Our colleagues at the Center on Budget and Policy Priorities recently documented the widening income gap at the national level, which was exacerbated by the Bush-era tax cuts. Not surprisingly, the pattern here in California mirrors that for the nation as a whole. Data from the Franchise Tax Board show that the share of total adjusted gross income – income reported for tax purposes, which includes investment income such as capital gains – going to the top fifth of California personal income taxpayers has increased, while that going to the bottom 80 percent of the income distribution declined between 1993 and 2008. Interestingly, the largest drop occurred among middle to upper-middle income taxpayers – those between the 40th and 80th percentiles of the income distribution. Similarly, the average growth for individual taxpayers was the largest at the top of income distribution, with little or no growth, on average, for most state taxpayers after adjusting for inflation as shown here.
It isn’t surprising that California mirrors the national trends. The data should, however, provide a sobering reminder to state lawmakers as they craft a plan to close the budget gap and to federal lawmakers as they consider aid to states and the unemployed.
— Jean Ross