Hiltzik - Democrats Are Seeking Reshuffle in Tax Game

[realFedUp]

http://www.latimes.com/business/la-fi-golden6jun06,1,252924.column?coll=la-headlines-business

Democrats Are Seeking Reshuffle in Tax Game
Michael Hiltzik
Golden State

June 6, 2005

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The Democrats' proposal is to raise the top tax rate to 10% from today's 9.3% on married taxpayers earning from $285,000 to $570,000, and to 11% on incomes over that. The proposal, which is supposed to produce about $1.8 billion a year, is sure to elicit the usual claim from the governor and other taxophobics that raising tax rates always brings in less money than forecast, and even leads to general economic decline.

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Leaving aside that this point has been made in nearly identical terms by the California Taxpayers Assn., a conservative anti-tax lobby in Sacramento, the analysis is accurate as far as it goes — the Wilson tax hike did fall short of expectations. The problem is that the analysis doesn't go far enough. Neither Weintraub nor Cal-Tax mentions the other major state tax hike of postwar vintage — the Reagan hike of 1967, which remained in force until 1985.

Their amnesia about Reagan's increase is unsurprising: It destroys their argument about Wilson's. Tax revenue during the Reagan era rose at a record pace of more than 15% a year, pushing California's annual receipts from $627 million to $11.4 billion. The resulting unexpected surplus stoked the citizen discontent about taxes that drove Proposition 13 to victory in 1978.

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Will these wealthy taxpayers treat a modest tax increase as the last straw, and relocate en masse to the deserts of Nevada? That sounds like a bluff, and I think we should call it.

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