How the tax package affects you

March 15, 2011

By Michael Gardner of the San Diego Union-Tribune
For California Budget Watch

SACRAMENTO – For the past two years Californians have paid more on April 15, at the cash register and to the DMV.

How much more? About $260 each per year, or more than $1,000 for the average family of four.

These increases in the income, sales and car taxes were sold as temporary pain that would be relieved once California’s economic engine restarted and the state’s monstrous budget deficit was tamed.

But neither has happened. The economy remains sluggish and the budget gap stands at $26.6 billion over the next 15 months out of an $84.6 billion general fund.

So Gov. Jerry Brown is pushing lawmakers to ask voters to extend the taxes for another five years, with most going to selected programs.

Sound familiar? Then-Gov. Arnold Schwarzenegger and lawmakers submitted a similar plea in a special election in May 2009. Voters said no by a nearly 2-1 margin, 66 percent to 34 percent. In San Diego County, Proposition 1A lost 70 percent to 30 percent; and 74 percent to 26 percent in Orange County.

Brown insists times have changed enough to warrant a new “check-in with the people of California.” But so far Republicans have balked at providing enough votes to secure the desired two-thirds majority to place the issue on a June ballot. Negotiations have been running hot and cold for weeks.

Pocketbooks as well as principles are on the line.

For example: those with a $20,000 car have paid an extra $125 annually in vehicle license fees. A $500 iPad rings up $5 higher because of a 1 percent sales tax boost. And come April 15, a California family with one child and a gross taxable income of $60,000 in 2010 will send the state $340 more because of higher income taxes and a smaller exemption for dependents.

Those four extra taxes will bring in an estimated $9.25 billion , or more than 10 percent of the entire general fund, in 2011-2012, according to the state Department of Finance. The income tax extension and lower dependent care exemption would bring in about $1.9 billion for the current fiscal year, making the total tax package worth $11 billion.

Brown earmarks some of the money to guard against complaints that the new revenues would just fall into the Capitol’s black hole. Brown proposes to set aside the increases in sales and car taxes for local governments as part of his ambitious plans to shift some state public safety responsibilities, such as parole services, to counties. He would dedicate 6.5 percent of all net personal income tax receipts to K-12 schools and community colleges.

Brown and others have warned of even deeper cuts if the extensions are not granted..

The nonpartisan Legislative Analyst, responding to a senator’s request, conducted a broad-brush look at how the state could slash the deficit without new taxes beyond Brown’s already proposed $12.5 billion in cuts.

The analyst did not take sides. Rather, he outlined a list of possibilities that sweeps in schools, prisons, social services, environmental protection and general government. Combined the potential savings would approach $13.5 billion. Among the possibilities:

Schools: Savings: $5.23 billion out of K-12 and community college budgets. Among the targets: increase class sizes, starting kindergarten later, eliminate state funding for busing and hike per-unit fees .

Higher education: Savings: $1 billion. Slash budgets at UC by 10 percent, CSU by 5 percent. Further increase tuition by 7 percent t at UC and 10 percent for CSU students, and make broads cuts in enrollment and financial aid.

Health and social services: Savings: $1.15 billion. Slice wages paid to in-home aids for the elderly and disabled; eliminate adult protective services, end drug courts and cut benefits for noncitizen legal immigrants.

Prisons and Judiciary: Savings: $2.6 billion. End support for local police programs, delay construction of new courts, reduce felons convicted under three-strikes law to shorten sentences and send more parolees to local governments for supervision.

General government: Savings $1.5 billion. Cut state worker pay by 9.24 percent, reduce state contributions to employee health care by 30 percent, stop all bond sales and pay-as-you-go construction projects, eliminate victim service programs, and dissolve various state departments, including the Health and Human Services and Environmental Protection agencies.

Other: Savings: $2 billion. Mostly through new oil drilling fees and cuts, including in transportation.

Jonathan Coupal, president of the Howard Jarvis Taxpayers association said the list sends a message that taxes are not the only resort.

““It’s not pretty but it’s definitely doable,” Coupal said the cuts.

Coupal argues that it’s a “misnomer” to describe the taxes as extensions. He pointed out that the surcharge on personal income taxes and cut in dependent exemption credit lasted through the 2010 tax year – not 2010-11 fiscal year.

Sen. Mark Leno, D-San Francisco, urges a ballot measure. “Just give the voters a voice.”

Leno, the chairman of the Senate Budget Committee who requested the broad-brush look at alternatives to taxes, said, “The Legislative Analyst report indicates it will seriously dismantle the public infrastructure” to try to close the gap with cuts alone.

If so, individuals and families could lose more through higher college fees, increased class sizes for students and cuts in services, from firefighting to libraries, he said.

“The costs will pop up somewhere, one way or the other,” Leno said.

Negotiations are continuing in the Capitol.

Which taxes are at stake?
Sales tax: The state share was increased 1 percent, to 6 percent. It would raise $4.5 billion in 2011-12.
Income tax: There is a 0.25 surcharge. It would raise $2.07 billion in 2011-12.
Vehicle license fees: An increase of 0.65 percent to a 1.15 percent rate based on vehicle value. It would raise $1.38 billion in 2011-12.
Dependent exemption: A $99 credit, down from the $309 allowed two years ago. It would raise $1.25 billion in 2011-12.

Here is how much the extension of the temporary increase in personal income tax would cost typical California families.

Adjusted Gross Income* Cost without extension Liability with extension Increase
$60,000 $783 $1,123 $340
$90,000 $2,743 $3,158 $415
$100,000 $3,543 $3,983 $440
$150,000 $8,182 $8,746 $564

*Source: California Department of Finance. Figures based on income before deductions.

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One Response to How the tax package affects you

  1. DKelfor America

    March 16, 2011 at 10:40 am

    I also looked at the budget and these are some of the savings I found instead without drastically impacting necessary services. In the budget taxpayers are paying for 1,448,339 babies from mothers who didn’t even plan for a dad to be there (welfare). Dept of Child Support is budgeted $1 billion to monitor deadbeats when they could be charged a fee to be monitored for paying for their bloodline. Estimated taxpayers shell out $10 billion annually for an (estimated) 3 million illegal immigrants’ education, medical, welfare, incarceration bills. Stop it. We are budgeted to pay $49 billion for K-12 ed – included is ESL class, adult ed, remedial (for kids who failed once) childcare and still LAUSD has a whopping 70% dropping out of high school- why can’t we charge a fee for those extra services over the $9k per student allotment?! Transfer entitlement programs like GR/ Welfare and paying for gang members to remove their tats to the nonprofit world and let the taxpayers select their important causes as well as get a tax write off. Make parents contribute to their Special Needs bill for educating their child with learning disorders. Now, you will save our firefighter’s jobs.

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