Brown worries about ramifications of killing California’s golden geese
To intertwine cliches, Gov. Jerry Brown let the cat out of the bag last week and acknowledged that he’s concerned about killing the golden geese.
Those geese are the few thousand Californians with the highest incomes whose taxes allow Brown and other California politicians to spend tens of billions of dollars a year and the new federal tax overhaul encourages them to take their money elsewhere.
When President Trump and the Republican Congress were working on what they called tax reform, Brown and governors of other high-tax states, such as New York’s Andrew Cuomo, complained loudly that it was unfair to their constituents.
However, they never admitted the obvious, that their concern was really about its impact on high-income taxpayers who would no longer be able to deduct more than a tiny fraction of their state and local taxes on their federal tax returns.
In fact, while the federal tax legislation can be criticized on many grounds, it really will benefit most low- and moderateincome taxpayers by increasing their standard deduction to $24,000 on joint returns.
High-income taxpayers in most states also will benefit from lower marginal rates. But in California and other states with high tax burdens, the opposite will be true. With a $10,000 limit on local and state tax deductions, wealthy Californians, New Yorkers and residents of the other high-tax states will see their federal tax bills zoom upwards.
In other words, they will feel the full impact of their state and local taxes, which will no longer be subsidized by the federal government and the impact will be the heaviest in California because of its highest-in-the-nation As Gov. Jerry Brown introduced his 2018-19 budget last week, he voiced concerns about the impacts of the new federal tax overhaul on the state. “People with higher incomes pay a lot more money, and some of them may be tempted to leave,” he said. income tax rates. When Brown proposed to
“People with higher incomes temporarily raise income taxes pay a lot more money, and on those in the highest brackets some of them may be tempted to close a budget gap, one to leave,” Brown said as he introduced of the arguments was that they his 2018-19 budget, wouldn’t feel the pain because calling the new federal tax they could deduct the new overhaul “an assault by the Republicans taxes on their federal returns. in Congress against That also was the argument California, New York and New two years ago when a unionled Jersey.” coalition successfully urged
Brown’s budget underscores voters to extend the higher his concern about a potential rates for 12 additional years. flight of golden geese. That rationale for taxing the
“The highest-income Californians rich has now vanished and the pay a large share of the full weight of those taxes will state’s personal income tax,” it be felt. says. “For the 2015 tax year, the Some Californians have already top 1 percent of income earners made the switch, moving paid just under 48 percent their official residences to of personal income taxes. This states with low or no state income percentage has been greater taxes, such as neighboring than 40 percent in 11 of the Nevada, and others will past 12 years. certainly follow.
“The share of total adjusted As he closed his budget presentation, gross income from the top 1 Brown more or less percent of income earners has breathed a sigh of relief that increased from 13.8 percent the impact of those moves, plus in 1993 to 24 percent in 2014 any recession, will hit after (and) changes in the income of he’s departed from the Capitol a relatively small group of taxpayers a year hence and be a problem can have a significant for the next governor. impact on state revenues.”
There’s more than a small tinge of irony about the situation.