Recap of CA Propositions Effecting your Taxes

Proposition 30

California voters approved Proposition 30, which increases personal income tax on annual earnings over $250,000 for seven years and increases the sales and use tax rate by 0.25¢ for four years.

Below are the new rates:

10.3% (1% increase) on income of:  $250,001–$300,000 for single/MFS;
                                                     $340,001–$408,000 for HOH; and
                                                     $500,001–$600,000 for MFJ.

11.3% (2% increase) on income of:  $300,001–$500,000 for single/MFS;
                                                     $408,001–$680,000 for HOH; and
                                                     $600,001–$1,000,000 for MFJ.

12.3% (3% increase) on income of:  More than $500,000 for single/MFS;
                                                     More than $680,000 for HOH; and
                                                     More than $1,000,000 for MFJ.

Proposition 38

Voters rejected Proposition 38, which would have increased personal income tax rates on annual earnings over $7,316 using a sliding scale from 0.4% for lowest individual earners to 2.2% for individuals earning over $2.5 million, for 12 years.

Proposition 39

Voters approved Proposition 39, which provides that, starting in 2013, multistate businesses are no longer allowed to choose the method for determining their state taxable income that is most advantageous for them. Instead, most multistate businesses must determine their California taxable income using the single sales factor method. Businesses that operate only in California are not affected by this measure. This measure includes rules regarding how all multistate businesses calculate the portion of some sales that are allocated to California for state tax purposes, including a set of specific rules for certain large cable companies.

Tax Increase Proposals Bubbling Up for California Ballot

Fox & Hound blog summarizes the five tax increase initiatives potentially making it to California's 2012 ballot:

• Governor Jerry Brown's (D) proposal to raise the sales tax by a half-cent and raise income taxes on high earners. Top rate would be 12.3 percent, up from the current 10.3 percent.
• Teachers' union "Courage Campaign" proposal to impose higher income taxes on top earners. Top rate would be 15.3 percent.
• Tom Steyer proposal to adopt single sales factor, taxing multistate companies based on their share of sales in California as opposed to their share of property or employees in the state.
• "Think Long" proposal that broadens the sales tax, lowers rates, and raises a large amount of revenue. Services would be taxed at 5.5%, taxes on goods would drop a half-cent, the top income tax rate would be 8.5 percent, and the corporate rate would drop from 8.84 percent to 7 percent.
• Molly Munger proposal to raise taxes across-the-board.

Much of this of course assumes that the problem is insufficient taxation. But California is not a low-tax state. Back in 2009 I pulled together some numbers. They might have changed slightly but the points are still relevant:

California is a high tax state. They are sixth highest in state-local tax burden as a percentage of state income. The sales tax is the highest state rate in the country even before the recent 1% increase, and numerous county rates keep them in the top 5 of state-local combined rates. Their individual income tax top rate is the second highest in the country, eclipsed only recently by Hawaii, and is sixth highest in the country in terms of collections. The corporate income tax is one of the highest in the country and sixth highest per capita in collections. Even the gas tax is the third highest in the countryand the state Lottery has the fifth highest implicit tax rate in the country. Only on property taxes is California "low": 28th highest in collections per capita.

The Tax Foundation's annual State Business Tax Climate Index evaluates tax structures for business-friendliness, and the 2009 edition ranked California 48th, or third worst. The individual income tax ranked second to last, corporate income tax ranked 45th, and sales tax ranked 43rd. (Property tax structure was a bright spot, ranking 15th in the country.)

With these comparisons, and the enormous growth in state spending, it's hard to say that California's problem is insufficient taxation. Ultimately, California voters need to decide whether they are willing to pay the taxes to fund the programs they want. The tax system prevents this from happening now, due to the state's overreliance on taxing capital gains, corporations, and high-income earners. Most Californians rightly think additional spending is a free lunch that they won't have to pay for.

More on California here.