Saturday, March 26, 2011

California Relies Too Much On Taxing The Rich

Those who squeal "tax the rich!"are demonstrating nothing more than an infantile class envy. When actual facts are considered, instead of being angry at people who have more, we should realize that California shafts itself when it tries to shaft the rich:
As Brad Williams walked the halls of the California state capitol in Sacramento on a recent afternoon, he spotted a small crowd of protesters battling state spending cuts. They wore shiny white buttons that said "We Love Jobs!" and argued that looming budget reductions will hurt the Golden State's working class.

Mr. Williams shook his head. "They're missing the real problem," he said.

The working class may be taking a beating from spending cuts used to close a cavernous deficit, Mr. Williams said, but the root of California's woes is its reliance on taxing the wealthy.

Nearly half of California's income taxes before the recession came from the top 1% of earners: households that took in more than $490,000 a year. High earners, it turns out, have especially volatile incomes—their earnings fell by more than twice as much as the rest of the population's during the recession. When they crashed, they took California's finances down with them.

Mr. Williams, a former economic forecaster for the state, spent more than a decade warning state leaders about California's over-dependence on the rich. "We created a revenue cliff," he said. "We built a large part of our government on the state's most unstable income group."
I have no problem with reasonably progressive tax rates, but we shouldn't be stupid about it. The purpose of taxes shouldn't be to "equalize" or "redistribute" income or to penalize the successful or to do any of the other silly things lefties want tax policy to do. The only purpose of taxes should be to raise money for the legitimate functions of government. And we need to raise that money in a way that is reasonable and efficient.

We can't just raise taxes in bad economic times so that the government has more money to throw around. Fiscal conservatives don't want to raise taxes because we see too much money spent of activities we don't agree are legitimate functions of government. Cut the crap--and then if we need more money for the government to operate, we can raise taxes. But not before then.


Mavor said...

Are you sure you are a conservative? Most conservatives wouldn't write:

"I have no problem with reasonably progressive tax rates,.."

A bit flaccid for a true conservative. Grove Norquist would rake you over the coals.

Darren said...

I can think for myself, thank you.

Mavor said...

It is refreshing to find a right winger who think for himself. Go on Darren.

allen (in Michigan) said...

Sadly, it's uncommon to find a liberal who's even capable of civility let alone with the ability to eschew condescension.

pseudotsuga said...

But Darren, that's just common sense. Everybody knows that the rich aren't paying their fair share! If they were, then they wouldn't have all that money they hoard so that we can't fund all our social justicey thingies!
Boooo! Evil rich! Hisss!

Ellen K said...

When people scream tax the rich, they seem to forget what the federal definition of "rich" entails. For example, when we had three kids in college, FAFSA never seemed to think it was a problem for me to contribute my entire annual salary to their college fund. Back when perhaps there were two wage earners at home, it was doable. But in this economy many former two income households have become one income or even a patchwork of part time income homes. As such, the taxes you can get from people who have lost jobs or taken pay cuts in order to keep a job are going to be less. California's Democrats just don't seem to get that.