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Tax hike on California millionaires would create 54% tax rate
- justinzollars 6y agoHow does this change things in California?
- onetimemanytime 6y agoat some point people start looking for a different state. Everyone has a breaking point
- nathanaldensr 6y agoThat point was reached many years ago. Here's some information: https://lao.ca.gov/LAOEconTax/Article/Detail/265 https://lao.ca.gov/LAOEconTax/Article/Detail/265
- LanguageGamer 6y agoThis shows that wealthier people are moving to California, while middle and lower income people are leaving (People with an income lower than 110k a year).
- cbhl 6y agoThat's due to rent, not taxes, though, right? A tax impacting the top 0.5% of earners would maybe cause someone to move a corporate HQ out-of-state. That said, based on how SF's Prop C (2018) went, billionaires disagree on whether or not paying more taxes is fair.
- C1sc0cat 6y agoIt's only a 1% increase in state taxes FFS for some one earning $1 million which if I where I that situation would think is fair. In the uk you'd be on 60%
- onetimemanytime 6y ago1% this year after many 1% in the previous years. Still everyone judges for their own
- bpodgursky 6y agoMaybe if you're not in that situation, you don't have the best insight into their mindset, how they would react, and at what point they decide to move to a different tax locale. It's very easy, but not very helpful, to theorize about what you'd do given taxation policy you don't actually have to deal with.
- deleted 6y ago[deleted]
- happytoexplain 6y agoIf only the people affected by this increase were allowed to theorize about it, there would be virtually no conversation.
- moultano 6y agoIn the UK you'd get free quality healthcare, abundant public transit, and streets without poop.
- chundicus 6y agoYep. Higher taxes + minuscule military spending (compared to U.S.) + citizens who probably believe more in governance and social welfare than your average American.
- leetcrew 6y agoUS tax revenue per capita is nearly double that of the UK, more than enough to offset the difference in military budget. popular opinion is the only meaningful difference that you listed. https://www.instituteforgovernment.org.uk/charts/tax-revenue-capita-england-scotland-wales-and-northern-ireland-199900-201516 https://www.instituteforgovernment.org.uk/charts/tax-revenue... https://www.usgovernmentrevenue.com/breakdown_2017USdt_21ds1n https://www.usgovernmentrevenue.com/breakdown_2017USdt_21ds1...
- mywittyname 6y agoWell yeah, but I think that's somewhat the goal here. Given the overcrowding in regions of California, I can see why some people would incentivize others to leave the state. Especially the very wealthy.
- idoh 6y agoWhy would you want to incentivize wealthy people to leave?
- mywittyname 6y agoBecause they drive up prices. If a bunch of people with 10-100x your income kept moving into your city, driving property prices into the stratosphere, you'd be pissed too. It doesn't stop with houses either. All of the middle class stores start getting replaced with higher cost ones that cater to the ultra-wealthy, leaving you to drive further out for good deals. Resident who don't want to be pushed out have their own breaking point to, and instead of voting with their feet, they vote to evict the invaders. California isn't the only place where this a problem. All across the world we are seeing pushback against ultra-wealthy taking over cities/neighborhoods and driving out middle class residents.
- setr 6y agoDriving up prices such that a minority population can afford it is a solution to overcrowding -- not a cause of it. In fact, its the natural market solution to overcrowding: demand exceeding supply..
- mywittyname 6y agoAnd yet, the problem isn't fixed, even after 20+ years of this "natural market solution". Turns out, these people have to live somewhere, so now they travel from further out by car, causing a bunch of traffic congestion. They had to move, but the jobs are still in the same place.
- rockinghigh 6y agoThis change is pretty small. If you make $2 million it’s only a 0.5% increase of your effective tax rate.
- yazaddaruvala 6y agoIts still an income tax, impacting 0.5% of taxpayers, and most companies reduce pay if the employee leaves the bay area for remote work or to work at a remote office. 1. The reduced pay might not be worth leaving. 2. There are also other benefits to be in California (e.g. friends, like-minded people, infrastructure, etc). Even if some of those taxpayer chose to leave, demand for housing and goods/services is reduced, but supply stays constant. i.e. prices decrease for the people who choose to stay. Reducing economic inequality for the people who choose to stay in California. Seems like a win either way.
- tehlike 6y agoabove 2M$ is definitely an executive level pay, which would mean remote work would not work, and it's all about being close to hq.
- coldpie 6y agoImagine deciding to move because the tax bill on your $1,100,000 salary increased by $1,000. What a hardship.
- reducesuffering 6y agoThat's only the 1m - 2m segment, not the 2m+. Also, the last steep hike was 7 years ago. Many people will see the writing on the wall that taxes in CA are going to squeeze most of their marginal income.
- coldpie 6y agoIf I did my math right[1], the ones ""earning"" $2,100,000 will have to pay an extra $13,000. How will they survive? Golly. [1] (1,000,000 * 0.01 + 100,000 * 0.03 = 10,000 + 3,000 = $13,000)
- nickff 6y agoRich people know how a frog gets boiled... slowly.
- coldpie 6y agoI know! If we tax them too much, they'll have to... live like 98% of the country already does[1]. That's totally comparable to being killed. Good analogy. [1] Top 1% of earners are those above $750,000 https://www.investopedia.com/personal-finance/how-much-income-puts-you-top-1-5-10/ https://www.investopedia.com/personal-finance/how-much-incom...
- UncleMeat 6y agoIf you are making literally 10 figures annually this increases your tax bill by an overall amount of about 3%. Every ten years you can buy one fewer yacht. Oh no.
- learc83 6y agoIt would create a marginal combined income tax rate of 54% when you combine federal and state taxes. From the article: "California’s top marginal tax rate is 13.3%. The new proposal would add three new surcharges on seven-figure earners. It would add a 1% surcharge to gross income of more than $1 million, 3% on income over $2 million and 3.5% on income above $5 million." So basically 3.5% tax on income above $5 million.
- satya71 6y agoExactly, MARGINAL tax rate is different from the actual tax rate. It's the tax on the marginal dollar. There are deductions, and the first few hundred thousand are taxed at a lower rate.
- pj_mukh 6y agoNote: The combined MARGINAL tax rate has been approximately 50% for a while now (over a decade?) The real headline is "California considers hiking tax rates by 3% for people earning over $2M in income". Maybe worth editing the description.
- toast0 6y agoNote that before the 2017 federal tax changes, California incpome tax was deductable at the federal level without a cap (but subject to AMT), so a 40% marginal federal tax and a 13% marginal state tax did not add up to a 53% marginal income tax like it does now.
- throwaway373438 6y agoIt's already 54% for folks with a 7 figure income deriving their income from short term investments (say, stock options). This is almost always the case in tech. 37% federal 13.3% state 3.8% Net Investment Income Tax 54.1% total, before this new tax.
- WilTimSon 6y agoThe headline is pretty manipulative then. Because I saw it and was shocked, imagining this to be a steep increase. Are these large tax rates unusual in other states?
- Gibbon1 6y agoCalifornia has high income tax rates partly because of Prop 13 limits on property tax rates.
- Trias11 6y agoVote with your feet.
- ipnon 6y agoWhat if you vote for your rational self-interest? This tax applies to income greater than $2 million per year. Let's assume everyone whose tax base will increase will vote against, everyone whose tax base will not increase will vote for. A popular ballot cast this way would pass by a wide margin.
- nickff 6y agoThat's not how people vote in elections.[1] In reality, some people will probably leave, and the rest will likely avoid the increase by receiving the income via lower-rate methods. It seems likely that CA is past the peak of the Laffer curve, and will lose tax revenue.[2] [1] https://en.wikipedia.org/wiki/The_Myth_of_the_Rational_Voter https://en.wikipedia.org/wiki/The_Myth_of_the_Rational_Voter [2] https://en.wikipedia.org/wiki/Laffer_curve https://en.wikipedia.org/wiki/Laffer_curve
- deleted 6y ago[deleted]
- prokes 6y ago“Democracy is two wolves and a lamb voting on what they are going to have for lunch." ― Benjamin Franklin
- Trias11 6y agoRight. Modern politician who think that they can tax the hell out of the rich and rich won't do anything about it - do not deserve to be listed in a ballot. Today's wealth is very fluid and today's zero-tax jurisdictions are fighting for foreigners dollars. Catch me if you can.
- iaw 6y agoThat's a 4% increase from the current top tax rate.
- tsuru 6y agoDoes CA have split between capital gains and other income? Is it taxed at a lower rate? If so the rich will continue laughing all the way to the bank.
- nullc 6y agoNo. For CA tax purposes capital gains are just income.
- gwittel 6y agoNo. In California capital gains (at least from stock) count same as regular income.
- pmoriarty 6y agoBetter than a capital gains tax would be a wealth tax. Tax, say, 1% for every million in net worth. This would be cumulative, so $2 million would be taxed at 2%, $50 million would be taxed at 50%, etc...
- eloff 6y agoA lot of comments are saying people will leave. I don't think this is true. I think a max 3.5% decrease in income is not going to make many people move. The difference in cost of living in any major California city over most other cities in the US is much larger than that, and didn't make people move. What is true is it will be the last straw for some small amount of people already waffling over this. It's also true that it won't make much of an impact, both in terms of people leaving and in terms of additional revenue.
- cellis 6y agoIt's more about a portend of what's to come, not that this tax per se is the final straw. Next year there will be another tax, and another tax. I'm convinced people in California won't be happy with the level of taxation until we're like Sweden or France.
- shakezula 6y agoGod that would be awful huh, having healthcare and decent public transportation systems
- twblalock 6y agoThat isn't what would happen. Lack of funding is not the reason we don't have those things now.
- shakezula 6y agoI dunno. Seems like every time a public transportation system proposal pops up in my city, money is the number one thing they cite when they say “it’s just not feasible.” :shrug:
- twblalock 6y agoThat's because it costs a lot to build, because voters have made it difficult by passing strict zoning laws, because they don't want people to be allowed to build. If the city did find the money, you would then see people opposing transit on the grounds of environmental impact, or noise, or crime, or the "character of the neighborhood". Then the lawsuits would start.
- x87678r 6y agoThe crazy thing is you get nothing for it. In Europe you pay high taxes but you get free healthcare, free college and the same for everyone in the country. In the US you get 14 aircraft carriers and something else which I'm not sure.
- DeonPenny 6y agoIn california is more similar to Europe. There state health care, lower college tuition etc. Plus infrastructure to create tech jobs. I doubt the US as a monolith could pull those things off, the bigger the organization the worse it usually is at execution.
- x87678r 6y agoThe homeless slums tell a different story.
- DeonPenny 6y agoHealth care and tuition don't fix homeless slums
- missedthecue 6y agoAs everyone knows, there are no homeless slums in europe
- leeoniya 6y ago> you get 14 aircraft carriers and something else which I'm not sure. the F-35 program
- DeonPenny 6y agoI think they should wait until they see their budget this year. NYC is having a bloodbath with their finances with so many of the wealthy leaving to florida and surround states. With tech letting people work from where ever I'd be cautious of giving the tax base paying for most things another reason to leave when you need money the most.
- jeffbee 6y agoA person with an income of a million dollars is a lot richer than a mere millionaire.
- mikestew 6y agoFor those saying people will leave, I'll note that I first heard that going on 40 years ago in a Wall Street Journal article that talked about how California's high tax rates were driving people to Nevada (now, why I remember that...?) I'm sure that the WSJ wasn't lying, and some former CA residents did, indeed, move to less taxed states. I've heard the same trope repeatedly in the years since. I'll note that the complaint most folks have with CA these days is the cost of housing, indicating that taxation didn't drive everyone away.
- nickff 6y agoMy understanding is that both are true; net interstate migration is away from CA, but CA's population is increasing due to international migration and relatively high fertility among some communities. On average, CA's emigrants are richer than its immigrants.
- Cshelton 6y agoTexas: Can confirm, many people have left CA because of high housing cost and tax rate.
- jeffbee 6y agoThe high tax rate has the opposite effect that most people seem to assume. It attracts and concentrates high-earning people, because they're the only ones who can afford it. If you look at migration stats the category of California residents that grows is the top income quintile.
- epicureanideal 6y agoThe problem with any temporary tax to pay for current hardships is that it'll never be ended. I think a tax to help with the pandemic makes sense. But then again, it seems the pandemic should've been over long ago if the government had done the right things. The virus only lasts 3 weeks. Lock everyone up for 4 weeks and we would've been back to work 3-4 months ago. I don't expect they'll spend the money carefully.
- davidw 6y agoIf California really wanted to do something sensible with taxes, revisiting Proposition 13 would be a great place to start.
- bradlys 6y agoBusinesses have too strong of a lobby. Same with the landlords. Beyond that, since it was voter passed, it has to be voter repealed. :( I don’t think it’ll happen.
- davidw 6y agoI wrote "sensible", not "easy" :-) I agree with your assessment.
- twblalock 6y ago> Businesses have too strong of a lobby. Same with the landlords. Pretty much every homeowner in the state would vote against it too.
- bradlys 6y agoYou could easily add in a widowed grandma on social security clause in a replacement piece of legislation - where it only applies to a single property per family/household/whatever-definition. That said - America is full of temporarily embarrassed millionaires... So, even though the masses will never own a second home - they will vote against it because they think it will screw them over later.
- Apocryphon 6y ago> Beyond that, since it was voter passed, it has to be voter repealed. Couldn't that happen in the next generation?
- jeffbee 6y agoThere a pretty weak reform for 2020 in Proposition 15. It will tax at realistic values (i.e. exempt from Prop 13) certain commercial properties. I'd like to see much stronger reforms so that second homes are realistically taxed etc, but at least it is a start. https://www.politico.com/interactives/2020/california-november-ballot/#section-1 https://www.politico.com/interactives/2020/california-novemb...
- Shivetya 6y agoTL;DR This group pays 40% of the taxes on 23% of the wages and budget risk is that if something happens to those incomes it has an exaggerated effect and is dangerous. What people should focus on is the percentage of how much of the taxes these people pay. That should give you an idea of how lopsided taxation has become. The top 1% in California earn 23% of the wages and pay 40% of the taxes. This does not include real estate taxes which are some of the highest in the country. I know some say, they should. However understand when it gets lopsided it puts budgets at risk if the sources of those incomes take a dramatic shift or worse leave. So if the market tanks a lot of that income can dry up very fast. If the jobs economy moves towards remote working then businesses may not become as attached to swanky offices in expensive states moving two more sources out and further imperiling taxes. People don't truly understand how much their government costs them. California budget is over two hundred billion dollars. the majority is from payroll taxes followed by sales taxes; about half of what income taxes were; then fees and licenses, and then property taxes. There are some other sources in there but lets say 60:40:6:4 in percentages. California allocated nearly six billion towards issues related to COVID19 initially, not sure how much it has changed.
- annoyingnoob 6y agoThere is a big gap between those with money and those without in California. We need to have better average pay and close the wage gap, the tax issue then takes care of itself. How many of those that would experience this new tax step over homeless people everyday? That is the real issue here.
- ponker 6y agoVery clever to limit the tax to people making over $1 million — at that level, your pay is based more on who you know than what you know, making it harder for them to “vote with their feet” and leave California.
- thomasahle 6y agoAs someone in the process of moving to California, this actually makes me more happy to go there. I guess because I'm assuming the money will help improve things like infrastructure and homelessness problems, which are some of my main worries. But then I'm also from Europe and would prefer if they increased taxes even more ️
- rsync 6y agoAs a California resident, I am pessimistic. What we need is consolidation and streamlining of expenses, programs and maintenance. This, however, will serve to enable and cover over the poor policies and inefficiencies that are either causing, or at least failing to solve, the many issues we have in California. I am very sympathetic to the idea, oft raised by critics of capitalism, that economies cannot grow forever. Why, too, would we not have the same critique of government and its services ?
- gms 6y agoI live in California. Unfortunately you're going to be disappointed - California has the highest tax rates and the worst infrastructure. The failure to solve these problems isn't due to having too little money (states and countries with a fraction of California's wealth have solved these problems).
- drewnick 6y agoI agree with this assessment. We moved from FL (0% income tax, 1.5% property tax) to CA (9% for us income tax, 1.05% property tax) and the quality of the infrastructure is at best on par. Which was surprising. Our SALT taxes went up 5x and the services are similar quality.
- gms 6y agoIt's rather unfortunate that tax increase as a solution is such a common fallacy. It's rather like immediately recommending a salary increase every time you encounter a failing employee.
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- rsync 6y agoI think that the percentage income tax rate is, largely, an arbitrary number. Which is to say, I can't find any anchoring, or a priori justification for, say, a 28% rate over a 32% rate, etc. That is, until we cross 50%. I feel that there are fundamental issue of fairness and proportionality that are incompatible with taking, via tax, more than half of any particular income - even marginal income. Two immediate reactions I have, related to these concepts of fairness and proportionality are: 1. What does it say about the fundamental relationship of the state to the individual if we are crossing the halfway point in a taking such as this ? 2. What does it say about the economic and budgetary functions of our government (their relative profligacy) if they can't make things work at 35 or 40 or 45% taxation rates ? Taxation is not my issue. I prefer to live in (relatively) high tax jurisdictions with robust government services and high quality infrastructure, etc., and I would like to help pay for that. There is, however, something about the halfway point that disturbs me.
- bwb 6y agoTotally agree. I think a lot of the issues are on the federal side, too much military spending, etc.
- pmoriarty 6y agoThe US once had an income tax of over 90%
- kyleee 6y agoWas it paid in practice?
- marcrosoft 6y agoA lot of tea was thrown into a harbor for much less. History is repeating itself.
- zentiggr 6y agoI've thought for a while about a progressive tax rate of N * log(asset value). Not income tax. So if N = 1, entities with $10,000 in assets pays 4% taxes. $1M pays 6%, $1B 9%. Then let N be the point of adjustment. I say entities because I mean every person and corporate entity. Same rate, across the board for everyone and everything. If companies want to pay less taxes, then everyone with less money than they do benefits as well. Never happen, but hey, it's a thought.
- jadbox 6y agoMaybe this is the real reason why Joe Rogan decided to leave California? https://www.click2houston.com/entertainment/2020/07/28/joe-rogan-says-hes-leaving-california-for-a-little-bit-more-freedom-in-texas/ https://www.click2houston.com/entertainment/2020/07/28/joe-r...