priorities.
California public employees are the highest paid in all 50 states. California has 12% of the U.S. population, but its taxpayers support one third of the nation’s welfare caseload.
In these tough times for average taxpayers, the Legislature has just given out 6% pay raises to most of its Capitol staff, many of whom earn six figure salaries. It may seem a small amount when compared to total state spending, but it clearly illustrates the lawmakers’ state of mind — they take care of themselves and their own first.
Then there is the bullet train to which the governor and the Legislature have committed $70 billion — money that would pay for a lot of teachers, classrooms and textbooks. They claim that this is not a problem because it will be paid for by borrowing. Yet just the interest on the $10 billion in bonds now being sold would cover the cuts in higher education that they are threatening if the Proposition 30 tax increase is not approved.
Jerry Brown, who has taken ownership of the bullet train with an almost boyish glee, dismisses objections by comparing the high speed rail project to the investment in European Cathedrals that were financed through the sacrifices of generations who never lived to see the final result. (No, you can’t make this stuff up.)
While the high-speed rail project may be on track, the state is running off the rails. California has the worst credit rating in all 50 states. Taxpayers are on the hook for $497.9 billion in unfunded pension liability for government workers, while pay for these workers is growing three times faster than the personal income of Californians. This year’s state budget approved by the Legislature is 6% larger than last year, but the Sacramento politicians are threatening to take it out on schools if they don’t get more money.
On November 6 we will see if the Sacramento bully boys have been able to intimidate enough voters to approve their tax increases and make California number one in tax burden. We hope not. A far better outcome would be if voters say no — recognizing that taxpayers already pay more than their fair share. That’s the message that will help force our state politicians to clean up their act.