NCPA - National Center for Policy Analysis

CALIFORNIA'S AGED TAX SYSTEM

April 24, 2007

One of the main problems with California's state income tax is that the rich pay, while the lower middle-class and poor skate, says the Los Angeles Times.

Consider:

  • The top-earning 1 percent of taxpayers paid more than 40 percent of personal income taxes in 2004, the last year for which there are solid figures, according to the Public Policy Institute (PPI) of California.
  • The nonpartisan institute says in that same year, taxpayers earning at least $200,000 accounted for only 5 percent of the tax returns, but more than 55 percent of the taxes.
  • Conversely, Californians with taxable incomes under $50,000 comprised 45 percent of the returns, but paid only 6 percent of the taxes.

Beyond the state income tax, California's other taxes are equally bad, says the Times.  For example, the sales tax is a relic, designed for a manufacturing and retail economy, not for consumers of service.  And the property tax, while low is hardly fair.  Consider:

  • Because so many purchases are tax-exempt, says PPI Legislative Analyst Elizabeth G. Hill, the sales tax rate -- an average 8 percent -- is higher than it need be to raise the same revenue.
  • Further, property is taxed less on its value than on how long somebody has owned it; so there's often a dramatic difference in how two identical, side-by-side houses are taxed.

Source: George Skelton, "Fixing aged tax system is a job no one wants," Los Angeles Times, April 23, 2007.

 

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