July 18, 2008
The Los Angeles Times on Raising Taxes on the Wealthy
"State legislators consider increasing income taxes on the wealthy"
By Evan Halper
California has long had a reputation for soaking the rich, claiming a particularly large slice of their earnings to feed its growing government. Now, legislative Democrats want to push it further.
Their plan to balance the state budget would raise the wealthiest Californians' income taxes—already the highest in the nation—to a level not seen anywhere in the country in years. After years of income taxes steadily dropping elsewhere, California would raise the effective rate on those earning at least $1 million to 12%, more than twice the rate in most other states that have income taxes.
Although legislative leaders are weighing a plan to balance the budget in part by raiding transportation funds and local government accounts, many Democrats are still rallying around an income-tax increase as the best way to bring the budget into balance over the long term.
Economists and money managers, though, are wondering whether California would be returning to this well one time too many. There is, they say, a point at which the cash infusion is outweighed by damage done to the economy: Entrepreneurs get driven away. Profits get stowed in tax shelters. Companies shelve plans for expansion.
. . .
The Small Business and Entrepreneurship Council, a national trade group, and the Tax Foundation, a nonpartisan think tank based in Washington, D.C., say the state's tax system is among the least business-friendly in the country. Both groups ranked California in the bottom four. Only New Jersey fared worse in both studies.
