Skip to comments.'Buffett Rule' a bust in California
Posted on 09/22/2011 2:15:49 AM PDT by Cincinatus' Wife
If President Obama really wants to see the "Buffett Rule" in action, he should look at California's tax system. The state has been plagued by it for years.
The revenue stream is unstable and the state budget has been a deficit disaster.
..two principal reasons why Buffett can get away with paying at a lower federal rate than his secretary but couldn't if he had to pony up for state taxes in California.
One is that capital gains and dividend income are taxed by the federal government at lower rates than ordinary earnings. That's not true for California taxes. Here, it's all taxed as ordinary income.
Second, the feds have their payroll taxes. The Social Security tax eats up a much bigger share of a middle-class family's pay than it does a million-dollar earner's. That's because only the first $106,800 of earnings is taxed for Social Security.
Capital gains is a biggie. At the federal level, a taxpayer could be in the top 35% bracket and still pay only 15% on capital gains earnings.
California used to offer preferential tax treatment for capitalgains and dividends, but eliminated it in 1987 to conform to a new federal "reform" law. The feds later reinserted their preferences, but California never did. Consequently, California relies heavily on rich investors for its income taxrevenue, which fuels half of the general fund.
Some examples of this over-dependence, based on..2009..
...top 1% earned 18% of California's income but paid 37% of the income tax.
Illustrating the volatility of the California income tax, however, the top 1% paid 48% of the total take in 2007 before the stock market collapsed. In the next two years, the state's income tax revenue fell 25%.
...top 10% earned 45% of the income but paid 72% of the taxes.
(Excerpt) Read more at latimes.com ...
Well, the author is sticking his neck out with this article. You wouldn’t want hims to get lynched would you?
But he tidies it up at the end by heavily quoting “left leaning” Center for Continuing Study of the California Economy and the California Budget Project.
To be fair, he has to be balanced not honest.
First, foremost and always -- LIBERALS!
When California converts to the peso the revenue will increase numerically.
Often lost in the discussion of capital gain taxes is the rationale behind them. Lower capital gain rates were instituted to minimize the impact of progressive tax rates on income generated over the years but not recognized until the investment was disposed which unfairly pushed the taxpayer into a higher rate. Income averaging was also instituted for the same reason. A flat tax would eliminate the need for lower capital gain taxes.
He would also pay social security on 100% of that income, not the first 100K.
The problem is, when you're a gas bag, all you do is talk. It sounds like his motivation is adulation. Perhaps money can no longer scratch his itch.
I wonder if Buffett is doing this in exchange for better treatment in his IRS case or some other benefit.
It’s another reason why lots of people moved from California.
If we had reporters, not repeaters, every story on the “Buffett Rule” would explain these fundamentals. They’re critical to understanding the context.
The problem isn't the revenue stream. It's all the canals that have been cut into it.
At last check there was some 595 State agencies paid for by the California taxpayer.
And then there are Federal agencies, County agencies and City agencies.
The Amazon would run dry.
And from NY and NJ!