Who Pays?

A number of our blog posts have examined the impact of recent state tax changes and questioned whether “volatility” is a strength or a weakness of the state’s tax system.

The Commission on the 21st Century Economy, the latest in a long series of “blue ribbon” panels charged with studying the state’s tax system, will meet at UC Davis tomorrow. The Commission’s charge has focused on the issue of volatility, while largely ignoring issues of equity (the impact of tax policies by income group) and adequacy (whether the state’s tax system raises sufficient revenues to support public services.) To this end, the Commission’s deliberations have largely focused on shifting the balance of the state’s revenues from the personal income tax to consumption-based taxes, a shift that would significantly increase taxes paid by low- and middle-income Californians, while reducing those paid by the wealthy.

Citizens for Tax Justice Director Bob Intyre, a well-respected advocate for tax fairness, will testify at tomorrow’s hearing. McIntyre’s testimony documents who currently pays how much of what tax by income group in California, examines the relative growth rates for the state’s major revenues, and examines the distributional impact of reducing taxes on investment income and increasing taxes on consumption or personal income taxpayers more generally.  McIntyre concludes that “California’s progressive personal income tax is the fairest, best-working component of California’s tax system. It makes a major contribution toward offsetting the regressivity of California’s other major taxes, and because it is deductible on federal tax returns by better-off taxpayers, a substantial portion of the income tax burden is exported to non-Californians. The California income tax should be maintained.”

— Jean Ross

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