The article I was referring to earlier
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Are high-income taxpayers the enemy?
....Logically, therefore, those campus demonstrators should be praying for the much-despised one-percenters to enjoy big increases in their taxable incomes so that higher education appropriations could be increased and fees could decline.
Somehow, one doubts that will occur.
and here's another one along that theme of battling insanity
Brown counting on the 1 percent to save California
Governor wants to raise rates on the highest earners, who already pay nearly half of all income taxes and whose incomes can fluctuate wildlyCalifornia's budget is in a constant state of peril or, perhaps more accurately, a budgetary inferno, because of, as Gov. Jerry Brown accurately noted in his recent Open Letter to the People of California, "
years of failing to match spending with tax revenues as budget gimmicks instead of honest budgeting became the norm." Ironically Brown's new proposal to raise tax revenue employs the same old approach to extract additional dollars from Californians rather than make tough, structural reforms and better steward existing resources.
It's has become almost cliché to say "California does not have a revenue problem, it has a spending problem," but the underlying issue is much more fragile than that.
The state has a preferred source of money – high-income earners – but if Brown is successful in raising taxes on the state's wealthiest residents, he runs the risk of milking the source dry. He also rests his hopes for the state's long-term fiscal solvency on the most volatile incomes.
With great fanfare Gov. Brown this week announced his latest quick fix to save the state from further financial ruin with the predictable solution of a ballot initiative next year to raise taxes on residents of the Golden State. The proposal aims to raise $7 billion over five years by boosting the state sales tax for everyone and the income tax on people who make over $250,000 a year. The state may face a budget shortfall of $13 billion in fiscal 2012.
Increasing the sales tax, even modestly, hits consumers in all income brackets, many already reeling from the lagging economy. And
raising taxes on the highest-income earners is even riskier business because it further concentrates the source of state income. The top 1 percent of income earners in California already account for nearly one-half of all revenue. And according to the state's nonpartisan Legislative Analyst Office, the portion of state taxes paid by that income bracket has fluctuated "from just above 30 percent in the early 1990s to nearly 50 percent in 2000 at the height of the tech boom."
The top 1 percent's "share of the personal income tax burden rises or falls with their share of taxable income," reports the LAO. "Compared to other taxpayers,
this group reports proportionately much more business income and capital gains, which are far more volatile than wage and salary income."
Relying so heavily on the highest earners further narrows the tax base and puts the state at the risk of further insolvency. It also makes budgetary planning more difficult.
Brown's proposal has rightly been met with instant opposition from business leaders, taxpayers groups and Republican legislators but governor Brown and his fellow Democrats and union allies have begun, already, stringing their violins claiming that if taxes are not increased schools will suffer and public safety programs will be cut – two arguments that usually resonate with Californians.
For Brown and his ilk the state faces a revenue shortage – that is,
the state government is in "need" of more money to spend. But the real issue is that legislators and bureaucrats in Sacramento for too long have been poor stewards of taxpayer dollars.
The Legislature repeatedly has misfired by crafting budget plans based on one-time revenue – windfall tax collections from stock sales – assuming such revenues would continue year to year. The result has been huge budget shortfalls. Earlier this year when the state reported an $11.8 billion windfall, the state's finance director, Ana Matosantos, said
the influx of cash was "almost entirely from the top 1 percent of earners," the Wall Street Journal reported.
New York Times bestselling author Robert Frank's book "The High Beta Rich" describes precisely how dysfunctional California's fiduciaries operate. He wrote that "the state would treat each year's windfall from the rich as a reoccurring income stream, allocating the long-term programs in education, health care, pensions or other areas."
But, Frank observed, "When the revenues from the rich dried up,
the spending continued, leading to multibillion-dollar budget shortfalls."
Now, Gov, Brown is attempting to continue this dysfunctional tradition.
In the past, as Frank writes, state lawmakers "preferred to spend the money from the rich while they had it rather than worrying about its end."
California voters ought to ponder this sad reality when considering the governor's tax plans.
The debate is not an ideological battle over tax increases. Instead
it is about failed management of existing resources and poor understanding of the dynamics of state revenue. California legislators – Republican and Democrat – have perpetually failed to budget properly.
Gov. Brown's latest proposal continues that legacy.
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