Posted on 12/16/2008 9:49:59 AM PST by goldstategop
In 2004, voters narrowly approved Proposition 63, the Mental Heath Services Act (MHSA), which imposed an additional 1% tax on personal income above $1 million. The funds generated from this “millionaire’s tax” were intended to expand county mental health programs. Taxpayer and business groups opposed the measure for a couple of obvious reasons. First, California is already a high tax, high spending state that didn’t need any more revenue. Second, as we predicted, Prop 63 would exacerbate California’s income tax volatility.
Although the final vote for Proposition 63 was tallied more than four years ago, evidence suggests that California’s most wealthy have continued to vote on this measure – with their feet. A recent survey from TNS Research, an international business research firm, found the California counties of Los Angeles, Orange and San Diego had the 1st, 4th and 6th highest number of millionaires in the country. However, even as the national population of millionaire households grew by 5.9% in 2007, Los Angeles County lost about 7000 of these households. Orange and San Diego Counties lost millionaire households as well.
Milton Friedman’s maxim that few things are as mobile as rich people and capital, is proven starkly by data showing the wealthy are leaving California in record numbers. It is probably no coincidence that, while California has been punishing the successful for the sin of being rich, Maricopa County in neighboring Arizona gained 23,000 new millionaire households in the same time period. Arizona’s top marginal personal income tax rate is 4.79%, less than half California’s rate of 10.3%, which includes the Prop. 63 surcharge.
When California millionaires choose to become Florida or Nevada millionaires, the consequences to the state’s economy is profound. In California, the top 10% of earners pay nearly 75% of income taxes. If the trend of millionaire households relocating out of state continues, it will make finding the revenue to fund essential state services even more difficult.
Given that passage of Proposition 63 is responsible, at least in part, for the accelerated out migration of California’s wealthy, can we at least conclude that Prop 63 has done some good? Unfortunately, no. While the California Department of Finance is reporting a net domestic outmigration of taxpaying citizens along all income groups, DOF’s May 2008 audit of the MHSA states: “As of March 31, 2008, approximately $3.2 billion has been collected and $2.9 billion has been allocated for county use. Of the $2.9 billion allocation, $1 billion has been approved for distribution but only $726 million has been distributed to the counties.” This means that $2.174 billion is just sitting in the bank unused.
Similarly, much of the funding that has been distributed to counties still is not being utilized and is instead being held in reserves. Total county Proposition 63 reserve funds statewide exceed $80 million. However, as we face a $27.8 billion budget deficit over the next 20 months, Proposition 63’s inflexibility prohibits counties from transferring reserves to fund other priorities.
The Department of Finance’s audit declares, “An overall documented plan for the development and implementation of the MHSA does not exist.” Furthermore, the audit cited ineffective communication between the Department of Mental Health, the Mental Health Oversight and Accountability Commission (an agency responsible for overseeing parts of the MHSA) and the counties. The audit states the Department of Mental Health’s application of Community Services and Supports (mental health services for children and adults) guidelines has been “strict and inflexible,” and counties have therefore developed plans ranging from 300 to 1000 pages that meet the guidelines but not the needs of their communities.
Even supporters of Proposition 63 are concerned. It has been so unsuccessful that Rose King, a member of the measure’s drafting committee wrote in a Sacramento Bee op-ed, “Almost four years after passage, however, there is little evidence that the system has improved, and an infinitesimal number of clients are getting better treatment.”
So, just to be clear, in addition to driving those out of the state whom we can least afford to lose, Proposition 63 has failed abjectly to accomplish its goals and thus reflects the worst example to date of ballot box budgeting. Congratulations, Golden State. Once again, we have demonstrated why we rank so low in terms of effective governance.
Four years of hindsight should compel elected leaders to take two separate courses of action. First, the Legislature should pass all necessary laws to allow both the state and counties to tap into the unused Prop 63 funds to help address the current crisis. Second, recognizing that punishing the rich is a strategy akin to the old medical practice of “bloodletting,” Proposition 63 should be repealed immediately.
Republican leaders may be proposing this week to address both sides of the Proposition 63 unbalanced equation. But the chances that the majority party will take decisive corrective action to fix this double error? Zero.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
What a useless paragraph.
Punishing success while allowing millions of illegals to run rampant and kissing the boots of every labor union in the state...all while “going green”.
I hate this place.
Take Prop 8, Hollywood, gang bangers and Berkeley, it’s yours.
...bet you a dollar that most millionaires voted for this prop 63 or whatever it is.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
Yes, they then bring that liberal socialism virus with them and immediately it starts to metastasize in their new digs. Then they look for their next new home, while leaving their old place in ruins..........
I hate to say it I think politically we need to throw millionaires under the bus federally to break the Republicans only for rich label GWB has left us with (it wasnt the tax cuts, but that plus massive federal contracts and bailouts together.) We should call on democrats to raise their taxes, but draw the line at 1M. Why that number? It sounds good politically. This is not to raise tax money but to counter damage already done.
I understand this article but the voters dont, they see BoB as saving them.
I wonder if it was Democrate millionairs who left?
Wouldn’t surprise me.
California gubamint has not shortage of stupidity in its ranks... considering the Gub is a multimillionaire, how long before he leaves too? none too soon.. unfortunately ;-)
Maryland and Virginia already happened , see my comment #8
I meant 'useless paragraph' because if you look at all the numbers, percentages and ranking of states, they bear no relationship to eachother.
As far as your points though, you are right; folks are beating feet out.
Thou shall not covet thy neighbors’ goods. PERIOD. Doesn’t matter how rich he is.
But then covetousness drives U.S. politics and government at all levels. No wonder we are headed for collapse.
I didn’t say it did.
What I said was that I’m guessing most of the rich (who are now fleeing California) probably voted for these tax hikes.
We should not give up our principles because we are concerned about what others think.
That is what we have RINOs for.
>I wonder if it was Democrate millionairs who left?<
You got it. They came to Reno and changed us over to a blue majority.
RE :”We should not give up our principles because we are concerned about what others think.”
That is EXACTLY why we lost 2 elections. Democrats poll test everything.
That bus is long gone via GWB and others. By standing for massive federal contracts, bailouts of risky investors, massive deficits all with the higher income tax cuts we have lost the PR war. The voters gave Obama the tax issue over McCain, why? He had a consistent message to tax the rich but cut ‘your taxes’. McCain was trapped by GOP history when defending rich and corporations who are seen to benefit from contracts and bailouts. So now when they propose massive spending programs to cure the economy our winning argument is? Later they declare a debt crisis (GWB’s fault) to raise taxes our winning argument is? You cant abandon so many key principles and then hang on to a few that look bad politically, looking hypocritical, and expect to win anything.
Lastly, the super rich tend to overwhelmingly support democrats, did you know that? Why should we pay higher taxes to try to defend them? National Review had a great article on losing 2008. We need a middle class message and I dont mean 70K like Obama.
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