What do tax hikes cost Californians in a year?
Posted: 03/12/2011 06:19:39 PM PST (Published in the San Jose Mercury News)
SACRAMENTO -- That $1,000 flat-screen TV you bought last year came with an extra $10 in sales tax. The five-year-old car with an original price tag of $18,000 cost $54 more to license than it did three years ago. And the $100,000 you and your spouse earned meant an extra $320 in state income taxes.
Those are examples of how the Legislature's temporary tax increases two years ago affected personal income, sales and vehicle taxes in California, levies Gov. Jerry Brown and Democratic lawmakers want to extend for another five years.
The tax increases have generated $17 billion since they were approved by the Legislature in February 2009, with $3 billion more to follow by the time the last of them expire on July 1.
If the Democratic governor gets his way, a measure to extend those tax hikes and reduce California's $26.6 billion budget deficit will go before voters in a June special election. The governor is trying to round up enough votes in advance of expected action in the coming days in the Assembly and Senate.
Should voters opt to keep paying the taxes, analysts expect state coffers to take in an additional $9 billion to $11 billion annually over the five-year period. The decision would affect all Californians who pay income taxes, own vehicles and shop from a retailer.
For starters, Californians have been paying an extra 1 percent in sales tax, a half percent more for vehicle licenses and a quarter percent higher income tax rate. Some tax filers also have received a lower tax exemption for dependents.
The tax hikes mean a single person making $40,000 a year pays an additional $125 in annual income tax. For a couple making $60,000, it's an extra $175.
To Jim Verboon, a walnut farmer in Laton, south of Fresno, any dollar more is a dollar too many. He said he would vote against an extension of the tax increases because state government has lived beyond its means for too long. Spending cuts are the only answer.
"I'm not opposed to taking a step down at a time so we're not just taking a meat ax to it," Verboon, 60, said of the budget.
Yet Brown and Democratic lawmakers say that is precisely what will happen -- with severe cuts to public schools and thousands of teacher layoffs, for example -- if they have to close the deficit with $27 billion in cuts. That amount represents nearly one-third of all general fund spending.
No Republican lawmaker has signed on to Brown's budget plan. GOP legislators say they have been hearing from constituents like Verboon who feel weighed down by taxes and want to see public money spent more prudently.
"It's 50 cents here and it's 50 cents there, and at the end of the day, it's real money," said Assembly Minority Leader Connie Conway, R-Tulare.
California has the sixth-highest tax burden in the country, according to the conservative but nonpartisan Tax Foundation, based in Washington, D.C. Residents pay 10.6 percent of their income toward state and local taxes, compared with a national average of 9.8 percent.
That includes sales taxes. Because of the increased rate, a shopper would pay an additional $5 for a $500 washing machine or an extra $150 for a $15,000 Ford Focus.
If bought new, that car also would require $76 more for a vehicle license fee than it did before the increases, according to the state Department of Motor Vehicles.
All told, the increased taxes have cost Californians $260 a year on a per-capita basis, the state Department of Finance estimates.
Jackie Scofield said the extra charges are necessary to support higher education and other programs. She is finishing a business degree at Sacramento State, but said she could have graduated one or two semesters earlier if budget cuts had not made it so hard to get into required classes.
"So many things are already being cut, and I can't imagine it being worse," said Scofield, 24. "At least it's not raising it, just keeping things the way they are."
The California Retailers Association says it's important that the governor's budget plan calls for maintaining the current tax level, not raising it.
"We're hoping since it's an extension and not an increase, we won't see a change in behavior," said the association's president and chief executive officer, Bill Dombrowski.
Democrats have latched onto that point in their attempt to generate support for a special election that would allow voters to decide the issue.
The governor's budget plan has been supported by numerous business groups around the state, many of which have acknowledged that cutting nearly $27 billion from state spending might do more harm to the economy than the extension of the previous tax increases.
Even the California Chamber of Commerce said it would not criticize any lawmakers who voted to place the tax question on the ballot.
Assemblyman Gil Cedillo said Californians have gotten used to the taxes and can continue to adjust.
"Would we like to pay less?" said the Los Angeles Democrat, a member of the Assembly Committee on Revenue and Taxation. "Would we like to have things for free? Of course. That's not reality."
Jon Gutierrez will be affected either way.
A state worker who is required to take several unpaid days off each year, he knows state government will have to make even deeper cuts if the tax increases expire this year.
But the 48-year-old Sacramento resident also isn't keen on paying more in taxes.
"How much more can you squeeze out of us, individually and collectively?" he said.
Sources: California Department of Finance, California Department of Motor Vehicles, Associated Press