George Skelton of the Los Angeles Times today says, “There’s a gleaming pot of gold within easy grasp of the governor and Legislature that would help them balance the state’s deficit-ridden books…It is an income tax increase on the wealthiest Californians — individuals earning more than $400,000; couples making above $800,000. That’s the top 1%. Their tax rate would be hiked from the current 9.3% to 11%….” Skelton says that “…[this tax increase is] a pot of gold that the Sacramento pols should have claimed long ago.”
The goal of the tax increase is to fund pre-school for all 4-year olds. It’s a laudable goal. Unfortunately, as I’ve written before it’s also very misguided.
Most smaller businesses (and these are the engines of growth in California and elsewhere) are taxed through personal income taxes, not corporate taxes, because they are structured as S Corporations and LLCs. If personal tax rates go up, business costs go up. California is already one of the worst places to do business in the country. This proposed income tax increase, expected to be on the June 2006 ballot, would be a disaster for the state’s economy, but a boon for our neighbors: Arizona, Oregon and Nevada.