It's already 54% for folks with a 7 figure income deriving their income from short term investments (say, stock options). This is almost always the case in tech.
Note that before the 2017 federal tax changes, California incpome tax was deductable at the federal level without a cap (but subject to AMT), so a 40% marginal federal tax and a 13% marginal state tax did not add up to a 53% marginal income tax like it does now.
It would create a marginal combined income tax rate of 54% when you combine federal and state taxes.
From the article:
"California’s top marginal tax rate is 13.3%. The new proposal would add three new surcharges on seven-figure earners. It would add a 1% surcharge to gross income of more than $1 million, 3% on income over $2 million and 3.5% on income above $5 million."
Exactly, MARGINAL tax rate is different from the actual tax rate. It's the tax on the marginal dollar. There are deductions, and the first few hundred thousand are taxed at a lower rate.
I think they should wait until they see their budget this year.
NYC is having a bloodbath with their finances with so many of the wealthy leaving to florida and surround states.
With tech letting people work from where ever I'd be cautious of giving the tax base paying for most things another reason to leave when you need money the most.
There has been significant migration from New York to Florida for many years now (at least partly driven by tax considerations); I would expect that not many people are moving anywhere these days.
The crazy thing is you get nothing for it. In Europe you pay high taxes but you get free healthcare, free college and the same for everyone in the country. In the US you get 14 aircraft carriers and something else which I'm not sure.
State taxes don't go toward aircraft carriers. Looking at the state's budget, it looks like California spends most of its budget on education, then healthcare and welfare programs, then prisons(‽).
I realize this won’t change your simplistic “Europe good USA bad” worldview but relatively high CA taxes do support good social services and as a CA resident I have benefitted. There is a strong paid family leave program for new parents or those caring for ill family, for instance.
> In Europe you pay high taxes but you get free healthcare, free college and the same for everyone in the country.
Firstly, college is "free" but at the trade off of not everyone being able to go. Instead the government decides who gets to go. In USA anyone can go to college. It's not uncommon for people in their 30s and 40s in USA deciding to go to college. In Europe you have to perform well enough on exams very early in your life if you want free college, otherwise no college for you.
Secondly, I would argue Europe can spend so much on social services because the US buys so many aircraft carriers (and jets and bombs, etc). Post WW2, Europe's military is very weak and can't really project force at all (just look at how well Europe responded to muslim genocide happening next door 20 years ago). Without the US military presence in Europe, Russia would have annexed a bunch of eastern European states by now.
USA isn't perfect, but USA has unique problems that are hard to solve.
Indeed. Most Europeans badmouthing US military spending don't fully grasp how much they have benefited from it.
It is hard to imagine a European lifestyle as we know it today without the advantage of the US military being a deterrent to Russia/China and the latest wannabe dictator.
Please note, I am not blaming the Europeans here, just trying to be realistic and look at a bigger picture.
I'll point out that while California's public college system isn't as cheap as it was 40 years ago when I got my degree. And there is a lot of competition to get into certain schools. The state never has discriminated against students by age. So pigeonholing people early on is wholly a shitty European thing that has nothing to do with public funding.
Close... you get what the majority votes for. Parent comment is that tech workers (minority of population) fund a disproportionate share of the budget and are being oppressed by the majority voting for higher income taxes (to the extent the next election does not result in throwing current politicians out for raising taxes).
I think that the percentage income tax rate is, largely, an arbitrary number.
Which is to say, I can't find any anchoring, or a priori justification for, say, a 28% rate over a 32% rate, etc.
That is, until we cross 50%.
I feel that there are fundamental issue of fairness and proportionality that are incompatible with taking, via tax, more than half of any particular income - even marginal income.
Two immediate reactions I have, related to these concepts of fairness and proportionality are:
1. What does it say about the fundamental relationship of the state to the individual if we are crossing the halfway point in a taking such as this ?
2. What does it say about the economic and budgetary functions of our government (their relative profligacy) if they can't make things work at 35 or 40 or 45% taxation rates ?
Taxation is not my issue. I prefer to live in (relatively) high tax jurisdictions with robust government services and high quality infrastructure, etc., and I would like to help pay for that. There is, however, something about the halfway point that disturbs me.
There a pretty weak reform for 2020 in Proposition 15. It will tax at realistic values (i.e. exempt from Prop 13) certain commercial properties. I'd like to see much stronger reforms so that second homes are realistically taxed etc, but at least it is a start.
California has one of the highest state income taxes AND sales taxes in the country. Combined, they can easily total nearly 20%. Yet, the state is in massive debt and infrastructure projects go no where (https://www.sfchronicle.com/politics/article/Train-to-nowher...)
I live in California. Unfortunately you're going to be disappointed - California has the highest tax rates and the worst infrastructure. The failure to solve these problems isn't due to having too little money (states and countries with a fraction of California's wealth have solved these problems).
I agree with this assessment. We moved from FL (0% income tax, 1.5% property tax) to CA (9% for us income tax, 1.05% property tax) and the quality of the infrastructure is at best on par. Which was surprising. Our SALT taxes went up 5x and the services are similar quality.
What we need is consolidation and streamlining of expenses, programs and maintenance. This, however, will serve to enable and cover over the poor policies and inefficiencies that are either causing, or at least failing to solve, the many issues we have in California.
I am very sympathetic to the idea, oft raised by critics of capitalism, that economies cannot grow forever. Why, too, would we not have the same critique of government and its services ?
Readit News
The real headline is "California considers hiking tax rates by 3% for people earning over $2M in income".
Maybe worth editing the description.
37% federal
13.3% state
3.8% Net Investment Income Tax
54.1% total, before this new tax.
Are these large tax rates unusual in other states?
From the article:
"California’s top marginal tax rate is 13.3%. The new proposal would add three new surcharges on seven-figure earners. It would add a 1% surcharge to gross income of more than $1 million, 3% on income over $2 million and 3.5% on income above $5 million."
So basically 3.5% tax on income above $5 million.
NYC is having a bloodbath with their finances with so many of the wealthy leaving to florida and surround states.
With tech letting people work from where ever I'd be cautious of giving the tax base paying for most things another reason to leave when you need money the most.
Deleted Comment
I thought your high taxes pay for education and healthcare? How is that free?
Firstly, college is "free" but at the trade off of not everyone being able to go. Instead the government decides who gets to go. In USA anyone can go to college. It's not uncommon for people in their 30s and 40s in USA deciding to go to college. In Europe you have to perform well enough on exams very early in your life if you want free college, otherwise no college for you.
Secondly, I would argue Europe can spend so much on social services because the US buys so many aircraft carriers (and jets and bombs, etc). Post WW2, Europe's military is very weak and can't really project force at all (just look at how well Europe responded to muslim genocide happening next door 20 years ago). Without the US military presence in Europe, Russia would have annexed a bunch of eastern European states by now.
USA isn't perfect, but USA has unique problems that are hard to solve.
It is hard to imagine a European lifestyle as we know it today without the advantage of the US military being a deterrent to Russia/China and the latest wannabe dictator.
Please note, I am not blaming the Europeans here, just trying to be realistic and look at a bigger picture.
The real difference is that in general you get what you pay for, and most college education is just licensing.
the F-35 program
I doubt the US as a monolith could pull those things off, the bigger the organization the worse it usually is at execution.
Which is to say, I can't find any anchoring, or a priori justification for, say, a 28% rate over a 32% rate, etc.
That is, until we cross 50%.
I feel that there are fundamental issue of fairness and proportionality that are incompatible with taking, via tax, more than half of any particular income - even marginal income.
Two immediate reactions I have, related to these concepts of fairness and proportionality are:
1. What does it say about the fundamental relationship of the state to the individual if we are crossing the halfway point in a taking such as this ?
2. What does it say about the economic and budgetary functions of our government (their relative profligacy) if they can't make things work at 35 or 40 or 45% taxation rates ?
Taxation is not my issue. I prefer to live in (relatively) high tax jurisdictions with robust government services and high quality infrastructure, etc., and I would like to help pay for that. There is, however, something about the halfway point that disturbs me.
https://www.politico.com/interactives/2020/california-novemb...
Beyond that, since it was voter passed, it has to be voter repealed. :( I don’t think it’ll happen.
Pretty much every homeowner in the state would vote against it too.
Couldn't that happen in the next generation?
I guess because I'm assuming the money will help improve things like infrastructure and homelessness problems, which are some of my main worries.
But then I'm also from Europe and would prefer if they increased taxes even more ️
What we need is consolidation and streamlining of expenses, programs and maintenance. This, however, will serve to enable and cover over the poor policies and inefficiencies that are either causing, or at least failing to solve, the many issues we have in California.
I am very sympathetic to the idea, oft raised by critics of capitalism, that economies cannot grow forever. Why, too, would we not have the same critique of government and its services ?