Thursday, July 17, 2008

California Boasts, "We're Number 1--in Taxes"

California has lost its national leadership role in most things, but it is about to claim the dubious distinction of being El Primero Numero Uno El Jefe in one category, the highest tax jurisdiction in the United States. Until now, New York City has been the leader, but its government at least delivers first class services, under the leadership of Mayor Rudy Guiliani and the incumbent Mayor, Michael Bloomberg.

However, our Democratic-controlled State Legislature has taken dead aim at the taxation crown, as described in today's Wall Street Journal. The Spendocrats are proposing an increase in the top marginal tax rate from 10.3% to 12%, which would be the highest in the nation and twice the national average. They are also planning to eliminate inflation indexing, which means that our increasing rate of inflation annually will throw more and more taxpayers into the higher tax brackets, without any increase in their real income. As a final coup d'grace, the Democrats favor increasing the corporate tax rate (by definition a double tax on income, once at the corporate level and once when paid to shareholders as dividends) from 8.4% to 9.3%.

Of course, as the Wall Street Journal observes, the natural result of these measures, if adopted, would be to drive out of California every high-income individual and every business that can move, taking with them the salaries and payrolls needed to keep the state solvent. Already AAA has announced that it is closing its national call centers in California, a loss of 900 jobs. Toyota has canceled plans to construct its new hybrid Prius plant in the Bay Area, opting instead for Mississippi, a loss of 1000 potential jobs. Somehow the low local taxes of Mississippi outweighed the unavailability of gay marriage.

Actually, the comparison of California to New York City is unfair. After all, New York City is a city, in a State that assesses its own income tax. The State of California managed to seize first place in taxation rates without even taking into account the local city taxes assessed by jurisdictions such as the City of Los Angeles, which taxes the GROSS INCOME of every business within its boundaries.

Unfortunately, unlike AAA and Toyota, some of us are stuck here. I have heard some conservative Republicans suggest that rather than compromise it is better to let the Democrats win, govern, tax, spend and ruin. That has been the result, if not the intention, in California, where the Democratic-controlled legislature and its fellow-traveler GOP governor have allowed spending to increase by 44% over the past 5 years, spending money even faster than Congress. Maybe that strategy will prove fruitful in the long run, if the State survives--the Democrats are certainly cooperating by spending and taxing the State into ruin--but it is going to be a painful tribulation for those of us who can't rapture out of here and will be left behind to witness the economic apocalypse.


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