Extra Time to File Doesn’t Mask Pain of California’s Huge State Tax Burden
California taxpayers – and all Americans were given a bit of breathing room this year when the IRS announced that this year’s tax deadline would be May 17th, instead of the usual April 15th.
The extra month given us to pay and file our 2020 taxes doesn’t mean that Californians are getting any breaks at all when they sign their checks to Sacramento and Washington.
According to the nonpartisan Tax Foundation, California once again this year ranks near the bottom of various state rankings for our state’s unacceptably high tax burden.
California taxpayers and entrepreneurs currently endure the following tax pain:
- Fifth-highest state and local individual income tax collections per capita
- Sixth-highest state and local tax burden
- Ranked 48th on state business tax climate
- Nation’s top state sales tax rate
- Eighth-highest combined state and average local sales tax rate
- Nation’s highest state gasoline tax rate
As I’ve written about previously, Speaker Pelosi and lawmakers from California and New York have been trying to mask the high taxes and high spending in their states by pushing for a repeal of the state and local tax deduction cap. But the cap shows taxpayers just how much their state lawmakers have run up taxes and spending. And if liberal lawmakers at the State Capitol have their way, California’s state and local tax burden is about to get much worse this year.
The California Taxpayers Association just released their annual Tax and Fee Report of the major tax and fee legislation introduced this year. According to their findings, state lawmakers have proposed a whopping $234.48 billion in new and increased taxes and fee since the start of the legislative session.
Mirroring efforts by Elizabeth Warren in Congress, Asm. Alex Lee has proposed a new “wealth tax” (AB 310 and ACA 8), which would be a $22.3 billion tax increase. CalTax notes this would make California the nation’s first state to tax, among other things, retirement funds, farm assets, and stocks.
Democrats also want to increase the top state personal income tax rate to 16.8 percent (AB 1253 by Asm. Miguel Santiago), which would be $6.5 billion tax increase. CalTax notes California already has the nation’s highest top individual tax rate.
While AB 1400 was just recently made into a two-year bill, CalTax estimates that the new taxes required to enact a single-payer health care system in California that outlaws private health insurance would be roughly $200 billion if the bill actually becomes law.
Finally, multiple lawmakers have proposed various new taxes on phone service (AB 14, AB 270, AB 988, among others). The tax increases range between $150 million and $542.6 million annually, according to CalTax.
As Michael Thom pointed out in his PRI study “Nickel and Dimed,” various state and local fees currently add about $9 per month to a $50 monthly cell phone bill – enough to pay for two months of service on an annual basis. Like the proposed legislation, a lot of the programs fund programs serving well-intended purposes, but fund programs that are either obsolete, duplicative, or under-utilized. Thom recommends reforming or repealing these programs to increase program effectiveness and give consumers relief.
If ever there were a year that lawmakers should have no need to raise taxes, it’s this year. Gov. Newsom announced last week that California had a $75.7 billion surplus, in addition to the $26 billion the state is receiving from the Biden stimulus plan. The state has so much revenue that Newsom is giving out $12 billion in tax rebates this year – though he may have been required to by the Prop. 13-era Gann spending limit.
Even Newsom, no tax fighter, proclaimed his opposition to raising taxes this year, given the massive size of the state’s projected surplus.
“When you are enjoying a $76-plus billion, and growing, operating surplus, I don’t think it’s time for new tax increases,” he said.
That some lawmakers are still proposing $234 billion in new taxes and fees in a year with a $75.7 billion surplus proves what many have long suspected – for some in Sacramento, the tax burden we pay is never enough.
Tim Anaya is the Pacific Research Institute’s senior director of communications and the Sacramento office.