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Californians cling to easily dispelled tax myths

February 25, 2009|STEVE LOPEZ

Seems like only yesterday that I was at the Orange County fairgrounds to watch Arnold Schwarzenegger drop a wrecking ball on a car, symbolically crushing the auto tax to the delight of supporters who never asked how the governor-to-be might cover the lost revenue.

Since then, he's continued to put that wrecking ball to use, crushing one campaign promise after another.

But not until the governor signed on to raising taxes, including the car tax, did GOP leaders and good citizens get angry, vowing to go after not just Arnold but any Republican legislators who voted with him on a budget that includes the new revenues.

It didn't matter that state services of every type were threatened from Chico to Chula Vista, that the bus was headed for the cliff, that inmates were packing their bags for early release, or that firing every state employee wouldn't have balanced the budget without new revenue.

All that mattered were taxes.

"California has the highest taxes in the country," a reader named Mary wrote to me.

"I guess it's our patriotic duty, as residents of California, to pay the highest taxes (or close to it) in the country, for the most incompetent government in any state," wrote Art.

Most incompetent government? We're probably in the running, but two other states I've lived in were at least as screwed up, with Pennsylvania actually taking pride in its monumental incompetence.

As for the claim that Californians pay the highest taxes of any state or close to it, I'm sorry to disappoint, given the great joy so many people seem to derive from hyperventilating.

But we're not even close.

"We're 17th," said Jean Ross, executive director of the nonpartisan California Budget Project.

That means the residents of 16 states pay higher taxes than Californians.

In an April 2008 report by Ross' group, California is called a "moderate tax state" based on the latest available figures. The report includes state and local taxes of all types in its computation, and rankings are based on taxation as a percentage of personal income. We tend to be higher on income taxes and lower on property taxes, Ross told me. We're also low on taxes for fuel and alcohol.

Given that we've just been handed a tax increase, I asked Ross if we'd be moving up in the rankings.

Impossible to know, she said, because other states are also being forced to raise taxes, so it'll take a while to settle out. She also said she hadn't yet computed whether the federal tax cut that's coming our way would nullify California's tax increase for some people.

"We've been fairly constant over the last decade," Ross said. "We might go up one rank and then down one rank from year to year. But over a period of time, we've been right about in the same place."

Look, nobody can be very happy about forking over an even bigger chunk of their earnings in taxes, especially at a time when jobs are being lost in droves, nest eggs are shrinking and foreclosures mounting. People have a right to be ticked off about false promises from politicians, and in this disastrous economy, they have every reason to be scared.

As for those who write me constantly, asking why I don't go back to Mexico and take all the illegal immigrants with me, I'm afraid that wouldn't be enough to balance the budget.

As my colleague George Skelton pointed out in a recent column, illegal immigrants cost the state several billion dollars a year in services, and that's far less than our budget shortfall.

And even if it would solve things, how practical is it for one state to address the federal failure on immigration reform? How many billions would it cost to round up and deport everyone? And how many industries would go belly up without cheap labor?

Don't get me wrong. I'm no apologist for Sacramento, where Democrats take care of labor unions in return for campaign donations and Republicans carry water for corporations, with working taxpayers footing the bill on both accounts. But if you want to blow a gasket, there are better targets than a tax hike that might move us from 17th in the nation to 15th.

Does it make sense that on the same street in any California town, one resident pays $3,000 in property taxes while the owner of an identical house pays $20,000, thanks to Prop. 13?

Does it make sense that businesses got a huge tax break in last week's budget deal while working blokes got smacked? Between 2001 and 2005, according to Ross' group, the net personal income of California taxpayers increased 22.7% while net corporate profits in the state increased -- watch the blood pressure, now -- 557%.

California's business taxes are among the highest in national rankings. But companies benefit from a large workforce, a huge pool of customers and access to venture capital, said Jed Kolko of the Public Policy Institute of California. He's in the midst of a study that is debunking the claim that businesses are leaving the state in droves.

"We found that very few businesses either leave or enter the state," said Kolko. "California's job growth is pretty consistently at, or a little above, the U.S. average."

Don't you hate when facts get in the way of so many good myths?

Yeah, taxes are a drag, and we should get more for our money. But from a global perspective, if you sleep under a roof, drive a car on a paved road, drink safe water and can attend school, you're relatively rich.

Speaking of rich, the wealthiest nation in history is fighting simultaneous wars in two of the most impoverished countries in the world, to no apparent benefit. No state is paying more in tax dollars for those wars than California, and no state has lost more soldiers.

Where's Howard Jarvis when you need him?

--

steve.lopez@latimes.com

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