Jan 8, 2013 Comments Off on California In Trouble As Jerry Brown’s Prop 30 Tax Increases Lead To Less Revenue Chuck Biscuits
Proposition 30, a Sales and Income Tax Increase Initiative, was on the November 6, 2012 ballot in California as an initiated constitutional amendment, where it was approved.
Gov. Jerry Brown led the charge for Proposition 30, which was a merger of two previously competing initiatives; the “Millionaire’s Tax” and Brown’s First Tax Increase Proposal.
Raises California’s sales tax to 7.5% from 7.25%, a 3.45% percentage increase over current law. (Under the Brown Tax Hike, the sales tax would have increased to 7.75%)
Creates four high-income tax brackets for taxpayers with taxable incomes exceeding $250,000, $300,000, $500,000 and $1,000,000. This increased tax will be in effect for 7 years.
Imposes a 10.3% tax rate on taxable income over $250,000 but less than $300,000–a percentage increase of 10.6% over current policy of 9.3%. The 10.3% income tax rate is currently only paid by taxpayers with over $1,000,000 in taxable income..
Imposes an 11.3% tax rate on taxable income over $300,000 but less than $500,000–a percentage increase of 21.5% over current policy of 9.3%.
Imposes a 12.3% tax rate on taxable income over $500,000 up to $1,000,000–a percentage increase of 32.26% over current policy of 9.3%.
Imposes a 13.3% tax rate on taxable income over $1,000,000–a percentage increase of 29.13% over current “millionaires tax” policy of 10.3%.
If this proposition is passed in November, 2012, the income tax will apply retroactively to all income earned or received since the first of the year (1 January, 2012).
Based on California Franchise Tax Board data for 2009, the additional income tax is imposed on the top 3% of California taxpayers.
Estimated revenue from Proposition 30 vary from Jerry Brown’s $9 billion estimate to the $6.8 billion estimated by the non-partisan Legislative Analysts Office (LAO).. The difference stem for the volatility caused by capital gains income from high-income earners, an issue in California’s tax system previously identified by the Legislative Analysts Office (LAO).
Excerpted from The Examiner: After Proposition 30 passed on November 6, 2012, the State of California experienced a decline in the total state revenue for the month of November. California State Controller John Chiang reported that the total revenue for the month of November declined by $806.8 million, which is 10.8 percent below budget.
The State of California experienced a decline in its revenue as several of the high income earners have relocated to other states, and have also relocated their businesses out of state. This led to a decline in corporate and income tax revenues by more than $1 billion.
With the expected increase in revenue to be derived from the passing of Prop 30, state bureaucrats increased deficit spending beyond the state’s $6 billion annual tax increase. The Department of Developmental Services and the Department of Health Services increased its spending in November by over $1 billion in comparison to its spending last year.