The progressive movement suffered a major defeat this Tuesday when California voters rejected all five tax raising measures on the ballot, four out of five of them by nearly 2-to-1 margins. The vote clearly shows that even in one of the most liberal states in the nation, there is an upper limit to how high Americans are willing to be taxed.
Historically, California has been a high tax/high service state. That’s fine. Some states prefer a low tax/low service model. That’s fine too. (It’s a lousy idea, I think, but fiscally it’s fine.) But over the past few decades we Californians have somehow concluded that we can be a medium tax/high service state. It’s a fantasy.
The only fantasy here is that California is a “medium tax” state. While it is true that Proposition 13 has limited property tax collections, Californians still paid a combined $1,030.60 in per capita state and local property taxes. According to the Tax Foundation, this places them 28th highest nationally. But property taxes are just one source of state revenue. In other taxing categories, California either leads the league or is in the top 10 nationally, including:
- Corporate Taxes – California has the highest corporate income taxes in the West. Even Apple, the star of California’s technology economy set up a company in Nevada to avoid the state’s high tax rates. Only seven states have higher corporate rates.
- Income Taxes – California has the most progressive tax scheme in the country including the second highest rate in the nation for those making more than $1 million.
- Sales Taxes – California enforces a number of sales taxes including a general sales tax, a gas tax, and a cigarette tax. Overall California has the 13th highest state and local sales tax burden in the nation.
- Total Tax Burden – According to the Tax Foundation, once all state and local taxes are taken into account, Californians face the nation’s 6th highest tax burden.
So if low taxes are not to blame for California’s huge deficits, what is? Spending. The Reason Foundation’s Adam Summers details California’s government spending explosion:
When Gov. Pete Wilson took office in 1991, the state budget was $51.4 billion. When he left eight years later, it was $75.3 billion. After five years of Gov. Davis’s administration, the budget had jumped to $104.2, and after another five years under the stewardship of Gov. Schwarzenegger, it has continued to increase significantly to its present level of $144.5 billion. In just the last 10 years state spending has nearly doubled, increasing approximately 92 percent.
Already California’s leaders are pressing the Obama administration for a federal bailout to cover their massive deficits. Don’t expect spending cuts to be part of any Obama plan to fix the Golden State.
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