Posted by j q public, a resident of the Fairmeadow neighborhood, on Jun 5, 2006 at 2:15 pm
I have to admit that I'm suprised about the relative lack of mention of the "something for nothing" mentality associated with this proposition.
Proponents seem to be arguing that an additional 1.7% tax on the wealthy will go unnoticed, but this increase combined with last years proposition 63 placing an additional 1% tax on those making over a million means that in two short years, the state's top tax bracket will have risen by more than 28%. Some argue that it's not that bad since state taxes are deductible on the federal return, but the majority of the individuals in this bracket are subject to the alternative minimum tax and will thus be ineligible for a deduction.
Now here's the kicker: even without this increase, California's top marginal bracket is already the absolute highest bracket in the entire country. There are at least 7 states in the country that have ZERO state tax, and California is directly adjacent to one of them.
Is it not possible that at some point the wealthy will consider that they can save millions of dollars per yer by domiciling themselves in N. Lake Tahoe, or in Jupiter Island, FL, where they will not be subject to the vagaries of a state income tax as have an Ebay founder and Netscape's founder?
Is it perhaps possible that even the affluent but not super rich might adjust their capital gains strategy a bit and at least save themselves the extra 2.7% tax by simply selling their accumulated capital gains positions over a number of years rather than all at once? If this happens, overall state taxes will declince quite significantly since the base tax amount will be defered these extra years also.
Oh well, screw the rich, after all who needs them.... At least house prices will decline when they leave. And labor costs will decline when they aren't around to drive economic demand up. Hmmm, so many upsides that I barely considered....