More on California’s epic self-inflicted failure

**Posted by Phineas


It’s okay. It’s all in the name of fairness:

California residents already contend with one of the most progressive tax codes in the country. Not only does California have high marginal rates, those high rates kick in at relatively modest income levels. California’s middle class residents earning $48,000 a year, for example, pay a state tax rate of 9.3%. Millionaires in 47 other states don’t even pay that high of a marginal rate. However, one of the state tax code’s greatest flaws is it’s over-reliance on upper income households and the revenue volatility it creates, and that is a problem that Prop. 30 would further exacerbate.

As of 2010, the state relied upon 144,000 households, 1 percent of taxpayers, for 50 percent of total state income tax… [With Proposition 30’s passage,] the top 10 percent of earners would be responsible for over 80% of the projected income generated – a fact that Gov. Brown and other advocates of the bill readily acknowledge.

I think I know how the lookout on the Titanic must have felt.

One of the weirdnesses (among many) I’ve noticed on the Left is the assumption that tax compliance is static, that, no matter how high you set the rates, you’ll draw in the expected revenue. That idea is, of course, a crock.

Tax behavior instead is dynamic: raise the rates too high, and rationally self-interested taxpayers will do whatever is legal to avoid them, including moving out of the jurisdiction.

Businesses are already leaving California at a rapid pace. Once Prop 30 really kicks in —with its backdated taxes— businesses and the so-called rich will truly head for the border.

But that’s okay; the left has already figured out the answer — we’ll just charge them exit taxes!

(Crossposted at Public Secrets)

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