Taxes and the Pyrite State
Posted by Dana Pico on 2013/01/13
After years of red ink, Gov. Jerry Brown said on Thursday that California’s $96.7-billion general fund is now poised to end next year with a surplus, thanks to years of deep budget cuts and billions in new taxes approved by voters last year.
“We achieved the position we’re in because of tough cuts … and then the people voted for taxes,” he said. “We broke the logjam by going to the people.”
Schools will be the big winner in the governor’s new spending plan, receiving $56.2 billion in state funds, an increase by $2.7 billion over the last year. That funding is set to jump to more than $66 billion by 2016.
The budget also dedicated an additional $350 million to the state’s public insurance program, Medi-Cal, to help implement President Obama’s healthcare law.
Brown’s budget predicts only the second budget surplus in the last decade, with an $851-million surplus projected at the end of the 2013-14 fiscal year — if all his proposals are approved by lawmakers.
Jerry Brown says we will have surpluses. I say we will not.
We’ll see who is right.
The boldfaced parts were by Patterico commenter Taney O’Haley, who said that it sounded like wishful thinking to her.
Donald Douglas referenced an article from Investor’s Business Daily which pointed out that the overwhelming majority the voters gave to the Democrats puts the restrictions under Proposition 13 at risk, and that there are already at least two proposals in the legislature to weaken it:
Already, state Sen. Mark Leno wants to put a measure on the ballot to lower the two-thirds vote threshold for school district parcel taxes to 55%. State Sen. Lois Wolk introduced a bill that would ask voters to drop the vote threshold to 55% for library parcel taxes and bond measures.
In the Assembly, Tom Ammiano plans to reintroduce a bill seeking to revise the definition of an ownership change that triggers a new business property assessment. Voters’ OK isn’t needed. Even if the bill stalls, as it has in the past, business owners fear that its goal — squeezing more tax money from commercial property — will surface in other proposals, some with better odds.
The tax increases approved by the voters in November were temporary increases, adding a 0.25% increase to the state sales tax, and creating three new brackets for the most productive Californians, lasting for seven years. For a single Californian earning $500,000 or more, the new 12.3% marginal rate, combined with the new federal top rate of 39.6%, means that 51.9% of his earnings over the thresholds will be seized just in income taxes alone. If his earning power is portable — and for many of California’s top producers, it won’t be — moving to a state like Texas or Florida, which have no state income taxes, is a completely rational economic decision.
How many will? We can’t know yet, but we’ll see in two more years, when Governor Brown’s projection of a balanced state budget is either realized, or it is not.
Cross posted on THE FIRST STREET JOURNAL.
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