Shifting Taxes Onto Low- and Middle-Income Californians

The Commission on the 21st Century Economy – the “tax commission” – will meet in San Francisco this Thursday to continue considering options for restructuring the state’s tax system. Last month, we blogged about how the proposals under consideration would reduce the share of taxes paid by the wealthy and increase the share paid by low- and middle-income Californians. A new analysis by commission staff provides further evidence that these proposals would increase the amount of taxes paid by California’s low- and middle-income working families. The preliminary analysis shows that 5.5 million individuals and families who currently have no personal income tax liability would owe taxes under the first proposal and 4.9 million would owe taxes under the second proposal.

Which Californians currently do not owe personal income taxes? The most recent Franchise Tax Board data show that in 2005, 5.5 million of the 14.1 million individuals and families who filed personal income tax returns did not owe taxes. Of these, 95 percent had incomes under $50,000. Therefore, it seems safe to assume that the overwhelming majority of the Californians who would start to owe personal income taxes under the commission’s proposals are those with incomes at the middle and low end of the distribution. And keep in mind that even though a large number of low- and middle-income Californians do not currently owe income taxes, they still end up paying a disproportionate share of their incomes in taxes when you factor in all state and local taxes.

— Alissa Anderson

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