It may not have been foremost in the minds of Californians as they completed their tax forms over the last several weeks, but the state has a progressive income tax system, meaning that the marginal tax rate increases as taxable income increases. Everyone is assessed 1% on the first $7,168 of taxable income, then progressively higher rates through six levels of income, up to 9.3% on taxable income over $47,056. Voters in 2004 passed Proposition 63, the "millionaire's tax" for mental health services, to add a top marginal rate of 10.3% on taxable income of $1 million or more.
It has long been the position of many would-be tax reformers on the left that California's income taxes must be even more progressive, to pump needed revenue into state programs from the highest earners and to ease the tax burden on the middle class. The very wealthy are a common target for new revenues, in part because, well, they have the money.
But the more progressive an income tax becomes -- or the greater the share of the income tax burden that is borne by the rich -- the more harrowing the revenue roller-coaster ride. That's because the wealthy get such a large chunk of their income from capital gains and investments. Economic swings have a greater impact on that kind of income than on wages and salaries, which are the typical sources for lower and middle earners.