A closer look at state’s tax burden
Federal IRS changes bringing new scrutiny
California was the birthplace of the 1970s tax revolt, but its residents still pay more in state and local taxes than those in most other big urban states. And many are asking why as they assess how a new federal income tax law that caps state and local tax deductions will shake out for them.
“We have relatives in Missouri, and when we travel there we wonder why it costs so much more here,” said Bob Jackson, 66, a retired postal worker who lives in San Jose.
Of the five most populous U.S. states — California, Texas, Florida, New York and Pennsylvania — only New York collects more state and local taxes per resident than the Golden State, according to The Tax Foundation, an inde-
pendent Washington, D.C., tax policy nonprofit.
Like California, Texas and Florida are big coastal states with miles of beaches, large, diverse, multilingual populations and all the urban complexities that come with hosting some of the country’s biggest cities. Yet they have more public school teachers per pupil and higher test scores, they have more cops per crime, more firefighters per resident and more criminals behind bars.
As the federal tax overhaul puts a spotlight on high-tax states like California, which just unveiled a new $131.7 billion budget proposal with a $6.1 billion surplus tabbed for rainyday reserves, it has renewed debate over whether Californians pay too much for their government.
Jackson, whose wife is a schoolteacher, said that even with the sales and income tax hike Gov. Jerry Brown championed in 2012 for education, state schools are “suffering” and “funding is not what it should be.”
“I guess I get annoyed when they keep trying to raise taxes and don’t make any improvements,” Jackson said.
Others, like Castro Valley lawyer John Hansen, 80, say Californians may pay more but get more in return, like freeways instead of turnpike tolls.
“You have to pay for what you get, and we probably get more here in a broad sense than citizens in Texas or Florida,” Hansen said. But do we?
A dive into the numbers — such as a “What Drives State Spending” report published last year by the Urban Institute, a Washington, D.C., nonprofit policy research organization — offers some clues.
In K-12 education, the Golden State’s top spending priority, the analysis showed California spending per resident on K-12 schools was about average among the states, but while teacher pay was among the highest, the state trailed others in teachers and support staff per student.
The Urban Institute analysis is based on 2012 figures, before the state’s sales and income tax hike kicked in. H.D. Palmer, state Department of Finance deputy director for external affairs, noted state education funding hit a trough that year from the last economic downturn, but has since grown significantly — 66 percent — with the help of voter-approved sales and income tax hikes. Voters extended the income tax on the wealthy in 2016.
Still, the National Center for Education Statistics tells a similar staffing story using more recent figures and also shows California’s math, reading, writing and science scores are below average.
In higher education, the Urban Institute ranked California among the biggest spenders per resident, but also showed the state had among the fewest professors and other staff per student, even though they were the highest paid.
California was among the highest spenders per resident nationwide on police and firefighting, with the highest paid cops and firefighters in the country, but the state has fewer cops per crime and firefighters per resident than most states, the Urban Institute analysis showed. California also was among the top in spending on prisons and correctional staff.
But while correctional staffing was high, 2015 U.S. Bureau of Justice Statistics figures crunched by the Sentencing Project found California has fewer prison inmates per resident than Texas, Florida and many other states.
Even with its miles of freeways, California highway spending was average among the states, though public transit spending was among the highest, the Urban Institute showed. Palmer said the state aims to boost spending on highways with the new gas tax the Legislature passed last year.
And although California has generous eligibility requirements for Medicaid, spending on the health program for the poor and payments to enrollees were average, the Urban Institute showed. California is among the country’s biggest spenders on the Temporary Assistance for Needy Families welfare program. But with generous eligibility, payments are spread among a broader group, and are among the lowest per recipient.
“You can have a program that’s more generous but you’re spreading benefits more thinly among those recipients,” said Tracy Gordon, a senior Urban Institute fellow and co-author of the analysis. “If you want to be generous on both fronts you need a bigger pot of money.”
To California taxpayer advocates like Jon Coupal, president of the Howard Jarvis Taxpayers Association, findings like the Urban Institute analysis aren’t surprising. He argues Californians overpay for public services and blames the power the state grants to public employee unions.
“The number one driver of costs is employment costs,” Coupal said, arguing government union contracts “have given public employees Cadillac pension plans and those costs are eating into the general fund of state and local governments.” Unions are fighting in court against some of Gov. Brown’s efforts to trim those perks.
Coupal added that even the benefits of the California property tax limits his organization fought for in the 1970s and 1990s, and which many liberal leaders want to loosen, are being offset by the state’s high housing prices. Coupal blames those housing costs, which help drive California public employee pay, on regulations that slow home building.
In the past, Californians caught a break on their state’s high taxes because they could be deducted in calculating federal income tax. But the tax overhaul President Donald Trump signed last month limits those deductions to $10,000.
Will that turn Californians against the taxfriendly leaders they elected?
Anthony Reyes, a spokesman for state Senate President pro Tem Kevin de León, a Democrat challenging Dianne Feinstein for her U.S. Senate seat, said most Californians consider the state’s taxes a fair price for paradise.
“Slightly higher than average taxes, far stronger economy, best public university system in the world, record low uninsured rate, strongest clean air and environmental protections in the nation, and we consistently lead the nation in job creation,” said Reyes.
And Palmer argues most Californians agree: Voters overwhelmingly approved sales and income tax hikes in 2012 and 2016 to fund schools and other public programs.
“That issue has been asked and answered in two ballot measures by the people of California,” Palmer said.
But Coupal, whose group is backing an effort to repeal the new gas tax, thinks voters may be ready for another revolt.
“We have the highest income tax rate, the highest state sales tax, the highest gasoline tax, one of the highest car taxes, and we’re getting very little for our dollar — just drive down the highway,” Coupal said. “I think people are starting to get fed up with that.”