George Skelton. The LA Times columnist yesterday recounted his recent lunch with Speaker Karen Bass, who pitched her excellent idea for a tax commission by among other things stating, "I’d expect it to come up with more stable ways to generate revenue so we are not completely dependent upon the upper income brackets."
Never reticent when sensing a possible inconsistency, Skelton no doubt asked her why then has she proposed nearly $6 billion in new taxes aimed directly at upper income taxpayers, increasing even more our dependence on high earners? It’s a shame the Speaker’s response to that pointed question did not make the column’s final cut.
Kudos to Skelton for detailing the increasing dependence of the California budget on the personal income tax, especially on high earners. But in discussing the smaller role of the state sales tax, he draws the wrong conclusion: the reason the state is less dependent on the sales tax is quite simply because we’ve become more dependent on the PIT.
In fact, sales tax revenues continue to increase at a healthy pace: since 1992 – the nadir of the aerospace recession – taxable sales and personal income have grown at almost exactly the same average rate, about 5.3 percent a year. It’s just that the progressive income tax generates more revenues for the treasury.
There is nothing wrong with the sales tax base that a little economic recovery wouldn’t solve.