The Freedom Minute

Wrong Again, Michael Hiltzik

In his column in Thursday’s LA Times, Michael Hiltzik attempts to draw some conclusions about the voters’ rejection of Props 1A-E while again extolling the virtues of higher taxes. Unfortunately for Mr. Hiltzik, as usual, he’s wrong about virtually everything. This doesn’t particularly surprise me considering my critique of his previous column where he couldn’t keep his facts straight. This time around, Hiltzik draws the wrong conclusions and uses specious statistics to back up his argument.

Are Californians Highly Taxed?

Hiltzik claims that it’s a lie that Californians are burdened by the highest state taxes in the nation. To prove his point, he writes,

The truth, according to 2006 figures derived from the U.S. census, is that, as a percentage of all personal income, California’s tax and fee schedule ranks 18th in the country.

But that’s a misleading statistic. The reason that California comes out 18th, is that we have a few very wealthy citizens and a large percentage of our tax revenue comes from the sales tax which is a flat tax on purchases. This skews the ranking, because when you calculate taxes as a percentage of personal income (taxes divided by personal income), the incomes of our wealthy citizens increases the denominator and lowers the overall percentage. In low income, sparsely populated states, it takes a higher proportion of their incomes merely to provide a basic level of government and infrastructure. More densely populated and higher income states, like California, spread those costs over a greater tax base, allowing the appearance of a lower tax burden. So why use this one statistic to determine whether Californians pay the highest taxes in the nation? I suspect Hiltzik chose this number because it seems to prove his overall point that Californians aren’t taxed enough. However, Hiltzik ignores other, more valid statistics that prove him wrong. For example, in the same report referenced in Hiltzik’s column, California ranks 11th in per capita taxes (total taxes divided by the number of people). Again, this statistic may or may not tell us anything about our personal tax burden, for if there are a large number of people who pay little or no tax, then those that do pay taxes might pay a lot, but the per capita tax rate is lower. Furthermore, it’s unclear whether the above numbers include such things as local levies or other fees imposed on the populace. The point is, measuring the tax burden as a percentage of personal income is only one consideration of the tax environment for any jurisdiction, and not a particularly good one at that. Taking this one statistic out of many and using it as the sole evidence to prove your point is intellectually dishonest and I’m sure Michael Hiltzik knows it.

So let’s set the record straight about how heavily Californians are taxed. California has the highest state sales tax in the nation, the highest tax on motor fuels, one of the , highest corporate tax rates in the country, the second highest top income tax rate (Hawaii just jumped to #1, but not by much) and higher personal tax rates that kick in at some of the lowest income levels. For example, California imposes a 9.55% income tax on individuals earning over $47,000. No other state has such a high rate for those earning such a low salary. Finally, according to the Tax Foundation, for 2008, California ranked 6th highest in the nation in overall state tax burden. And in their 2008 report, the Pacific Research Institute ranked California 47th in overall economic freedom. Considering these numbers, Californians appear to shoulder a very high tax burden as compared to residents of other states. I leave it to the reader to decide whether we should be paying more as Hiltzik suggests.

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May 24th, 2009 Posted by freedomminute | State Government | no comments