Please ensure Javascript is enabled for purposes of website accessibility

West Bank Town Becomes ‘Big Prison’ as Israel Fences It In

1 day ago

Trump Says He’s Willing to Let Migrant Farm Laborers Stay in US

1 day ago

US Electric Vehicle Tax Breaks Will Expire on Sept. 30

2 days ago

Eyeing Arctic Dominance, Trump Bill Earmarks $8.6 Billion for US Coast Guard Icebreakers

2 days ago

Trump’s Sweeping Tax-Cut and Spending Bill Wins Congressional Approval

2 days ago

Americans Celebrate Their Independence With Record-Breaking Travel Numbers

2 days ago

US Supreme Court to Decide Legality of Transgender School Sports Bans

2 days ago

Nvidia Set to Become the World’s Most Valuable Company in History

2 days ago

Poll: 41% in US ‘Extremely Proud’ to Be American, Near Historic Low

2 days ago
Walters: State Budget Depends on the Rich
dan_walters
By Dan Walters, CalMatters Commentary
Published 5 years ago on
January 22, 2020

Share

The final pages of the 2020-21 budget that Gov. Gavin Newsom proposed this month contain arguably its most important factor — an utter dependence on taxing a relative handful of high-income Californians.
Personal income taxes, the budget projects, will generate $102.8 billion during the fiscal year that will begin on July 1, or slightly over two-thirds of general fund revenues, and 47% will come from the top 1% of California’s taxpayers who file about 15,000 tax returns in a state of 40 million people.


Dan Walters
Opinion
To put it another way, nearly a third of what California spends on K-12 schools, public colleges, prisons, welfare grants and health care is supplied by fewer Californians than it would take to fill a professional basketball arena.
It wasn’t always so. A chart in the budget reveals that 70 years ago, in 1950, personal income taxes accounted for just 11.3% of the state’s general fund revenues, with sales taxes the biggest source at 59.4%. Nine years ago, personal income taxes were scarcely half of the state’s revenue stream.
What happened?
A strong recovery from the Great Recession and a rising stock market, compounded by a voter-approved increase in income tax rates on the most affluent Californians, increased dependence on them.
So what’s the problem with that?

It’s Called ‘Volatility’ and It Means the State Budget Could Get Clobbered

The rich can take care of themselves but being so dependent on so few people is dangerous from a fiscal standpoint, particularly since their incomes largely stem from investment earnings, such as those from the stock market, which can go up and down like an elevator.
It’s called “volatility” and it means that were another recession to hit, California’s budget would be clobbered, with projected revenue drops of about $25 billion a year. The state’s “rainy day fund” would cover only a fraction of that decline.
There’s another aspect to being so dependent on the rich to finance services that mainly serve middle- and low-income Californians. Wealthy taxpayers could — and some already have — simply move to another state and take their income-generating investments with them.
The potential for such an exodus increased a couple of years ago when a Republican-dominated Congress passed, and President Donald Trump signed, a federal tax overhaul that, among other things, capped the deductibility of state and local taxes at $10,000.
It increased the net impact of state and local taxes on high-income taxpayers, thus creating another reason to flee high-taxing states such as California for states that levy low or no income taxes, such as Nevada and Florida.

The Federal Hit on High Earners

Not surprisingly, the Democrats who dominate high-taxing states complained loudly about the $10,000 limit, openly fearful that it would entice the wealthy to migrate.

It’s unlikely that the Republican-dominated Senate would repeal the limit, and it’s not certain it would do so even if Democrats take control this year.
Last month, the House of Representatives, now controlled by Democrats, voted to repeal the $10,000 limit and thus ease the tax burden on the rich — a move dripping with irony, given calls by Democratic presidential hopefuls for taxing them even more.
Prior to the House vote, the nonpartisan Tax Policy Center calculated that one-percenters, households reporting $755,000 or more in income, would see 56% of the benefit from repealing the deduction cap, low-income Americans would get virtually nothing, and only about 3% of middle-income taxpayers would see their tax bills cut.
It’s unlikely that the Republican-dominated Senate would repeal the limit, and it’s not certain it would do so even if Democrats take control this year. It would be seen as a boon to high-taxing states, such as California and New York, at the expense of states that have more modest tax burdens.
CalMatters is a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters. For more stories by Dan Walters, go to calmatters.org/commentary.
[activecampaign form=31]

DON'T MISS

What Are Fresno Real Estate Experts Predicting for 2025 and Beyond?

DON'T MISS

First California EV Mandates Hit Automakers This Year. Most Are Not Even Close

DON'T MISS

How Trump’s ‘Big, Beautiful Bill’ Will Make China Great Again

DON'T MISS

What’s Caitlin Clark Worth to the WNBA? A Lot More Than Her $78,066 Salary.

DON'T MISS

Trump to Sign Tax-Cut and Spending Bill in July 4 Ceremony

DON'T MISS

Madre Fire Spurs Evacuations Across 3 Counties, Grows to More Than 70,000 Acres

DON'T MISS

Clovis, Sanger, Madera, and Bass Lake Will Light the Sky With Fireworks Shows Tonight

DON'T MISS

Oil Dips Ahead of Expected OPEC+ Output Increase

DON'T MISS

613 Killed at Gaza Aid Distribution Sites, Near Humanitarian Covoys, Says UN

DON'T MISS

Fresno County Authorities Investigating Suspicious Death of Transient Man

DON'T MISS

West Bank Town Becomes ‘Big Prison’ as Israel Fences It In

DON'T MISS

Israeli Military Kills 20 in Gaza as Trump Awaits Hamas Reply to Truce Proposal

UP NEXT

July 4th Quiz: Test Your Knowledge of the Founding Fathers

UP NEXT

Presidential Election Reveals Big Shift in California Voting Patterns. Will It Last?

UP NEXT

From Victims to Perpetrators: Israeli Soldiers’ Nazi Comparisons and the Unfolding War Crimes in Gaza

UP NEXT

Dear Mayor and City Council, Fresno’s Housing Bottlenecks Are a Modern Form of Redlining

UP NEXT

A Path Forward on Immigration Reform That Strengthens America

UP NEXT

Israel Faces Genocide Accusations Amid Gaza Food Aid Killings

UP NEXT

I Detest Netanyahu, but on Some Things He’s Actually Right

UP NEXT

Much of LA’s Community of Immigrants Is Hiding, Leaving a Hole in the Fabric of the City

UP NEXT

Things Netanyahu Might Say if Injected With Truth Serum

UP NEXT

California Politicians Ignore Ag’s Troubles, but Boost Movie Business

Madre Fire Spurs Evacuations Across 3 Counties, Grows to More Than 70,000 Acres

1 day ago

Clovis, Sanger, Madera, and Bass Lake Will Light the Sky With Fireworks Shows Tonight

1 day ago

Oil Dips Ahead of Expected OPEC+ Output Increase

1 day ago

613 Killed at Gaza Aid Distribution Sites, Near Humanitarian Covoys, Says UN

1 day ago

Fresno County Authorities Investigating Suspicious Death of Transient Man

1 day ago

West Bank Town Becomes ‘Big Prison’ as Israel Fences It In

1 day ago

Israeli Military Kills 20 in Gaza as Trump Awaits Hamas Reply to Truce Proposal

1 day ago

Valley Crime Stoppers’ Most Wanted Person of the Day: Rachelle Maria Blanco

1 day ago

Russia Pounds Kyiv With Largest Drone Attack, Hours After Trump-Putin Call

1 day ago

Boxer Chavez Jr Expected to Be Deported to Mexico to Serve Sentence, Mexican President Says

1 day ago

How Trump’s ‘Big, Beautiful Bill’ Will Make China Great Again

Can you hear it — that loud roar coming from the East? It’s the sound of 1.4 billion Chinese laughing at us. Thomas L. Friedman The New Yo...

11 hours ago

Solar Farm in Riesel, Texas
11 hours ago

How Trump’s ‘Big, Beautiful Bill’ Will Make China Great Again

Caitlin Clark Signs T-Shirt
11 hours ago

What’s Caitlin Clark Worth to the WNBA? A Lot More Than Her $78,066 Salary.

President Donald Trump speaks during a press conference in the Roosevelt Room at the White House in Washington, D.C., U.S., May 12, 2025. (Reuters File)
1 day ago

Trump to Sign Tax-Cut and Spending Bill in July 4 Ceremony

The Madre Fire burning near New Cuyama has scorched 70,801 acres as of Friday, July 4, 2025, afternoon, making it California’s largest wildfire of the year, with only 10% containment and multiple evacuation zones in place. (CalFire)
1 day ago

Madre Fire Spurs Evacuations Across 3 Counties, Grows to More Than 70,000 Acres

1 day ago

Clovis, Sanger, Madera, and Bass Lake Will Light the Sky With Fireworks Shows Tonight

A pumpjack operates at the Vermilion Energy site in Trigueres, France, June 14, 2024. (Reuters File)
1 day ago

Oil Dips Ahead of Expected OPEC+ Output Increase

Palestinians gather to collect what remains of relief supplies from the distribution center of the U.S.-backed Gaza Humanitarian Foundation, in Rafah, in the southern Gaza Strip, June 5, 2025. (Reuters File)
1 day ago

613 Killed at Gaza Aid Distribution Sites, Near Humanitarian Covoys, Says UN

Billy Wayne Sinisgalli, a 54-year-old transient known locally as Wayne, was found dead along a rural Fresno road Wednesday in what authorities are investigating as a suspicious death. (Fresno County SO)
1 day ago

Fresno County Authorities Investigating Suspicious Death of Transient Man

Help continue the work that gets you the news that matters most.

Search

Send this to a friend