Interesting consequence of ONLY taxing the rich - tax income becomes much more volatile:
Of all the facts and figures jammed into the pages of Gov. Gray Davis' proposed budget,
one chart jumps out for the way it illustrates the predicament that Davis, the Legislature
and all Californians face in the months and years ahead.
The picture, reproduced on this page, provides a stark reminder to insiders who have been
following the budget story, and an education to those just tuning in: California's public
finances are very, very dependent on the state's wealthiest residents.
The chart shows that while people reporting adjusted incomes of up to $50,000 for 1999
accounted for about 70 percent of all tax returns, they paid less than 8 percent of all
income tax. Middle income folks making between $50,000 and $100,000 accounted for
another 20 percent of taxpayers and paid about 18 percent of the tax.
But taxpayers reporting income of more than $100,000 paid 75 percent of the state's
personal income tax -- though they accounted for just 10 percent of all returns.
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The message here is not that we should feel sorry for the wealthiest Californians. It's that
we should hope they stay wealthy, and Californians. Because if they get sick,
economically speaking, or move, all the services they pay for -- from public schools to
health and welfare programs for the poor, and environmental protection -- will suffer
along with them.
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What does all this mean for state policy? For one thing, the governor and the Legislature
need to pay more heed to this volatility. When the next boom begins, they would be wise
to set aside a larger portion of the proceeds to prepare for the inevitable downturn.
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