Thursday, December 27, 2012
California raises taxes on the wealthy, and what happens to tax collections?
by Clifford F. Thies Why cut spending when we can ask the millionaires pay their fair share, said the people of California in the recent election, when they approved Gov. Jerry "Moonbeam" Brown's Proposition 30. The proposition raised the sales tax rate from 7.25 to 7.5 percent, and raised the state income tax rate for people making between $250,000 to $1 million from 9.3 percent to rates ranging from 10.3 to 12.3 percent, and for people making more than $1 million from 10.3 to 13.3 percent, retroactive to January 1, 2012. So what happened? The State Controller, John Chiang, has announced that revenue for the month of November revenue came in 10 percent under projection, with personal and corporate income taxes falling by $1 trillion, partially off-set by an increase in sales tax revenue of $100 million. In response to the ever increasing taxes of the once Golden State, businesses and individuals have been departing the state at increasing rates. According to one business relocation consultant, business departures have risen from one per week in 2009, to four per week in 2010, and five per week in 2011. Among giant corporations reducing their presence in the state or leaving altogether have been Campbell Soup, Comcast and eBay. According to recent Census figures, California suffers net out-migration of 100,000 per year, the most popular destination being Texas, followed by Arizona, Nevada, Oregon and Washington. These Census figures confirm the indications of the "U-Haul Index," based on differences in one-way U-Haul Truck rental charges into and out of a state, developed by economist Mark Perry. Since U-Haul Trucks are not naturally returned to California, the company has to hire drivers to do so, and work the average cost of hiring drivers to return their trucks to California into their price structure. Along the route of the state's economic state's death spiral are a choir of politicians denying that the departures are due to the state's high taxes or business climate in general. It's only bad karma, says Gov. Moonbeam. Just keep repeating, it's only real if you think it's real.