Interestingly, it looks like our economy was performing best when top marginal tax rates were highest.
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Maybe this is the biggest problem facing the state:
The major part of PIT revenue comes from wages and salaries and accounts for nearly sixty percent of the total. Capital gains taxation contributes to a much lesser extent however, in recent years the share of capital gains has been steadily increasing.
This has been on account of many factors. Firstly, because the nature of income is generally attributable to high bracket income tax payers and is therefore, subject to be taxed at higher rates. The dollar amount of capital gains has risen rapidly in recent times. Now as capital gains are highly volatile, being mostly related to the stock market and the housing sector, they make PIT volatile and difficult to forecast and this poses many revenue-related challenges.
In the US, forty-three states and the District of Columbia impose personal income tax. By making an interstate comparison, it is found that the California PIT is above average than all other states. In marginal tax rates, the upper most level of marginal tax rate in California is quite high, as compared to most other states and it is next only to Oregon, although the lowest marginal tax rate covers a rather wide band of income range. The PIT burden in California is certainly higher. It is another matter that the cumulative burden of all other taxes in the state of California is near average, which helps to mitigate the effects of a higher PIT to some extent.
Mind you, I’ll be the first to say that spending has gotten way out of control. Where we disagree is the nature of that overspending. Again, I’ve said before many times that the pension issue needs to be addressed, but trying to make public unions the scapegoat for all of our ills is overly simplistic, and uninformed, IMHO. It doesn’t address the root causes of our problems.
