On Tuesday night, 54% of California's voters approved Proposition 30 which would raise both sales and income taxes in a supposed attempt to "fix" the not-so-Golden State's debt problems. The state sales tax will be raised by 1/2 percent and, of course, that cost will be borne by everyone in the state who buys anything.
Then there's an increase in income taxes; retroactive to include all of 2012. Apparently, having taken a lead from Obama, the Democratic-supported Prop 30 will "only" raise taxes on "millionaires and billionaires". You know, that same old song: Individuals making more than $200,000 and families making $250,000 and above. The surtax will be progressive; starting at 1 percent on the low end and incremented upwards to 3 percent for true millionaires.
Now, if Obama is also able to raise the federal tax on those same $200,000/$250,000 wage earners to 39.6% from 35%, it means that that those "rich" in California will see an "additional" increase of 4.6%. Then, add to that the 2013 0.9% tax increase for ObamaCare and the plus $200,000 crowd will see a rate increases of ranging from 5.5% to 8.5%. But, here's the thing. California already has one of the highest income tax rates on high end wage earners at 9.3%; and, 10.3% for those making more than a million dollars. So, overall, rich Californian's -- at the very minimum -- will ultimately have to pay a combined minimum tax rate of 50.8%. 53.8% for those truly making a million dollars or more. Of course, both these rates assume that Obama will get his tax increases on the rich. So, if you do make $200,000, you will only get to keep a little more than $98,000 of it. For someone making a million dollars, their minimum tax bill will be $538,000. Of course, this doesn't even include the sales taxes and real estate tax burdens and all the other taxes imposed on these very same people. This, then, means that these income earners are no longer "unfairly" working for themselves. Instead, they are primarily working in support of the state and federal governments and all their waste, corruption, and multitude of giveaways.
The problem with these high taxes is that it "will" force many talented and wealthy Californians to flee the state in seeking lower taxes. Some amount of businesses will also leave. Those who are independently wealthy and not tied down to California by job, may actually move to places like Bermuda or Canada or some other country. Besides being a brain-drain, ultimately, this will shrink the tax base by lowering the mean income; and, that means a lowering of tax revenues. In fact, all these new tax increases may actually result in less tax revenues than California is currently taking in. Already, because of high taxes and over regulation, an estimated 3.4 million residents have fled the state since 1990. I know this well; being a Nevada resident with no state income tax. Many of the people in our particular neighborhood have moved here from California.
One last comment. Despite the state's high deficits and debt, the Democrats who are in control of the State legislature have found it impossible to lower any of the State's spending. This fact alone must infuriate those making high incomes and give them another incentive leave. States that raise taxes and don't cut spending are just whistling past the graveyard; as was noted in my previous blog post, Obama Should Learn A Lesson From His Home State, where Illinois implemented a 67% across-the-board tax increase and their debt just continued to increase.
--- Wall Street Journal: California Voters Approve Higher Taxes: http://online.wsj.com/article/SB10001424127887324439804578104854095658918.html?mod=googlenews_wsj
--- Federation Of Tax Administrators: State Tax Comparisons: http://www.taxadmin.org/fta/rate/tax_stru.html
--- Fox and Hounds: The Great California Exodus: A Closer Look: http://www.foxandhoundsdaily.com/2012/09/the-great-california-exodus-a-closer-look/
--- CNBC: Two Days After The Election: Boeing Announces Big Layoffs in Defense Division: "Boeing announced a major restructuring of its defense division on Wednesday that will cut 30 percent of management jobs from 2010 levels, close facilities in California and consolidate several business units to cut costs.": http://www.cnbc.com/id/49729998