By Jim Miller
While there was much bluster about the rich tying their hot tubs to the roofs of their Mercedes and heading off to Texas after Prop 30 passed, the truth is that the poor still pay a heftier share of their income in taxes than the wealthy. Last week, the California Budget Project (CBP) released their annual report “Who Pays Taxes on California?”, and it appears that the post Proposition 30 landscape is far from apocalyptic for the top 1%.
By the broadest measure of revenue collection, “Taxafornia,” despite its largely progressive tax system, ranks 15th in the country in total “own source” revenue, and the poorest among us pay the highest share of their family income in taxes.
Indeed, as the CBP report outlines, “California’s lowest-income families pay the most in taxes, when measured as a share of family income. This is true even after accounting for Proposition 30’s temporary personal income tax increases for very wealthy Californians, which took effect in 2012.
The bottom fifth of the state’s nonelderly households, with an average income of $13,000, spend 10.6 percent of their incomes on state and local taxes. In comparison, the wealthiest 1 percent of households, with an average income of $1.6 million, spend 8.8 percent of their incomes on state and local taxes.”
And before Proposition 30 passed the trend was not that the rich were being bled to death in California, but that more and more of them were managing to pay nothing at all. As the CBP report notes, “The number of high-income ‘no tax’ returns more than tripled between 1997 and 2010, rising from 579 to 2,135.” So if taxes are the price we pay for a civilized society in order to support education, infrastructure, parks, hospitals, public safety, and more, a growing number of our state’s most fortunate citizens are opting out.
How about the notion that things are getting worse and worse for business and hence driving jobs out of the state? Again the truth counters that mythology as the CBP report documents: “Over the past three decades, the cost of funding state services has shifted from corporations to personal income tax filers.
The Department of Finance estimates that personal income tax receipts will provide 64.8 percent of General Fund revenues in 2012-13, up from 37.7 percent in 1981-82. Meanwhile, corporate tax receipts are expected to provide 8.1 percent of General Fund revenues in 2012-13, down from 13.3 percent in 1981-82. New, increased, and expanded corporate tax breaks implemented in recent years, along with the 1996 corporate tax rate reduction, are responsible for the decline in the share of state revenues provided by the corporate income tax.”
And all this has happened during a time when corporate profits have risen while the share of the national income accounted for by wages has declined. Here in California, according to the CBP, “the recent growth in corporate profits reported for California tax purposes far exceeds the growth of income reported by individual taxpayers.” So if you put it all together, the bottom line is that the burden of paying for state services has shifted from corporations to individual tax payers and that the poor and middle class are still paying a larger share of their income than the rich.
And in Sacramento, where they can’t blame Republicans for anything anymore, the Democratic majority is shying away from engaging the revenue question altogether, preferring instead to outsource higher education and short change health care and the poor. This, compounded by Obama’s shameful budget that puts Social Security on the table, might lead us to wonder whether we need Republicans at all if the “party of the people” is going to embrace austerity rather than fight for a more just society.
Sadly, as a Democratic politician I know recently told me, with more than 60 percent of the funding in the party now coming from the business side rather than from labor, what do you expect?
What’s the result of this? Bill Moyers put it quite well recently when he reported on the reality of Tax Day in America: “So on Monday, when you send in your tax returns, think about this. Corporate profits are at record highs. But have those companies invested that in new jobs? No. Did they at least give their workers a bump in pay? Hardly. Surely they shelled out a little more in taxes to help refurbish the social structure – highways, bridges, schools, libraries, parks – where they do business! Guess again.
Corporations are sitting on $1.7 trillion of cash. Look at this report just published by PIRG — the Public Interest Research Group — on how average citizens and small businesses have to make up the $90 billion giant companies save by shifting profits to offshore tax havens. Among the 83 publicly traded corporations named: Pfizer, which for the past five years reported no taxable income in the US, even as it made 40 percent of its sales here; Microsoft, which avoided $4.5 billion in taxes over three years by shifting its income to Puerto Rico; Citigroup, which maintains 20 subsidiaries in tax havens and has over 42 and a half billion dollars sitting off-shore. Taxes collected here at home? Zero.”
So then where does this leave us? In the same show Moyers did a segment on the grinding poverty one finds in the Silicon Valley where the new normal includes a paucity of resources and income along with growing homelessness in the shadow of the lords of the high tech economy like Google, Apple, Facebook and others. He notes that, on this Tax Day, one of the many disturbing realities is that the spirit of FDR has left our politics, “those were the days when our political system rallied to the defense of everyday Americans.
Now a petty, narcissistic, pridefully ignorant politics has come to dominate and paralyze our government, while millions of people keep falling through the gaping hole that has turned us into the United States of Inequality.”
Amen.
Jim Miller
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I recently heard a lifelong Democrat, momentarily giddy about exploiting a loophole, declare with pride that she, “… doesn’t pay taxes when she can avoid it.” When I said I do, because I get a lot back from doing it, she realized what she’s said and got a stricken look on her face. I don’t kid myself by thinking she might walk away with a recovered sense of how democracy works. That striken look disappeared very, very quickly.