A Golden Opportunity: California’s Budget Crisis Offers a Chance to Fix a Broken Tax System

May 18, 2009

On May 19, Californians will be going to the polls to vote on a series of propositions. Proposition 1A is gathering the most attention, because if it passes, a series of tax increases due to expire will be extended 1-2 years.

In a new fiscal fact released today, we look at what those taxes are, how Californian’s tax burden compares to the rest of the country, and what the state can do to restore long-term economic growth while balancing their expected revenues and desired expenditures. A quick excerpt:

These tax increases are on top of what were already high taxes, especially for the individual income tax, corporate income tax, and sales tax. The high rates and collections from these taxes harm California’s long-term competitiveness and economic growth. With respect to the so-called millionaires’ tax on individuals, the idea of paying for broadly available public services through disproportionate taxes on high-income earners raises serious equity questions. More pragmatically, such taxes are highly volatile and contribute to the boom-and-bust cycle of California’s state budget.

Policymakers and stakeholders in California and other states considering reform of their tax systems should raise these concerns and resist efforts to substitute damaging short-term fixes for real long-term, pro-growth tax reform.

Read the full fiscal fact here.

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