California’s hard-working taxpayers just handed state lawmakers a $75 billion surplus for fiscal year 2021-22, which begins on July 1. The budget must be crafted by June 15.
Are the lawmakers eager to reward us by giving back a major chunk of the surplus? No. Not even a “thank you for your hard work.”
Instead, Assemblyman Miguel Santiago, D-Los Angeles, proposed AB 1253, which would raise taxes even higher. The current confiscatory top income tax rate of 13.3 percent, already the highest state rate, would soar to 16.8 percent.
The state sales tax rate of 7.25 percent also is the country’s highest. County and city levies raise it higher, to 7.75 percent in most of Orange. City taxes push it as high as 9.25 percent in Los Alamitos and Santa Ana.
Proposition 13 does keep property taxes at 1 percent of value, plus 2 percent maximum more per year for inflation. But property values have soared so much in recent years, the actual revenues now are among the highest in the country.
According to the California Association of Realtors, the median price for an Orange County home in April was $1.1 million. It’s this shockingly high cost of living that has sent so many Californians into exile that the state actually lost population last year.
According to the U.S. Bureau of Labor Statistics, California’s unemployment rate in April was stuck at an abysmally high 8.3 percent. Only Hawaii was worse, at 8.5 percent.
By contrast, Nebraska, New Hampshire, South Dakota and Utah sported jobless rates of just 2.8 percent. Despite COVID-19, they’re back to full employment. California, even with rapidly falling COVID-19 rates, remains unable to reduce its jobless rate to a healthy level.
The state corporate income tax rate of 8.84 percent is the eighth highest. Neighboring states Washington, Nevada and Texas don’t even tax corporations’ income. No wonder Tesla, Oracle, Charles Schwab, AT&T and thousands of other corporations, large and small, have made what’s called the Tech Exodus to Texas.
Many lower-income Californians remain out of work while they watch their daily costs of living rise. Inflation is pushing up the cost of groceries and utilities.
Gasbuddy.com clocks California’s average gas price at $4.18, the highest in the nation. It’s even higher than Hawaii, at $3.81, the longtime price leader. Compare that to $2.70 in Louisiana and Mississippi.
With a $75 billion surplus bequeathed him by industrious taxpayers, it would be easy for Gov. Gavin Newsom to relax the excessive tax rates or infuse some of the money into reducing unemployment. Cutting taxes would show Californians they are valued by government officials.
Instead, the governor proposed throwing money at the failing education system without long-needed reforms, especially of pensions. And more money is indiscriminately being thrown to the rising homeless population without needed reforms in mental health, the root cause of homelessness.
The governor also wants to provide a short-term solution by offering $600 for California families making under $75,000 a year, plus $500 for each child, costing another $12 billion. Unfortunately, these small payouts have no long-term effect when inflation and cost of living prices surge daily.
And “low income” in California stretches up to $165,000, the minimum needed to qualify for a home loan. This isn’t Kansas. Yet no stimulus checks will go to those making $75,000 to $165,000.
What to do? The governor and the Legislature ought to return most of the $75 billion surplus back to overtaxed Californians. Also, cut the corporate tax rate immediately to lure back businesses, which then would create hundreds of thousands of new, middle-class jobs.
Then the millions of Californians stuck in Newsom’s Kafkaesque Employment Development Department bureaucracy could instead get real jobs.
As the masks come off and the Golden State opens up, the state government needs to show it is open for business. The governor and Legislature need to reward Californians for sticking together during the tough times when COVID-19 was at its deadly worst.
They need to open wide the windows to business expansion and jobs creation.
Laurie Davies, R-Laguna Niguel, represents District 73 in the California Assembly
