Sunday, June 15, 2008

CA Income Taxes Too Low For Berkeley Leftist

With the state facing a budget deficit in spite of years and years of record revenue increases, Leftists are predictably searching for new tax dollars to mine. Thursday's Berkeley Daily Planet contained this lovely piece encouraging higher taxes and spending.

One of the most frustrating parts of being a conservative pseudo-journalist in this liberal region is that the local newspapers won't take any time whatsoever to present contrary viewpoints.

Sam Frankel's argument here is, frankly, insane. Frankel argues that the state government should reinstate the full Vehicle License Fee and, far more damaging, raise the top income tax rate to 11 percent and decrease the state mortgage tax deduction.

Frankel's argument sounds like the statements made by the antagonists in Ayn Rand's Atlas Shrugged, where they blithely allocate the wealthy citizens' money, under the assumption it will always be there for the taking.

I wonder if many Daily Planet readers have ever stopped to take a look at state income tax rates around the country. If they did so, they might be surprised. This is an issue of sufficient import that I've decided to reproduce the table at the bottom of this blog post.

Please do take a look at the table. What you'll notice is something people like Frankel either want to hide from you, or something they are just too ignorant to find out. California already has the highest income tax rate in the country, and its rates are far higher than any neighboring states, with the exception of Oregon.

Arizona and Colorado charge 4.5 percent, Utah and New Mexico charge around 5 percent. Nevada and Washington charge zero!

It's been well documented that the state of California has chased of millions of middle- and upper-middle-class residents through its ridiculous income tax rates. Frankel argues that an 11 percent tax rate is one wealthy people "can easily afford." But what our friend fails to realize is that they might choose to move in spite of their purported ability to pay the tax.

Each time California raises taxes of any sort, some of our productive citizens leave for other states. I have yet to see a single study which analyzes the effect this phenomenon has on the state budget. As recently as 2006, a proposition introduced a 1 percent surtax on those making more than $1 million per year. What if this tax caused enough people to leave the state that it actually lost the state money? I guess we'll never know whether that was the case.

Leftists make the arrogant assumption that high earners have no choices. This is far from true. The information economy permits people more flexibility than ever before in their choice of where to live. Hence the flood of people leaving California for more tax-friendly states.

What California should be doing is lowering its income tax rate and spending to reduce this outflow. Otherwise, we will end up with more of the same -- more people with their hands out as those with the money disappear across the Sierra Nevada mountains.

So, without further ado, I present a list of states, all of which would be better choices for EBC readers hoping to lower their tax burden.

The Table


  1. Your point about Oregon's state tax being close to California's is not really fair since Oregon does not have a state sales tax.

  2. Good point. Thanks. I've actually long thought the cleverest place to live is Vancouver, WA, which is just across the river from Portland. Then, you pay no income tax and you can shop in Portland with no sales tax. Pretty sweet deal!