HENDERSON: Will the California government raise taxes even more? | texasinsider

The measure would also pay for health care for illegal aliens.

By David R. Henderson

Are California taxes too high? Well, seven members of the California Legislative Assembly and five members of the Senate think they’re not high enough. These 12 politicians co-authored a bill to amend the California constitution to make tax rates permanently higher and impose an excise tax, payroll taxes and a special income tax.

The excise tax would be 2.3% for businesses on all their gross receipts over $2 million. These are gross receipts, not net receipts.

Profit for a typical business in the United States is about 8% of gross revenue. Thus, this 2.3% tax would be equivalent to a 29% tax on a company’s profits.

To add insult to injury, the bill’s authors say the tax would be imposed “for the privilege of doing business” in California.

And here, I thought doing business was a right, not a privilege. I’m stupid.

A fundamental principle of the economics of taxation is that a tax rarely stays where it lands. Translation: the one who pays the tax almost never bears all of it. The payer passes at least part, and often a large part, of the burden on to consumers.

This is especially true for a state tax. The reason: Businesses are free to move to other states and will do so until the pre-tax profit rate in California increases to compensate for remaining businesses. This means higher prices.

It is not the only tax that would increase.

The constitutional amendment would also impose a 0.5 percentage point tax increase on income between $149,509 and $299,508, a 1 percentage point increase on income between $299,508 and $599,012, up to to an increase of 2.5 percentage points on revenues above 2,484,121.

This is outrageous for two reasons.

First of all, these tax increases would cause many high-income people to leave California, even though the government relies heavily on high-income people to fund its outsized spending. When high-income people leave in response to tax increases, the state government doesn’t just lose the revenue that would have been generated by the additional tax. He loses all the income that high-income people would have paid.

Second, It is unfair. We often hear that “the rich” should pay their fair share. People who say this rarely say what the fair share of the rich is. But with current high-income tax rates ranging from 9.3% to 12.3%, California is well beyond that point.

The amendment would also impose a 1.25% payroll tax rate on employers who employ 50 or more California residents. An additional 1% payroll tax would be imposed on all employers for employee salaries over $49,900. Nevada is starting to look terribly beautiful.

And what would these revenues be used for? To fund single-payer health care. It’s because, you know, single-payer has worked so well in Canada.

The measure would also pay for health care for illegal aliens.

Fortunately, if the bill passes the Assembly and the Senate, Californians will be able to vote on it in November. I bet we will defeat him.

What if we don’t? Well, like I said, Nevada looks awfully good.

Today’s TaxByte IPI was written by David R. Hendersonresearcher at the Hoover Institution of Stanford University.

Bernard P. Love