California Nightmare Part XXIV
by digby
We’ve got yer Libertarian paradise for you, comin’ right up:
Gov. Arnold Schwarzenegger asked lawmakers Friday to eliminate the state’s welfare program starting in October and dramatically scale back in-home care for the elderly and disabled as part of his May budget revision to close a $19.1 billion deficit.
The Republican governor also proposed cuts to state worker compensation. Besides asking for a 5 percent pay cut, 5 percent payroll cap and 5 percent increased pension contribution, Schwarzenegger has proposed cutting one day per month of pay in exchange for leave credit.
The proposal would affect all state workers under the governor’s authority, regardless of whether they are general fund or special fund employees. Employees would not be able to cash out any of this unused leave credit when they leave state service. The plan would replace the three-day-a-month furloughs, which are due to end June 30.
Schwarzenegger said the sour economy, the failure of the Legislature to make cuts he proposed in January and the federal government’s failure to come up with about $7 billion leaves policymakers with no choice but to make deep cuts.
Schwarzenegger also proposed eliminating state-subsidized child care for all but preschoolers as a way to reduce the state’s education funding guarantee.
You’ll notice what is not on the table. And there’s no reason for it:
In discussion of AB 1836 (Furutani) in the Assembly Committee on Revenue and Taxation on Monday, some lawmakers raised the specter of millionaires fleeing California in response to higher tax rates on wealthy earners. As we’ve blogged about before, the claim that high-income people flee California for states with lower personal income tax rates amounts to nothing more than yet another urban legend. Once again, let’s look at the facts. In the early 1990s, when 10 percent and 11 percent personal income tax rates were in place for married taxpayers with taxable incomes of $200,000 or more who filed joint tax returns and single taxpayers with taxable incomes of $100,000 or more, the number of taxpayers subject to those rates increased substantially, even while the total number of taxpayers declined. The number of California’s married taxpayers with incomes of at least $200,000 rose by 33.4 percent between 1991 and 1995, and the number of single personal income tax filers with incomes of at least $100,000 increased by 40.2 percent. In contrast, the total number of joint filers declined by 6.7 percent during this period, and the number of single filers fell by 7.3 percent.
Similarly, the rise in the number of California’s millionaire taxpayers has outpaced the total increase in personal income taxpayers since the passage of Proposition 63 in 2004, which imposed a 1 percentage point income tax rate on personal incomes over $1 million to fund mental health programs. In addition, data from the Internal Revenue Service show that for more than a decade – at least – taxpayers who remain in California from year to year have considerably higher average incomes than taxpayers who leave California for other states, and this income gap has widened for most of this decade.
While we’d never argue that the wealthy come here to pay more in taxes, there’s no empirical evidence to support the claim that they leave California in order to pay less.
This is the urban myth that won’t die, of course, because our entire discussion of taxes is now predicated on the idea that if we hurt millionaires’ feelings they’ll hold their breath until they turn blue. But the truth is that they take tax hikes in stride.
This state offers a special way of life for those who have money, which if they like it, is not replicable anywhere else. They are not currently taxed at an onerous rate and they can well afford to step up right now and help this state through this crisis.
I wonder what would happen if someone made a straight-up public appeal to the state’s wealthiest inhabitants. Maybe they wouldn’t respond, but we won’t know unless someone actually proposes it. Sadly, the right’s successful crusade against taxes has so indoctrinated everyone in this country, that such an appeal is considered political suicide. Better to put little children on the streets than ask a wealthy person to step up and pay more. Values, dontcha know.
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