On Tax Day 2014, California is creeping toward a point that the issue of taxation may once again be selected as the main concern for the state’s voters. That might seem an irrational statement when you consider that in the most recent Public Policy Institute poll, taxes as a concern were ranked sixth behind, in order, jobs and the economy, water/drought, education, immigration and health care. In fact, only four percent of those surveyed picked taxes, the budget and deficits as their top concern.
However, there are signs that the tax issue is going to get more attention.
The annual Tax Foundation report on state-local tax burden has California in fourth place among the states. The percentage of tax burden as a share of state income is 11.4 percent. But the Tax Foundation’s numbers were calculated on 2011 figures. That was before California raised it sales and income taxes in 2012 to the highest in the nation.
From a historical perspective the California percentage has crept up over the years and is nearing the 12 percent figure of 1977, the year before California taxpayers revolted and passed Proposition 13.
After Prop 13, in 1980 the percentage of state-local taxes as a share of state income was 10.6 percent. It remained under 11 percent until 2007. The percentage has been over 11 ever since – approaching the tax revolt burden of 12 percent.
Does that mean there will be another tax revolt?
Times and especially strategies have changed. The pro-tax sentiment is to tax the wealthy and to tax business — less resistance, or at least, fewer voters to oppose these moves, so the thinking goes.
The equity argument has come to the fore, and to deal with an equity gap proposals are made that taxes should continue to go up on the rich. The PPIC poll found support for this idea.
As one college professor wrote in the San Diego Free Press “the biggest flaw of Proposition 30 was not that it was unfair to the rich, but that the increased taxes on top earners are only temporary. If we are to meet the educational, health, infrastructure, and other key challenges of the future, the Proposition 30 taxes on high-income earners need to made permanent. In addition to this, other quite reasonable progressive tax reforms should include an oil severance tax and a revision of Proposition 13 that saves the protections for ordinary homeowners but allows corporate property taxes to be revalued and taxed accordingly.”
This push is spreading with the state superintendent of schools calling for making Prop 30 taxes permanent and activists traveling to school boards and city councils asking for resolutions to support changes to Proposition 13.
The arguments for piling more taxes on business and upper income taxpayers ignore any ripple effect on the economy; the real possibility that big tax increases would discourage economic growth and job creation.
So as Tax Day 2014 passes with out much protest, taxpayer advocates and their adversaries cast an eye to the not-so-distant future in which a full-blown battle over taxation in California is likely to erupt.
Originally posted at Fox & Hounds Daily.