In the absence of a modern and logical state tax structure, jurisdictions are left to their own devices, and every two years voters must wade into the muddy public-finance waters in order to fund basic needs for their cities and towns. In the Sacramento County town of Isleton, voters will decide on adding a half-cent sales tax in order to pay for ambulances. In the city of Davis, voters will be asked whether they approve a 10 percent gross-receipts tax on marijuana sales. All told, according to CaliforniaCityFinance.com, Californians will vote on about $6.6 billion worth of parcel taxes, business license taxes, sales taxes, and school bonds.
If all of this sounds unnecessarily complicated, that’s because it is. Governor Jerry Brown and leaders in the California legislature desperately need to overhaul the outdated and illogical tax code. At present, California relies far too heavily on the most mobile and unpredictable of revenue sources: the individual income tax. With the highest personal income tax rate in the nation(13.3 percent), California effectively punishes productivity and encourages successful earners to take their businesses elsewhere.
Presidential hopeful Bernie Sanders loves to shout that the richest one-percent should “pay their fair share” – and in California, they certainly are. In fact, in 2014 the top one-percent of Californians paid nearly half (48%) of all the state’s personal income taxes. In a recent article for the Los Angeles Times, reporter George Skelton calls this overreliance on the income tax what it is: “lousy fiscal policy.” Describing California’s tax structure as not progressive but instead perpendicular, Skelton goes on to write that “the problem isn’t about fairness. It’s about stability — mainly the stability of programs that benefit the poor, such as healthcare and welfare. It also jeopardizes services for everyone: education and public safety.”
In the next fiscal year, about 70 percent of California’s general fund revenue is expected to come from the state income tax. That is an outrageous percentage, and one that puts the Golden State on increasingly shaky footing. Dozens of state ballot measures do not equal sound economic policy. Residents should not be forced to fund vital projects at the ballot box every two years. Instead, Governor Brown and the state legislature should make it a top priority to overhaul and modernize California’s tax code. The state’s stability depends upon it.