July 26, 2008
The Christian Science Monitor on Potential Tax Increase in California
"To solve budget woes, California eyes higher taxes on the rich"
By Ben Arnoldy
Sacramento, Calif. - For the "have-mores" of California, the tax man cometh.
Facing a $15 billion budget shortfall, Californian legislators are calling for tax hikes on the rich. That's despite the Golden State already having one of the most progressive tax structures, meaning the wealthy pay much higher rates than the poorest.
Top earners here could face a double whammy if Democratic leaders in Washington succeed next year in rolling back President Bush's tax cuts and allow Social Security withholding on income beyond the current $102,000 cap.
Political leaders are zeroing in on the upper echelons of the state's taxpayers because that's where much of the economic growth has taken place in recent years, say analysts. The strategy isn't without risks: Just as globalization has enriched the elite, it has also increased their ability to relocate if the tax climate gets too uncomfortable.
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If tax increases and rollbacks happen here and in Washington, D.C., Californian millionaires would see combined federal and state income taxes jump from a current 41.7 percent level to 51.4 percent. That's according to William Ahern, spokesman for the Tax Foundation, a pro-growth tax-research group based in Washington.
For high earners, the grass may start to look greener on the other side of California's borders, says Mr. Ahern. Arizona's top rate on income is only 4 percent; Nevada and nearby Washington have no income taxes at all.
