Sunday, June 07, 2009

Liberals Use Statistics to Lie About California Taxes

In fact, California ranks 18th among the states in percentage of personal income paid to state government, and its presumably beleaguered wealthiest 1 percent, according to Citizens for Tax Justice, pays just 7.4 percent of their income to the state, while the poorest Californians pay 10.2 percent.

So prattles Harold Meyerson, in a May 29, 2009 article in the San Francisco Chronicle, How the Golden State got tarnished.

To take the second part of Meyerson’s statement first, the Citizens for Tax Justice table he referenced was updated, and he overlooked the update. Instead of 10.2 % for the poor, and 7.4% for the rich, the table shows an effective tax rate for the poorest 20% of 11.1%, and 7.8% for the wealthiest 1%.

Meyerson conveniently overlooks some details in the study which aid him in distorting its results. The study says the wealthiest 1% only pay 7.8%, that is arrived at by deducting a "federal reduction offset" of 2.4% from the 10.2% the rich actually pay, which apparently adjusts the tax rate of the rich for the federal taxes saved by paying state taxes and itemizing deductions.

The poor only pay 0.1% percent of their "income" for income tax, but about 7% for sales and excise taxes. What the study doesn't even hint at is that the poorest 20% receive untaxed transfer payments (food stamps, rent subsidies, aid to dependent children, WIC, etc., plus their own "federal reduction offset," the Earned Income Tax Credit) that usually more than double their "income," but which are not reflected in their "base" for wealth and cost comparisons such as tax equity. Also this lowest 20% rarely pay federal income taxes (and get more back than is withheld), and often don't pay FICA/Medicare either.

As is the case with most of these agenda-serving studies, the author compared apples to oranges and produced a lemon.

Now for the first part. Meyerson apparently found a table he liked that showed Californians are 18th in the percentage of personal income paid to state government. However: "At 8.25%, California has the highest state sales tax, which can total up to 10.25% with local sales tax included."

Another table shows that California has the 2nd highest personal income tax rate at 9.3%, slightly lower than Vermont's 9.5% (although the California rate can be higher because some local governments can add taxes).

Then I found a table that showed California #9 in per capita state taxes paid. Interestingly, I found that Wyoming was #2, ranked higher than California even though Wyoming had a much lower sales tax, no personal or corporate income taxes, and lower gas and cigarette taxes. What's the story here?

The answer surprised me, and showed me how some analysts used statistics to pull the wool over over taxpayer eyes. Wyoming produces a lot of coal and gas, and is paid royalties by the companies that extract it. These royalties are lumped into the state tax receipts, then the total is divided by the Wyoming popultation, making it look like Wyoming folks are among the highest taxed in the nation when the opposite is true. This also appears in statistics for other resouces rich states like Alaska, South Dakota, and Louisiana, and makes states like California look like they are not taxed as highly in comparison.

As a Californian born and raised, I know we pay a lot of California taxes. Our problem is not that California taxes us too little, but that California spends too much, particularly on entitlement programs. Some Californians want that to continue, and feel that Californians, particularly the wealthy, should be taxed even more. Apparently they think California has a captive tax base, even as wealthy Californians and businesses move to more tax-friendly environs.

I'm sure as our tax base shrinks because of this exodus, our Liberal brain trust will answer by proposing even higher taxes. And wait for Obama to bail California out.

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