Down in California, arguably one of the most liberal states in America, they just can't seem to get their budget right. Maybe it's all of the welfare state type of programs they have. Or it could be their idiot fiscal policies, but Californian Paul McCauley is proposing a MASSIVE tax increase for the wealthy that will only drive their crumbling economy further down. Check this out:
Earlier this month, a California activist began gathering signatures to put a state wealth tax on the ballot. The measure would impose a new 35% income surtax (in addition to federal taxes and the existing 10.3% top state rate), and penalize people who leave the state by seizing 55% of assets exceeding $20 million. The money raised would be used to eliminate the state's budget deficit and for purchasing controlling shares in large corporations.
The 17.5% surtax is unusual because it would be on a taxpayer's total (not marginal) income whenever it exceeds $250,000, with another additional 17.5 percent tax on total income (for a total additional 35 percent tax) whenever it exceeds $500,000. In the case of single taxpayers or taxpayers filing as head of household, these additional taxes would be levied on incomes greater than $150,000 and $350,000 respectively.
So say someone has adjusted gross income of $1,000,000 and taxable income of $750,000. Today, their tax bill would be:
Federal Income Tax (35% top rate):
$241,574
State Income Tax (9.3% top rate):
$67,555
Payroll Taxes:
$41,648
Total Income and Payroll Taxes:
$350,777
Effective Tax Rate:
35%
With the new surtaxes, it would look like this:
Federal Income Tax (35% top rate):
$241,574
State Income Tax (9.3% top rate):
$67,555
Proposed Initiative Surtax (35%):
$262,500
Payroll Taxes:
$41,648
Total Income and Payroll Taxes:
$613,278
Effective Tax Rate:
61%
The same person faces an effective tax rate of just 28% if they lived in neighboring Nevada. Being able to cut your taxes in half by moving to the next state over is probably not an incentive California wants to offer. Staying would also mean your tax bill going up by over 74 percent. Marginal rates this high would undoubtedly curtail capital formation, productive investment, and economic activity.
The initiative's sponsors have an answer to this too: hit people leaving with a hefty exit toll. The creatively named "Hasta La Vista Tax" of 36.8 percent is imposed when an individual dies or moves out of California. This exit tax would be on both recognized income and unrealized appreciation in asset values over $5 million. Since this tax inhibits commerce and burdens the right to travel, it is probably unconstitutional.
In addition, existing California residents who stay are hit with a one-time tax of 55 percent on assets in excess of $20 million.
That's right, if you make $1 million a year, your taxes will go from $350,000 a year, to $613,000 a year. Tell me, why would ANYONE remain in California if this passes? Business owners would pack up shop and move, leaving thousands, if not millions out of work.
Would you accept the state taking 61% of your income? Of course not, but because it doesn't effect them, they'll probably get some signatures for this ballot.
That means that someone making say $50,000 a year would be taking home $19,500 a year. Of course, you've seen how well California can balance a budget, so where's the incentive to curb spending? Just tax some more, driving up prices for goods and services. Inflation would hit double digits or worse inside of a few months. A gallon of gas would jump from $4 to easily $6-$8.
Let me put it to you this way. If I'm a small business owner, and I employ 40 people, if my taxes go up this significantly, you can bet I'd look towards Arizona or Nevada, or somewhere where it's cheaper to operate. That'd put 40 people out of a job and millions in taxes would be lost. I'd take the taxes penalty to court and wrap it up in the court system for YEARS.
Start thinking responsibly California and CUT SPENDING.
Travis
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