In an Viewpoints column, California Federation of Teachers President Joshua Pechthalt (“Proposition 30 tax hike is working and must be kept in place,” Dec. 1) attempts to make the case that the temporary tax hike voters approved in 2012 should be extended. He justifies his position by claiming California is thriving and upper income individuals, unfazed by the higher taxes, are happy to stay and pay.
Not so fast.
For those who don’t remember, Proposition 30, titled the Temporary Taxes to Save Education Act, imposed the highest income tax rate in America. It also bumped up the sales tax – a tax that hits the lower and middle classes particularly hard – to tops in the nation.
While Pechthalt believes things are fine now that our economy is supposedly in a “recovery,” working families aren’t seeing it. Our unemployment rate is the third highest in the nation and the U.S. Census Bureau puts our supplemental poverty ranking at worst in the country.
Although Pechthalt absolutely refuses to see it, there is also clear evidence that businesses and upper income individuals are fleeing the state in response to high taxes.
Objective real estate reports from Nevada and other low or no income tax states make it clear that California has indeed lost many upper income taxpayers because of Proposition 30. The Wall Street Journal reported that “many Californians have arrived (in Nevada) in the wake of Proposition 30. Passed at the end of 2012, the measure hiked personal income and sales taxes.” The San Francisco Chronicle published a column in January titled “State leaders closely watch migrating millionaires,” noting that “whether you sympathize or not, millionaires’ migrating out of California has serious consequences to the state’s bottom line and is something state leaders are watching closely.”
The other problem with union leader’s thesis is that we simply don’t know how many of California’s wealthy decided to absorb the confiscatory tax rates for a couple of years knowing that they would eventually expire. If made permanent, the existing millionaire outmigration could very well turn into a torrent.
So, instead of asking whether we should make Proposition 30’s temporary tax hikes permanent, a better question would be whether those tax hikes were even needed in the first place or, better yet, did they inflict more harm than good? There is compelling evidence that California today would be enjoying a bigger slice of the national economic recovery had we not passed Proposition 30 at all.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.