Sell CA real estate, buy in Nevada and Arizona.
Today's Wall Street Journal's editorial page listed some good reasons why our state's economy, and thus real estate, is about to get clobbered if our looney legislature gets its way with upcoming tax hikes.
Our income tax top rate may get hiked to 12%, higher than any other state, and about twice the national average. Nevada has NO income tax. Look for more Bay Area "executive commuters" and entrepreneurs to live in Tahoe & Reno. Likewise Las Vegas for L.A. high earners.
They also plan to raise our already above average corporate tax.
Especially damaging would be their plan to end annual adjustments in the tax brackets for inflation, which would give every taxpayer an automatic tax increase each year. With inflation accelerating, this will become huge.
Companies are already saying to Schwartzenegger "Hasta la vista, Baby". AAA is moving all its call centers to other states (900 jobs), and Prius will not put its planned factory in the Bay area after all, citing high tax and regulatory costs in CA.
The state has had a net outflow of 1.3 million people between 1996 and 2005. Of course, our population has grown due to immigration, legal and illegal, plus a high birth rate. But the higher earners, employers, and better educated ones are the ones fleeing this high tax state. The lower earning people and those enjoying our generous safety net are accounting for a bigger share of our population.
Our income tax is so steeply progressive that it is little wonder so many voters don't mind our high taxes. "Those with incomes of more than $100,000 pay 83% of the State's income taxes..."
The anti-tax CA Republicans are a diminishing breed, and Governor Schwartzenegger long ago turned into a girly-man liberal. If the Democrats win just a few more seats, which looks likely, the Republicans will get rolled as vetos will be overridden.
High and rising taxes in CA will be an anchor on the long-term values of our real estate.
Our income tax is so steeply progressive that it is little wonder so many voters don't mind our high taxes.
Our income tax is FLAT. 9.3% on every dollar above certain amount.
WSJ says 10.3% is the top rate now. But they could be wrong...any input from others?
Funny, I don't feel very comforted if you are correct.
BTW, our capital gains tax is huge for Californians selling out and moving to another state. I recently sold a long-held commercial property and the state cap gains bite was nearly half as large as the federal.
So, it doesn't really matter if everyone wants to live here or not.
In 20 years the only jobs will be Starbucks and Lockbox sales and distribution.
I've heard local small businesses complain about all the loops they have jump through, and when I look at my telephone bill there are lots of little charges and taxes that are probably costing nearly as much to just to collect. Add in CGT and AMT and it's no wonder people get irked. However, it isn't that bad that I would consider moving to somewhere like Las Vegas or Reno. There's a reason why there's no income tax there.
I think it's more been the outrageous housing prices compared to elsewhere. 2-3% extra in tax is nothing compared to spending an extra $2,000 a month in housing costs.
The top tax rate in CA is 9.3% but the bracket is some ridiculously low figure like everything above $50,000/yr (for singles) is taxed at the top rate so effectively for most educated people their marginal rate would be 9.3% and any increase would affect most middle class people.
Increasing the tax rate to 12% is an EXTREMELY bad idea, count me among those who will seriously consider leaving CA if this happens. I pay ludicrously high taxes as it is.
In 20 years the only jobs will be Starbucks and Lockbox sales and distribution.
Check that Starbucks comment:
http://www.latimes.com/business/la-starb...
This should probably go in the "other taxes" category.
I just pulled permits for a new house. The combination of new fees and increases in previously existing ones effectively doubled to tripled the total I paid as compared to a project 3 years ago(don't want to dig up the receipts). This house is much smaller with the exact same zoning and design elements. No one else in the industry can raise rates and most are lowering them to compete due to the lagging market. Of the other materials and services related to building only the governments bite and necessary metal products,copper and steel, are up.
CA now has the third-highest unemployment rate in the nation. So we should raise taxes in order to beat up on those nasty employers.
Our tax rate is 9.3% and long term cap gains is taxed the same amount. The Fed govt long term cap gains is 18%. If CA goes to 12%.....
Our tax rate is 9.3% and long term cap gains is taxed the same amount. The Fed govt long term cap gains is 18%. If CA goes to 12%.....
Last time I checked, fed long term cap gains rate was 15%.
Ok.. you made be do it.. I pulled my 2007 CA Tax return, form and instructions. This is from the Form 540 instructions.
Page 26
Single or married/separately, top bracket is 9.3% of everything over $44,814 + $1,973tax
Married/jointly, top bracket is 9.3% of everything over $89,628 + $3,946tax
Head of household is 9.3% over everything $61,000 + $2,228tax.
Page 53 for line 13 of form
Long and short capital gains taxed as income (this is the one that bites me)