Terry McLaughlin: Who will fill California’s coffers without the 1 percent?
California residents have the privilege of paying a marginal income tax rate of 13.3 percent, the highest in the nation.
Less than 1 percent of households in a state of 40 million people now pay nearly half the annual state income tax in California, while about 40% of Californians pay no state income tax at all.
California does not hold the record for highest gas taxes — that honor is bestowed upon Pennsylvania, whose combined state and federal gas tax is a whopping 77.1 cents per gallon. But California is a close second with a combined gas tax of 71.9 cents — and on July 1 you can add another 5.6 cents per gallon to that total.
“The national gas price has now risen for two months straight, tacking on a total of 50 cents per gallon in the last 90 days,” said Patrick DeHaan, head of petroleum analysis for fuel-price tracker GasBuddy. “California will soon be home to something not seen in nearly five years: a statewide average of over four dollars per gallon, with some of the largest cities there swelling to averages as high as $4.15 per gallon.”
In Nevada County, we are already seeing premium gasoline sold for over $4 per gallon. The major cause of the high price of gas in California is government, via taxes and regulations. Remember that Sacramento requires a special gas blend each year starting on April 1, which is even more expensive to produce.
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California does hold the record for the highest state sales tax in America at 7.3%, and as of April 1 that tax is now being applied to goods that California residents purchase online from out-of-state sellers.
The estate or “death” tax, which was phased out in 2005, is being resurrected by Scott Weiner (D-San Francisco) in the form of Senate Bill 378. As stated in the bill, “private action and market forces alone cannot be expected to address wide-scale racial wealth inequality, and public sector intervention is needed. It is the intent of the Legislature to address the racial wealth gap by enacting legislation that would create California Social Inheritance Accounts to counterbalance the uneven effects of intergenerational wealth transfer and reverse our state’s record level of inequality.”
If passed, this tax will become operative on January 1, 2021.
As income taxes, gas taxes, sales taxes and estate taxes do not seem to be sufficient to satisfy Sacramento’s enormous appetite, Robert Hertzberg (D-Van Nuys) has reintroduced the concept of a tax on services, with SB 522, which is currently sitting in the Senate Rules Committee. If this bill passes you can count on spending extra dollars each time you visit your favorite dry cleaner, barber, manicurist or personal trainer.
And here’s a glimpse at just a few other taxes being proposed in the current legislative session:
AB 138, proposed by Richard Bloom (D-Santa Monica) would tax sodas and other sugary drinks. AB 142, authored by Cristina Garcia (D-Downey) would increase the manufacturer’s recycling fee on batteries by 100%, a fee which would be passed on to the consumer. Eduardo Garcia (D- Coachella) has proposed AB 217, which would impose an additional 50 cents per service connection on all public water systems.
Assemblypersons Marc Levine (D-Marin), Rob Bonta (D-Oakland), and Adrian Nazarian (D-Van Nuys) have authored AB 18, an excise tax on retailers of firearms of $25 per firearm sale.
AB 755, proposed by Chris Holden (D-Pasadena) would increase the California tire recycling fee from $1.75 to $3.25 per tire. Senator Bob Wieckowski, (D-Fremont) has proposed SB 246, which is an oil and gas tax that would be imposed upon any operator for the privilege of severing oil or gas from earth or water in California, at a rate of 10% of the average barrel price in California or 10% of the average price per unit of gas. These taxes, of course, would be passed on to the consumer at the gas pump.
What public services are Californians receiving in exchange for these taxes? California is ranked near the bottom of state ratings for schools. San Francisco ranks first among America’s largest cities in property crimes per capita. About a quarter of the country’s homeless are found in California, along with about one-third of all Americans on public assistance. Almost one-third of Californian’s are enrolled in Medi-Cal.
It seems as though California is waging a war on the upper-middle-class, many of whom may feel that not only does California not appreciate their contributions, but that they are being chastised for not paying even more — as though paying half of their income to government entities is not enough and merely reveals their greed.
For the less than 1% of Californians who are paying nearly half of the total income taxes collected in California, and whose high-value estates would be subject to a 40% death tax at their passing, the natural beauty and incredible weather we enjoy in our state become less and less of a compelling reason to remain. The incentive to abandon California for a more tax-friendly state in life, and one in which 100% of your estate may be transferred to your desired heirs in death, only becomes more appealing.
And when that 1% leaves California, taking their tax money with them, whose cash will then fill the coffers of our state?
Terry McLaughlin, who lives in Grass Valley, writes a twice monthly column for The Union. Write to her at email@example.com.
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