Killing the Goose
- The 50% of California's population that does not pay state income taxes has no problem voting to re-distribute other people's wealth into their pockets.
- There is some evidence that the producers are starting to relocate out of California to low tax states.
(San Francisco Chronicle) - In 2011, the top 1 percent of tax returns accounted for 41 percent of the state's personal income tax revenues, and that was before Proposition 30 raised rates on the rich.
Meanwhile, about half of California adults paid no state income tax that year, according to an estimate from the state Finance Department.
Prop. 30, approved by voters in November 2012, raised state income taxes retroactively to Jan. 1, 2012, on singles making more than $250,000 and married couples making $500,000. It raised rates by one, two or three percentage points through 2018, bringing the top rate on incomes above $1 million to 13.3 percent, the highest in the nation.
Wealthy people say they have moved out mainly or partly because of skyrocketing tax rates. Whether you sympathize or not, millionaires' migrating out of California has serious consequences to the state's bottom line and is something state leaders are watching closely.
Lee Schneider, a hedge fund salesman who works from home, also cited Prop. 30 as the "deciding factor" for his move from Walnut Creek to Austin, Texas, in 2012. The California native had recently built a $2 million house at the foot of Mount Diablo and took a loss on the sale, but "I can make half of it back in one year of tax savings," he says.
Schneider's neighborhood in Texas, which has no state income tax, is full of cars with license-plate frames from California dealerships. On a flight from Austin to Los Angeles shortly before Christmas, 11 of the 12 seats in the emergency row were occupied by people who had moved from California to Texas, he says.
Another telling statistic: On the Nevada side of Lake Tahoe, where there is no state income tax, 151 homes sold for more than $1 million in 2013. That was 86 percent higher than the previous year.
On the California side, only 67 homes sold for more than $1 million, down 9 percent from 2012, according to Susan Lowe, a broker with Chase International.
It's too soon to say whether these anecdotes represent a larger trend, but state leaders realize the growing dependence on personal income tax revenue.