The new Public Policy Institute of California Poll confirmed what I have noted here and elsewhere: that the Proposition 30 tax extension starts with an advantage and has a decent chance of passing.
One reason for this, according to a question asked by the pollsters, is that likely voters (by 60%) think that schools need more money. Of course, these are the same voters who when tested in previous PPIC polls incorrectly claimed that schools are not the top funding priority of the state budget, but that prisons are.
Given the feeling that schools need money, that the tax will be levied only on people making $250,000, and that, as of yet, no campaign has come together to oppose the millions of dollars already raised in support of a Prop 30 extension, it would be difficult to bet against the measure passing. The PPIC poll records a 62% to 35% support among likely voters for extending Prop 30.
Assuming that the schools will get all the money expected from a Prop 30 extension is another matter. Most economic experts say the high-end taxpayers would be hit the hardest in a recession meaning a drop-off in revenues to the state. Over the 12-year life of the extension there is bound to be a recession or two. California currently receives 56% of its revenue from income taxes and the top 1% of income taxpayers pay over 50% of all income taxes.
Of course, the revenue assumptions are based on top income taxpayers remaining in the state.
The fight between inventor Gil Hyatt and the Franchise Tax Board has been going on for a quarter of a century. The battle centers around whether Hyatt was a resident of California when some of the royalties for his microprocessor invention started to pile up and how much income tax he owed the Golden State.
Hyatt left for Nevada, a no income tax state, and his battle with the California, still alive after all these years, just had a decision in the U.S. Supreme Court that will keep the issue alive longer. More on the court action here.
The relevance of this 25-year old battle deals with the greater issue if the rich plan to leave California and it’s highest in the nation marginal tax rate created by Proposition 30.
It has been argued by the pro-Prop 30 side that California’s economy has grown under Prop 30. The question is did those who suffered under the new tax rates choose to stay in place and weather the storm because the tax increase was supposed to be temporary?
With the push to extend the tax another 12 years that might give some of those high end taxpayers something else to consider. Especially since they must understand that in 12 years another extension almost certainly will be called for.
However, evidence that the high-end tax is already taking its toll appeared in Monday’s editorial in the Las Vegas (NV) Review-Journal. To wit:
Consider that according to IRS data, the residents of Douglas County — population about 47,000 — in Northern Nevada have the highest average adjusted gross income in the state. That shouldn’t be surprising, considering it features expensive real estate on and near Lake Tahoe.
But the figures also show that as many as 10,000 residents in Douglas County — and in nearby Washoe County — are newcomers from the San Francisco area who fled California’s punishing tax climate. Many of these transplants report incomes in the six figures or higher.
In 2012, Californians passed Proposition 30, which retroactively jacked income tax rates on the state’s highest earners. By 2018, state residents making more than $1 million a year will send 13.3 percent of their earnings to Sacramento — above and beyond what they already owe in city income taxes or to the federal government.
Not surprisingly, many people have voted with their feet and hit the road.
What mood the taxpayers are in by the time the election rolls around is unclear. But other questions in the PPIC poll indicate that raising taxes is not a slam-dunk.
For one thing, likely voters opposed the idea of lowering the two-thirds vote to 55% to raise local parcel taxes for schools (44% Yes; 49% No.)
Further, the way PPIC asked about raising revenues in local districts left room for doubt about the veracity of the answers. PPIC asked if school bonds or parcel taxes for schools would receive support. Yes, in both cases, likely voters responded. But would the response be the same if the question revealed that the bonds and parcels taxes would raise property taxes? That important tidbit of information was not found in either question.