California Ballot 2016 - Prop 55

"Promises are like pie crust, made to be broken" - Jonathan Swift

Proposition 55 is the result of California voters being promised something when there was no intention to keep that promise.  Governor Jerry Brown and everyone else associated with the 2012 CA ballot's Prop 30 promised us that its tax increase provisions would be temporary.

Based on that broken promise, and the fact that California's state government is already too dependent on income tax revenue from the wealthy, I'm going to vote NO on Prop 55.  The emotional argument that we can't force the state to make $4 billion in cuts on education ignores the fact there are other ways to balance our state's budget without the extreme risk of having so much of our state's tax revenues being dependent on such a small portion of the population.

This is an extract from the actual 2012 sample ballot:

"TEMPORARY TAXES TO FUND EDUCATION.  GUARANTEED LOCAL PUBLIC SAFETY FUNDING."

It was sold to the voters as a temporary tax.  Prop 30 did two things.   It increased the statewide sales tax from 7.25% to 7.5% (that's the state level component of the statewide sales tax, county and city sales tax rates make the actual tax paid at the point of sale higher) for four years; and it raised the top state income tax rates from 9.3% to levels ranging from 10.3% to 12.3% depending on the family's income level.  That increase will not expire until 2019.

Prop 55 extends the second component of Prop 30 for an additional 12 years.  So in effect, Prop 55 is taking what was to be a seven year extension of state taxes on the wealthiest Californians and breaches the promise that this was to be a temporary tax increase, and it extends it for another 12 years.  It does this two full years in advance of the expiration of the current temporary tax increases.

There is another component to the discussion and that is that 12.3% apparently isn't enough of a top marginal income tax rate for the state's wealthiest residents, as there is a 1% additional tax levied on the incomes of those California taxpayers whose income exceeds $1 million.

To put this in perspective I used the 2015 income tax return of Bill and Hillary Clinton and applied the CA state income tax to their income of over $10 million for that year.  The difference between what they would have paid under the state tax rates prior to Prop 30 and what they would have paid as CA residents under the Prop 30 rates was nearly $200,000.

Bear in mind that when the tax federal marginal tax rate is 39.6% and California's top marginal tax rate is 13.3%, the combined federal/state tax rate would be more than 50%.

Now there is an argument to be made that this may well represent what the majority would consider to be the wealthy's "fair-share" but that ignores some realities that must be considered in viewing the entire equation.  In a blog I wrote back in May I used some numbers from a George Skelton column and they are very relevant to the discussion of Prop 55.

The top 1% in CA pay 48% of the income taxes
The top 10% in CA pay 79% of the income taxes
The bottom 60% in CA pay only 2% of the income taxes
To be in that top 1% you have to have an adjusted gross income (AGI) of $556,638
To be in that top 10% you have to have an AGI of around $149,000

In the upcoming CA fiscal year income taxes will be around 70% of the total revenue.
In CA in 1950 income taxes provided only 10% of the total revenue.
In that upcoming CA fiscal year, sales taxes will provide 22% of the total revenue.
In CA in 1950, sales taxes provided 60% of the total revenue.
The top 1% in CA pay 48% of the income taxes
The top 10% in CA pay 79% of the income taxes
The bottom 60% in CA pay only 2% of the income taxes
To be in that top 1% you have to have an adjusted gross income (AGI) of $556,638
To be in that top 10% you have to have an AGI of around $149,000

In the upcoming CA fiscal year income taxes will be around 70% of the total revenue.
In CA in 1950 income taxes provided only 10% of the total revenue.
In that upcoming CA fiscal year, sales taxes will provide 22% of the total revenue.
In CA in 1950, sales taxes provided 60% of the total revenue.

According to an article in Forbes from earlier this year, California has the 5th highest state tax burden of the 50 states.   Prop 55 will only exacerbate and extend that ranking.  That's why I'm voting NO.