Are Big Tax Increases Coming to California?

TaxesGavin Newsom’s election as governor and the expanded Democratic Party majorities in the Legislature have raised hopes in some quarters and fears in others that big tax increases may be on the horizon.

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During his campaign for governor last year, Newsom pledged support for a variety of expensive public services, including universal health insurance coverage and universal pre-kindergarten care and education.

His initial budget offered only token appropriations for those and other items on his wish list, but were he to seriously pursue them, they would require tens of billions of dollars in new taxes each year.

Newsom has proposed a new tax on water to pay for cleaning up municipal water supplies in impoverished communities. Several other targeted taxes have also been introduced in the Legislature.

Meanwhile, an initiative has qualified for the 2020 ballot to undo some of Proposition 13’s property tax limits. The measure would create a “split roll,” removing the 2 percent annual cap on increases in assessed valuation for non-residential, non-agricultural commercial property, such as office building and shopping centers.

If passed, it would raise property taxes by perhaps $10 billion a year – a lot of money, certainly, but far short of what the most ambitious service expansions would need. However, the initial polling on the split-roll measure doesn’t bode well for its passage, and the commercial real estate industry has pledged to spend $100 million to defeat it.

The more likely avenue for big tax increases would be some version of tax reform, which Newsom has endorsed in principle.

However, it must contend with the simple fact that we Californians are, in the aggregate, already carrying one of the nation’s highest tax burdens and quite possibly the highest.

The Tax Foundation, a Washington-based organization that charts taxation trends, has California at No. 6 in state and local tax burden as a percentage of personal income, the most accepted method of comparison. It pegs Californians’ burden at 11 percent of personal income.

However, that’s based on 2012 data, so it is seven years out of date, and it does not include all forms of taxation.

A more up-to-date estimate is that California’s state and local governments collect about $325 billion a year in taxes, and that works out to 12.5 percent of personal income, estimated by the state as $2.6 trillion this year, thus putting us very near the top of the states.

So, assuming that Newsom and his fellow Democrats in the Legislature want a bigger tax bite to finance their expansionist ambitions, what form would it take?

Income taxes? They already supply 71 percent of the state’s general fund revenues, half of them are paid by the top 1 percent of taxpayers and California already has the nation’s highest marginal tax rate, 13.3 percent on incomes over $1 million.

Sales taxes? We’re at or near the top in those rates as well, 10 percent in many communities.

Property taxes? That would require not just a split roll for commercial property, but voter permission to virtually repeal Proposition 13’s protections for homes, which polling indicates would be close to impossible.

The real world effect of a big tax increase, moreover, would be magnified by new federal tax laws that sharply limit deductions for state and local taxes, raising the likelihood of a political backlash.

So are we going to see a big tax increase? However much Newsom, et al, might want it, the political lift would be daunting.

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  1. Did the CA Griz take a dump in the woods?
    Being CA, and that it is wholly owned by the Progressives;.
    Yes, BIG tax increases are coming.

    • Those are not “progressives”. They are very well-funded public sector union forces, using “social justice” as their political fig leaf. Follow the money; it ALL goes back into the hands of government union employees – teachers, fire, police, civil service. ……ALL of it. The government unions and their bosses now own us.

      It is disingenuous to call them by any other name, or political cause. Until you define this enemy from within, you cannot control it. Let alone oust it.

    • Gotta Gedada Displace says

      No the dump was taken on the (remaining) taxpayers. The woods are no longer a constraint. Take a walking tour of SF if you doubt.

  2. This is plain silly! It’s the Socialist State of California of course there are big (think HUGE) tax increases coming. It’s the Tax and Spend leading State of America.

  3. Only if the people don’t rise up and say “ENOUGH!!!” and start by recalling Newsom….

    • Are you ready to take on the teachers unions, the police unions, the fire fighter unions, the nurses unions, the civil service unions, the construction unions feeding off government contracts?

      The CTA, CSEA, SEIU……etc…etc That is your opposition. It is a tough crowd.

      • You mean the Democrat fundraising team???
        Yes, and they should be called out for that which they are….extortion organizations….
        Why do government employees need a union to represent them, from a practical perspective???

  4. Gotta Gedada Displace says

    OMG, SMH, what miraculous oracle could have EVER predicted higher taxes in CA’s future ? With those sane, fiscally responsible, economically literate stewards of the Uni-Party in control ? I’m SHOCKED, I tell ya !

  5. Anthony G. says

    Say it isn’t so. More taxes from the clowns in Sacramento. I’m just shocked, shocked I say. Never saw that coming, rolling eyes. We are so screwed……Thank you.

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