Tax Foundation

CA Next to Last in Business Tax Climate Report

October 13, 2018 By Joel Fox 3 Comments

The Tax Foundation has surveyed all 50 states on tax climate that businesses face and once again placed California near the bottom of the list. The Golden State ranked 49^th, dropping one spot from the previous year’s ranking. Only New Jersey had a sorrier tax climate than California, according to the Tax Foundation analysis.

Why is the tax climate important for business? As the Tax Foundation points out, “The modern market is characterized by mobile capital and labor, with all types of businesses, small and large, tending to locate where they have the greatest competitive advantage. The evidence shows that states with the best tax systems will be the most competitive at attracting new businesses and most effective at generating economic and employment growth.”

The Tax Foundation report ranks California in different tax categories. While overall, the state placed 49^th, the state’s Corporate Tax Ranking was 31; Individual Income Tax Rank was 49; Sales Tax Rank 43; Property Tax rank 14 and Unemployment Insurance Tax Rank 17.

The report made it clear that businesses didn’t rely exclusively on the tax climate in making business decisions. Skilled-labor pool, education and infrastructure are also factors business executives consider.

But tax systems can more quickly influence the business climate because tax changes can more easily be implemented when compared to making major changes in the areas of transportation, health care or education systems.

As the report notes, “It is important to remember that even in our global economy, states’ stiffest competition often comes from other states. The Department of Labor reports that most mass job relocations are from one U.S. state to another rather than to a foreign location.”

Business taxes are an important bottom line calculation. If taxes reduce profits that reduction is often passed to consumers through price increases, taken from employees through wage cuts or lost jobs or lowering shareholder dividends, all factors contributing to the business climate and business decisions, which in turn effects a state’s economy.

California has the top individual income tax rate, the top state sales tax rate, and is second in state gasoline tax per gallon rate. The Tax Foundation calculated that the state’s “Tax Freedom Day,” when a taxpayer has paid all tax obligations, is May 1.

Joel Fox editor and co-publisher of Fox and Hounds Daily.

This article was originally published by Fox and Hounds Daily

Filed Under: Top Stories Tagged With: Tax Foundation, taxes

Trump’s Incentive-Packed Tax Plan

October 6, 2017 By Larry Kudlow 5 Comments

Much as he did in his command performance before the United Nations, when he took back control of U.S. foreign policy, President Donald Trump has seized and energized the tax cut issue. Almost daily, he is pounding away on the themes of faster economic growth and more take-home pay, arguing that his plan will make America’s economy great again.

“Under my administration,” Trump just told the National Association of Manufacturers, “the era of economic surrender is over.”

The Trump plan would slash large- and small-business tax rates, double the standard deduction for middle-income folks, make the whole tax code simpler by eliminating unnecessary deductions, repeal the death tax and end the alternative minimum tax.

As usual, Democrats say the president’s plan is a handout to the rich. But in a recent speech in Indianapolis, Trump asked: Why can’t this be a bipartisan tax cut bill?

…

The argument that the U.S. is doomed to 2 percent or less growth — “secular stagnation” no matter what we do in terms of tax policy — is nonsense. Across-the-board tax cuts produced 5 percent annual growth during the JFK period. And after tax cuts were fully implemented in 1983, real growth averaged 4.6 percent for the remainder of Reagan’s presidency.

…

OK, let’s take one example from the Trump tax plan. Corporations today are taxed at 35 percent. That means, for every extra dollar of profit, a company keeps 65 cents. But the president has agreed on a 20 percent corporate tax rate. So, for the extra dollar earned, the private company would keep 80 cents.

…

On the individual side, the sleeper tax detail is the doubling of the standard deduction. This is a huge positive for young millennials (who don’t own much) and folks with no mortgages or homes. It puts more cash in worker’s pockets, simplifies the code and means that near 80 percent of taxpayers won’t have any deductions.

Slimming income-tax rates from seven to three brackets and cutting income-tax rates in general add even more supply-side incentives to the Trump package.

More money for rich people? Well, the not-rich family of four will be a lot better off with a $24,000 standard deduction. And the center-right Tax Foundation calculates that the bottom 80 percent of households get a lower tax burden, while the top 20 percent get a higher burden.

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Filed Under: Top Stories Tagged With: Donald Trump, Ronald Reagan, Tax Foundation, Tax Reform

How the Trump tax plan will make most people better off

October 2, 2017 By Trent Gillies Leave a Comment

With Washington planning a broad overhaul, your tax bracket could be changing. But will that actually score you and your family a lower tax bill?

While the Republican-led tax reform plan is short on some details at this point, the head of a tax policy group called the plan “viable” in an interview with CNBC.

“I think it’s a real step in the right direction,” Scott Hodge, president of the non-partisan tax policy research Tax Foundation told CNBC’s On the Money recently. “Not only in just simplifying the tax system, but in creating a more dynamic tax system, one that is more conducive to economic growth.”

Founded in 1937, The Tax Foundation is an independent, non-partisan tax policy research organization.

The tax overhaul promises a simpler tax code. For individual taxpayers, the current seven income tax brackets would be reduced to just three: 35 percent, 25 percent and 12 percent.

However, another “bracket” is zero percent, which represents those who don’t pay any income tax at all. The standard deduction will double to $12,000 for single taxpayers and $24,000 for married couples filing jointly.

Hodge predicted those folks will come out ahead under the new plan. “At the bottom end, they’re going to make some big changes. They’re increasing the standard deduction, the ‘zero bracket’ if you will, so that a couple won’t pay any income taxes up to $24,000 a year. That’s great.”

But while establishing fewer income brackets, the plan is proposing the removal of nearly all itemized deductions, except those for mortgage interest and for charitable donation deductions.

“That’s the real balance here, is how far we can reduce tax rates to make up for some of the deductions that we’re going to lose,” Hodge said.

Another major provision of the GOP tax reform plan is the elimination of deductions for state and local taxes – a change that could hit middle and upper-income taxpayers. …

Visit CNBC for the rest of the story

Filed Under: Top Stories Tagged With: Donald Trump, Tax Foundation, Tax Reform, taxes

CA “Tax Freedom Day” Later Than Most States, But Hope on the Horizon

April 8, 2016 By Joel Fox 1 Comment

According to the newly released report from the Tax Foundation, California’s Tax Freedom Day is April 28—the day taxpayers of the state have collectively earned enough money to pay their federal, state and local taxes for the year. While that date places the Golden State 46^th on the list of state taxpayers claiming tax freedom, there is a chance that California could move up dramatically. It all depends on November’s election.

California is grouped in the back of the pack with other high tax-high income states. Only Massachusetts, New York, New Jersey and Connecticut residents pay off all their taxes after California. The national average of all states is April 24.

The good news for the Golden State is that Tax Freedom Day occurs three days earlier than last year.

Tax Freedom Day is calculated by dividing income into taxes paid in each state. Because California has seen stronger economic growth than the nation as a whole, taxes are paid off more quickly.

Taxes still take a large chunk of people’s income. The Tax Foundation report noted that Americans would spend more on taxes in 2016 than on food, clothing and housing combined.

Tax Freedom Day is always in flux depending on actions in a state. 2016 being an election year with potential state and local taxes facing voters, California taxpayers could see their taxpaying obligation rise or fall depending on election results.

One of the big items, of course, is the effort to extend Proposition 30’s income taxes. California has the top U.S. marginal income tax rate in the country. If voters reject the Prop. 30 tax extension what would that do to California’s Tax Freedom Day standing?

Joseph Henchman, Vice President of Legal & State Projects for the Tax Foundation gave me what he called a “back of the envelope” projection of Tax Freedom Day arriving “about a week” earlier if the Prop. 30 taxes expire on schedule.

If all else remains the same that means California taxpayers would jump from nearly last at 46^th place in paying off taxes up to around 37^th position among all the states.

This article was originally published by Fox and Hounds Daily

Filed Under: Top Stories Tagged With: Prop. 30, Tax, Tax Foundation, Tax Freedom Day

How is Government Spending Hidden Tax Revenue?

August 11, 2015 By Jon Coupal 2 Comments

Especially in California, the word “taxpayer” is frequently preceded by the word “beleaguered.” Given our large tax burden and the tragic level of government waste, perhaps there should be a grammatical rule that these two words must always be combined.

While some California taxes are hidden, most are unfortunately and painfully obvious. But the same is not true for the level of wasteful spending by government. The unstated rule of politicians and bureaucrats is that average taxpayers must be kept in the dark about how their money is being spent.

Ask the average man or woman in the street what they think the 87 cent tax on a pack of cigarettes goes to and they will likely respond that it goes for anti-smoking programs – like those scary TV spots – and for health care.

Because of the detrimental impact of smoking on health, most Californians will agree that there seems a logical connection between what is being taxed and how the money is being spent. However, most of the tobacco tax does not go to these programs. Of the 87 cents, 50 cents goes to children’s programs administered by First Five California, a creation of Proposition 10. Now children’s programs may be a great idea, but many ask why these are not funded openly out of the state general fund instead of having the costs hidden inside the tobacco tax.

Ironically, we have seen First Five California objecting to additional taxes on tobacco products because the number of smokers might decrease and thus reduce revenue to their programs. So what we have, in effect, is an agency that is tacitly supporting what they concede is an unhealthful habit, simply because it wants the revenue.

Then there are parking tickets that in cities like Los Angeles can cost more than $60. While parking fines are imposed, in theory, to make spaces available to all motorists, the real motivation is to satisfy the appetite for revenue. Because Los Angeles has some of the highest paid workers in a state that the federal government says has the highest paid government employees in all 50 states, it desperately needs the revenue to support payroll and benefits. This may help explain some of the city’s confusing signage that makes it difficult for drivers to tell when they can park and where.

More confusion that benefits the public sector, and puts taxpayers at a disadvantage.

But state and local governments do not have a monopoly on confusing or hidden taxes, charges and other revenue enhancements.

Enter Congress and the highway bill. The version being considered by the Senate would place a new tax burden on home buyers by increasing the fees Fannie Mae and Freddie Mac charge for their loans. “Not only will it increase the cost of homeownership and make it more difficult for a buyer to purchase a home, it will hinder future efforts at mortgage finance reform,” said California Association of Realtors President Chris Kutzkey.

As bad as that sounds, it is even worse. It is another charge whose purpose is intentionally hidden from the casual observer and where there is a total disconnect between what is being taxed, home loans, and on what the money will be spent, highways. (In California this would be defined as a “special tax” under Proposition 13 and require a two-thirds vote.)

According to the Washington D.C.-based Tax Foundation, America spends more on taxes than on food, clothing and housing combined. In California, the average taxpayer works for government until May 3rd, before they start working for themselves.

It is not too much to demand from politicians that they make clear what taxpayers are being charged and on what the funds are being spent. Maybe then we can remove the modifier “beleaguered” from the word “taxpayer.”

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayerorganization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

Originally published at HJTA.org

Filed Under: Top Stories Tagged With: HJTA, Jon Coupal, Tax Foundation, taxes, Taxpayer, Tobacco, Tobacco Tax

CA Tax Freedom Day Comes Late Again

April 24, 2015 By Joel Fox Leave a Comment

California lags behind much of the country when it comes to high taxes and creating an atmosphere that allows businesses to create jobs.

Another area where California fails to meet the national standard — National Tax Freedom Day. This year, California residents will work nine days longer than the national average to meet their annual tax obligation.

California’s byzantine tax structure continues to create a difficult economic environment in which to live and work. Unfortunately, Californians must work 123 days to pay their tax bill. We can do better.

Tax Freedom Day, calculated annually by the Tax Foundation, is the day Americans have earned enough money to pay their annual tax obligations at the federal, state and local levels.

This year’s national Tax Freedom Day arrives on April 24. According to the Tax Foundation, Americans total tax bill comes to $4.8 trillion and collectively will spend more on taxes in 2015 than they will on food, clothing and housing combined.

Compared to other states, California’s Tax Freedom Day, which won’t arrive until May 3, is the fourth latest in the nation. Only Connecticut, New Jersey and New York have later dates.

Learn more about Tax Freedom Day at www.taxfoundation.org/taxfreedomday.

Filed Under: Top Stories Tagged With: Joel Fox, New York, Tax Foundation, Tax Freedom Day, taxes

Tax Day hits Californians harder than most

April 16, 2015 By Travis Allen 2 Comments

April 15 is forever recognized by everyone as the day of the year that you settle up your “debt” with the government, if you have one. Some people have no tax liability because only 60 percent of people actually pay taxes in California. These individuals should be recognized on this day each year as the ones who are working hard for the greater societal good and the American Dream.

Yet our government would rather look at Tax Day as Christmas and California taxpayers as individual Santa Clauses with never-ending gift bags of funds for the state. California’s personal income tax system consists of 10 brackets and a top rate of 13.3 percent. That rate ranks California as the highest in the nation among states levying an individual income tax. In 2011, our average total tax burden of 11.4 percent ranked fourth highest out of 50 states, and was well above the national average of 9.8 percent. California currently ranks 48th in the Tax Foundation’s State Business Tax Climate Index when comparing the states in five areas of taxation that impact business: corporate taxes, individual income taxes, sales taxes, unemployment insurance taxes and taxes on property. California took the most taxpayer money in the country in 2013 with $108.22 billion in tax revenues, 111.4 percent higher than the similarly populated state of Texas.

One would think that our state must be the “gold standard” in services due to the high amount of taxes flowing into Sacramento. The reality is we are ranked 46th in the nation for our education system. California drivers continue to pay the highest gas taxes in the nation, and due to Assembly Bill 32, a new fee is being added to those taxes. Further, California is ranked 47th in unemployment, a failure to every resident of our state. Given such high unemployment numbers, it is not a surprise that California has the highest rate of poverty in the nation, too.

As an investment advisor, it is my job to assist my clients in making decisions that ensure their money is working for them. Isn’t it about time that we empower Californians to insist that their tax dollars do the same? When did we settle for such mediocrity? I came to Sacramento to fight for more cost-effective policies and accountability when it comes to the spending of taxpayer money. As a representative of our taxpayers, their money needs to be invested wisely. Taxpayer dollars must be thoughtfully used to invest in our children’s education, deliver an educated future workforce and to support essential services such as public safety and our judicial system. Further, these investments should be supported by policies that incentivize business creation, job growth and economic recovery.

This legislative session, I’ve authored two common-sense bills that will ensure our taxpayer dollars are working for us and our communities. One of my bills, AB799, would create a more competitive investment climate and bring more resources to California in support of our local startup companies. Given that California’s tax structure is far less competitive than other states, investors are flocking elsewhere and taking countless jobs and capital investment with them. AB799 will move California toward becoming the best state within which to launch a startup company.

I’ve also introduced AB89, which will help local schools provide better resources and materials for our students inside the classroom by allowing schools to retain all of their funds without being forced to pay sales tax back to the state. Currently, our public schools, funded by our tax dollars, are subject to the state’s 7.5 percent sales tax which has created a “double tax” situation on our taxpayer dollars. By taxing public schools, the state is actually taking money out of our local classrooms. AB89 will fix this issue and ensure that more of our tax dollars make it into our classrooms.

President Ronald Reagan famously said “Status quo, you know, is Latin for ‘the mess we’re in.’” While we’re taking out our checkbooks this April 15, I think we should all take a cold, hard look at what we are paying into. Ultimately, it will take a more balanced representation of Republicans and Democrats in the Legislature to truly address our broken system. Until then, we can at least insist that our hard-earned money is being well invested while we continue to work toward returning fiscal responsibility to Sacramento.

Assemblyman Travis Allen, R-Huntington Beach, represents the 72nd Assembly District in the California Legislature.

Originally published online by the Orange County Register

Filed Under: Top Stories Tagged With: Tax Day, Tax Foundation, taxes, Texas, Travis Allen

New Studies: CA Has 4th-Highest Taxes and 3rd-Worst Business Climate

March 12, 2015 By John Seiler Leave a Comment

The newest figures just released by the Tax Foundation show California continues to be one of the highest-taxes states in the country. According to “Facts & Figures 2015: How Does Your State Compare?” the Golden State now ranks fourth-highest for taxation. The only states with higher taxes are Connecticut and New Jersey, tied for the highest; and New York in third place.

A big problem was pointed out to CalWatchdog.com by Esmael Adibi, A. Gary Anderson Center for Economic Research and Anderson Chair of Economic Analysis at Chapman University: Three of our Western States competitors make the Top Ten list of the least-taxed states: Nevada in third place, Utah in 9th and Texas in 10th.

Overall, the state with the least taxes is Louisiana, followed by Mississippi, South Dakota and Tennessee.

Adibi pointed out that California’s high rank derives largely from it having the highest personal income tax in the country, 13.3 percent at the top marginal rate after voters passed Proposition 30 in 2012. “Prop. 30 really pushed us over,” he said.

He added that, despite the Proposition 13 tax limitation measure, California ranked only 14th-best for property-tax collections. If property here cost less, then California would rank much higher. “But property is so expensive, the taxes paid equal the tax rate times the amount you pay for the property,” he calculated.

California also scored low on the overall 2015 State Business Climate Index, with third-worst business climate. Worst of all was New Jersey, followed by Connecticut.

That’s similar to the finding of CEO Magazine’s survey of CEOs, who have ranked California the worst state in which to do business for eight straight years.

And the Kosmont-Rose Institute Cost of Doing Business Survey found, “California dominates the list of the most expensive cities, with a total of 12 cities – nine in Southern California and three in the San Francisco Bay Area. Los Angeles and the San Francisco Bay Area are the two most expensive metropolitan areas in the western United States.”

Leaving the Golden State

“There’s no question high taxes at least affect some people on whether to stay in California or move to a state with lower taxes,” Adibi pointed out. He provided CalWatchdog.com a chart showing “Net Population Outflow and Destination” for California. “Net” means both those coming into the state and those leaving.

From 2005 to 2013: 279,000 Californians left for Texas, 222,500 for Arizona, 157,200 for Oregon, 153,200 for Nevada, 98,300 for Washington State, 76,900 for Colorado and 59,500 for Utah; all other states were 217,500.

Rankings

Some other rankings from the Tax Foundation “Facts & Figures”:

Sources of California state and tocal tax collections: 28.1 percent from property tax, 22.3 percent general sales tax, 30 percent individual income tax, 4.3 percent corporate income tax and 15.3 percent all other taxes.
Federal aid as a percentage of general state revenue: 25 percent. The national average is 30 percent. That is, California is a “donor state,” it pays more into the federal government than it gets back.
State individual income tax receipts per capita: $1,750, ranking fourth; Connecticut was highest, at $2,174.
State and local sales tax rate: 7.5 percent, highest of any state. (Some local governments add to that.)
State gasoline tax rate per gallon: 45.39 cents, second highest. Pennsylvania is highest, at 50.50 cents.
State spirits excise tax rate, per gallon: $3.30, 39th highest; California is Wine Country. The highest was Washington State, at $35.22.
Like most states, California exempts groceries from the sales tax. The highest grocery sales tax is Tennesse’s, at 5 percent.
California does not have a state inheritance tax, or “death tax.” The highest state rate is Washington State, at up to 20 percent.
California state and local debt is $11,094 per capita, 8th highest. At the top is New York, at $17,405.

Originally published by CalWatchdog.com

Filed Under: Top Stories Tagged With: business, CalWatchdog, John Seiler, regulation, Tax Foundation, taxes

Farmer Brothers the Latest Company to Flee CA

February 17, 2015 By Jon Coupal 13 Comments

In the 1930s, tens of thousands of farmers, mostly from Oklahoma, fled the Dust Bowl for California with hopes of a better life. Today it is ironic that California’s Farmers (Farmer Brothers coffee company, that is) has announced that it is fleeing our state for a less expensive destination that includes Oklahoma on the short list. Any humor, however, will no doubt be lost on the 350 employees who are about to lose their jobs paying $40,000 to $80,000.

Farmer Brothers, a fixture in California for over 100 years, is just another of a long list of firms that, fed up with California’s high taxes and anti-business environment, have left for less costly states. Other recent refugees include Chevron, Nestle, Sony, Charles Schwab, Occidental Petroleum, Toyota, Campbell Soup, Nissan and Comcast, all of which have moved all or a significant portion of their work force out of state.

These departures are treated with a great collective yawn from Sacramento. When asked, flacks for the governor and other senior elected officials try to convince the public that these losses are not due to state policies and that the jobs and tax revenue lost are not significant anyway. Some in the media have even been known to listen to these rationalizations from elected officials with a straight face and proceed to parrot back this nonsense in what they report. Those who claim that California is not hemorrhaging companies, and the jobs they provide, should be challenged to provide their list of major companies that are relocating to California or that are making a significant expansion of their California workforce.

Sure, California is benefiting from the national recovery like all other states and some jobs, mostly low-paying, are being created. But California’s job creation for good middle class employment is anemic compared to pro-growth states like Texas.

Californians should not be surprised to see these companies go. The Washington, D.C.-based Tax Foundation lists California at 48, two from the bottom, in its 2015 Tax Climate Index. (This will, no doubt, annoy those on the far left who claim, that because of Proposition 13, California businesses do not pay their “fair share” in taxes.) Then there is Chief Executive Magazine, whose survey of CEOs has ranked California dead last as a place to do business for eight years in a row.

The Dust Bowl of the 1930s made the land unproductive. Eighty years later, California’s Tax Bowl, where we lead, or nearly lead the nation in almost every tax category is making our state unproductive. Any small economic progress our state has been able to make has been in spite of, not because of, Sacramento’s policies.

Those who jumped the gun to stake out land in the Oklahoma Territory before President Grover Cleveland officially proclaimed it open to settlement in 1889, were nicknamed “Sooners.” (Today, the University of Oklahoma proudly uses this name for its athletic teams.) Perhaps it would be appropriate to call companies now leaving California as “Laters,” as in “See ya later.” Sacramento could raise revenue by selling this motto on a bumper sticker to those departing our state.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.