Poizner says he’ll increase state revenue by cutting California’s tax rates

Despite projections that the next governor will inherit multibillion-dollar deficits, Republican gubernatorial candidate Steve Poizner on Tuesday promised to slash taxes on personal income, corporations and sales.

Poizner said that as part of his “Jobs Plan,” he would reduce those rates by one-tenth, as well as cut capital gains taxes in half.

In a conference call with reporters, Poizner said his plan would generate more revenue, not less, although he did not provide data on what budgetary impact his proposal would have. He said lower taxes would prevent residents from leaving and allow businesses to invest in more jobs.

“Our tax rates are extremely high, and people leave,” Poizner said. “And every time a taxpayer leaves, there goes the opportunity to balance the budget. I mean, you want total tax revenues (to be) enough to pay for expenses. You’re not looking to cream every taxpayer. You want lots of taxpayers gainfully employed.”

Poizner borrowed from former President Ronald Reagan’s playbook, arguing that tax revenues are higher when rates are lower.

Still, Poizner’s plan seems to contradict Department of Finance projections of what will happen when tax rates decline under existing law in 2010. In a document issued last month, the department determined that the state will face $15 billion deficits during the next governor’s first two budgets precisely because lower tax rates will cause revenue to fall.

In February, lawmakers and Gov. Arnold Schwarzenegger approved temporary tax hikes, such as an increase in the sales tax rate by 1 percent and a 0.25 percent hike in each income tax bracket. Those will end by the time the next governor takes office.

Poizner’s plan would drop rates even further. His top permanent income tax bracket would drop to 8.37 percent from the 9.3 percent it is scheduled to be in 2011. His proposal also would drop the mandated share of the state sales tax from 8.25 percent to 6.53 percent.

Public Policy Institute of California associate director Jed Kolko issued a finding this summer that low-income Californians leave the state at a higher rate than do wealthy residents.

“Taxes can matter for some households, but for most people, the differences in taxes between states aren’t going to matter as much as where the employment opportunities are and whether housing is affordable,” Kolko said.

But Jason Clemens, research director at the Pacific Research Institute, a conservative think tank, said lower corporate and income tax rates would benefit job growth and keep some taxpayers in California.

“Some businesses now may say, ‘I’m fed up, so I’m going to Utah or Nevada,’ ” Clemens said.

“If a high personal income tax is a barrier to job opportunities, business development or entrepreneurship,” he added, “people may leave because they don’t see opportunities in California.”

Call Kevin Yamamura, Bee Capitol Bureau, (916) 326-5548.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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