Originally Posted By SuperDry <<< I say, raise the rates through the roof, just as they did back then during times of crisis. The President is being far too KIND by not insisting that taxes be raised through the roof STARTING RIGHT NOW. Do it now. Fast and dirty. They'll be pissed, but they'll manage to get over it. >>> Ridiculous. <<< And I think the "incentive to be rich" thing is completely bogus. It's the shallowest argument conservatives have. They make it sound like people like me are sitting at home going, "Well, I *was* going to go out tomorrow and start a business to become a multi-millionaire, but now forget it! Taxes are too high." >>> I think you under-estimate the tremendous amount of effort it takes to make a business successful and grow. It's probably true that most people that contemplate starting a business are not directly thinking about taxes. Probably only those that OD on noise machine radio would honestly have it in their heads that they won't start the business they want to, because in the event that they're wildly successful (as they know they will be) they'll have to pay a lot of tax. There are probably people that use that as an excuse to remain in the comfort zone and not start a business, but if not for taxes, most would readily find another reason not to. But once a business is started and gets to a certain point, most businesses plateau and it becomes very difficult in most cases to break above that and get to the next level. In addition to financial risk, it requires a whole lot of commitment, time, and elbow grease. Faced with a 79-92% potential tax rate should the plateau be successfully breached, a great many business owners will say "it's not worth it. I'm happy enough where I am." And very often, the thing that is not done is the hiring of additional employees for expansion. And considering that small business is the engine that generates most jobs in the US, this is a very real issue when it comes to economic expansion. ecdc, have you ever signed someone else's paycheck on the front? <<< Yeah, because I'd rather make $60,000 a year and pay 15% taxes than make $500,000 a year and pay 40% taxes. That makes a whole lotta sense. >>> To that, I agree. The notion that raising the top marginal tax rate from 35% back to 39.6% as it was during most of the 1990's is going to serve as a deterrent to new business or expansion, I think for the most part is a hollow talking point. Anyone that would claim that a 39.6% tax rate would have a chilling effect on economic growth would have to explain the real-world experience the US had during the 1990's. I think that most people that bring up the bogeyman argument in response to proposals to restore the top tax rate to 39.6% are really just of the "always lower taxes always" crowd, or are propaganda victims that really don't understand the issue and have had that idea planted in their heads. But, raising taxes back to historical highs, such as the 79-92% rates proposed by Mr X, that's a totally different story, and it's my opinion that it would be devastating to the US economy.
Originally Posted By ecdc I certainly have no quarrel with your analysis here, SuperDry. But that's also not what I'm hearing in the Republican talking points. I'm hearing Joe the Plumber saying he can't start his own business because taxes are too high. I'm hearing the same sad manipulation - "Someday you'll be rich just like us and the big bad government's going to take your money!" I have an otherwise intelligent friend who's just so convinced that someday he's going to be a rich businessman that he continues to vote against his own interests. Being a middle-class American with middle-class belongings and lifestyle isn't good enough. It's bizarre.
Originally Posted By SuperDry <<< But that's also not what I'm hearing in the Republican talking points. I'm hearing Joe the Plumber saying he can't start his own business because taxes are too high. >>> Agreed. Joe the Plumber was totally bogus from start to finish. <<< I'm hearing the same sad manipulation - "Someday you'll be rich just like us and the big bad government's going to take your money!" >>> I can think of at least 3 situations very similar to the above that I ran into during the 2008 election cycle: 1. There was an interview on CNN of a 30-something female who worked as a private security officer. I don't know why, but for some reason I thought this might be a $37k/year job. I'm probably not that far off, but it might be far less than that. Anyway, she looked right into the CNN camera while in uniform and said that she was voting for McCain because she wanted to keep her taxes down. Pay no mind to the notion that Obama was saying that you'd have to make $200k+ a year in order to be eligible for his tax increases. 2. I know someone that I'd guess makes far less than $50k a year that told me that he was going to vote for the candidate that would keep his taxes the lowest, and therefore that would be McCain. 3. I know someone that the day after the election, was rather steamed and said "Well, I guess our taxes are going up!" even though he makes less than $75k/year. <<< I have an otherwise intelligent friend who's just so convinced that someday he's going to be a rich businessman that he continues to vote against his own interests. >>> That's what I don't get. In all three cases above, the people in question would be far more likely personally to be better off with Obama's proposals at the time than McCain's, speaking only from personal taxation. Yet, each somehow got it in their head that they personally would pay much higher taxes if Obama was elected. It really is amazing to see this in action. <<< It's bizarre. >>> Indeed it is.
Originally Posted By EighthDwarf Dabob: "Without an adequate property tax base, as other states have, CA has no choice but to raise other taxes." I don't think all of California's problems can be tied to Prop 13. The real problem is the volatile nature of California's "progressive" tax system. A very large portion of the revenue California depends on comes from the super-rich and their capital gains. In a growing economy, revenues flow in. But then the spending ratchets up just as fast (if not faster). In a receding economy, the revenues dry up but the spending for the most part stays level. This leads to significant budget shortfalls such as what we see right now. Most of the cuts that are talked about right now are really cuts in spending growth, not actual cuts themselves. For most people, when income declines, spending declines with it. In California, rather than save money in good years, the government spends all they have and maxes out their credit cards, so to speak. So when the downturn comes, they have no reserves to fall back on. And their income no longer supports their lifestyle. Those against spending cuts essentially want to maintain the lifestyle without the income. That's not responsible. It's like the average Joe stretching himself to the max, buying a home he can't afford at the peak of his income earning, buying a Hummer, six flat screens, etc. And then when his income falls he asks for a handout to help him maintain the lifestyle he had. Oh wait....I guess we're in favor of that too. Thanks Obama. <sigh> Some of us pay an inordinate amount of taxes to support irresponsible behavior. It is our moral obligation to fight against it. Rewarding irresponsible spending habits is the worst thing we can be doing - that's what got us into this mess.
Originally Posted By Mr X ***Rewarding irresponsible spending habits is the worst thing we can be doing - that's what got us into this mess.*** I don't think there is ANYONE who could disagree with THAT!
Originally Posted By Dabob2 <Dabob: "Without an adequate property tax base, as other states have, CA has no choice but to raise other taxes." I don't think all of California's problems can be tied to Prop 13.> I didn't say they all could. But check out the percentage of revenues from property tax for CA vs. other states, and you'll see what I mean.
Originally Posted By SuperDry Another problem with Prop 13 is that it causes an inherently unjust situation, where people with homes of the same value pay dramatically different amounts in property tax, depending on when they bought their homes. It would be akin to basing the income tax on the wages you paid when you first got hired, with only a 1% increase allowed per year. So, two people making exactly the same amount of money in the same job would get taxed vastly different amounts depending on their hire date.
Originally Posted By Kar2oonMan >>It would be akin to basing the income tax on the wages you paid when you first got hired<< No it wouldn't. Assuming you get raises you are getting paid a higher and higher wage over time, but with a home, even though the value may increase, that's meaningless until you are ready to sell it. If someone bought a house 30 years ago and paid it off, why should they be hit with a higher tax rate? They aren't making any money off the house, and as we have seen, prices can go back down again. If someone isn't selling their home, they aren't contributing to price increases or "bubbles" or anything else. A better analogy for the pre Prop 13 California would be someone getting taxed on pay they MIGHT receive at some future date.
Originally Posted By EighthDwarf <<I didn't say they all could. But check out the percentage of revenues from property tax for CA vs. other states, and you'll see what I mean.>> Because of higher home values in California than most of the rest of the US, Californians pay a lower PERCENTAGE amount of property tax but still pay more property tax DOLLARS than most of the other states. According to this link, we rank 10th in the U.S. <a href="http://articles.moneycentral.msn.com/Taxes/Advice/PropertyTaxesWhereDoesYourStateRank.aspx" target="_blank">http://articles.moneycentral.m...ank.aspx</a> The highest property tax state, New Jersey, pays more than double (dollar wise) than we do. Yikes. However, I think it's important to look at the overall tax picture (income, sales and property tax). Often states with lower property taxes have higher income and sales taxes. This link, while dated, is a pretty good illustration of what I mean. <a href="http://money.cnn.com/galleries/2007/pf/0704/gallery.tax_friendliest/8.html" target="_blank">http://money.cnn.com/galleries...t/8.html</a> California overall ranks 12th in total taxation. So we are definitely paying an adequate share of our money already to support the state. And keep in mind, this pre-dates a number of tax-cuts that have been passed at the state level (in other states of course) in the past year -- not to mention the recent tax hikes in California. I wouldn't be surprised if California rises toward the top of the list by the end of this year. Face it people, California is bankrupt because our spending is out of control. It's not because we're taxed too lightly.
Originally Posted By SuperDry <<< No it wouldn't. Assuming you get raises you are getting paid a higher and higher wage over time, but with a home, even though the value may increase, that's meaningless until you are ready to sell it. >>> I disagree. The very nature of a property tax is that it's based on the value of the property. Any time you monkey with a property tax and base it on anything other than the value of the property, you're asking for trouble and inequity. I do see what you're saying, but your argument isn't really against rising valuations, but against the whole notion of a property tax at all. Maybe an argument could be made that there should be a much higher tax on the capital gains when you sell your house instead of paying as you go along, but that's not what Prop 13 was about.
Originally Posted By Mr X ***I disagree. The very nature of a property tax is that it's based on the value of the property. Any time you monkey with a property tax and base it on anything other than the value of the property, you're asking for trouble and inequity.*** Well, this brings up the larger question of why property is taxed differently than other capital assets... I realize that property taxes are needed to cover certain services and all that (although you don't get any more or better services just because a bubble inflates your asset for a number of years even though you don't sell it). I don't know of any solution. But I do agree with the argument that it's not fair to some degree that you should pay exorbitant taxes through a bubble while never enjoying the benefits of your "gain" when the bubble comes crashing down.
Originally Posted By SuperDry <<< Well, this brings up the larger question of why property is taxed differently than other capital assets... >>> I'm assuming that you mean real property (i.e. real estate and improvements). Other property is actually taxed in various ways, and this varies by location. For example, in California, there's an annual property tax on your car based on its depreciated value that gets folded into your registration fee. Many states don't have this - they only have various fixed-rate fees that don't vary with the value of the car. Until two years ago, Florida had an intangible personal property tax that taxed the value of all your investments and savings each year by some small amount (above a floor of something like $1 million). Many states also have a tax on personal property owned by a business. For example, my employer pays the state a property tax for the current value of everything in my office, including the furniture and computers. I think that real property is most often taxed the most because it's one of the easiest things to keep track of, and there's the notion that the payment is in return for the local gov't services provided to that property and its residents.
Originally Posted By Mr X Interesting (particularly that Florida example...did not know that!). ***I think that real property is most often taxed the most because it's one of the easiest things to keep track of*** Yes, that's what I'm thinking as well. In any case, going back to your automobile example, I can understand a depreciating tax but as you say "real" property doesn't work like that. But what about "classic" cars or other collectible items? Obviously the value increases or decreases based on how you maintain it etc., but depending on the situation (and the market) it could be either priceless or valueless by the time you decide to sell it. Depends on a lot of factors. But do people pay skyrocketing taxes on their collectible car when the market booms, year after year, even if they have no intention of selling?
Originally Posted By Dabob2 <<I didn't say they all could. But check out the percentage of revenues from property tax for CA vs. other states, and you'll see what I mean.>> <Because of higher home values in California than most of the rest of the US, Californians pay a lower PERCENTAGE amount of property tax but still pay more property tax DOLLARS than most of the other states. According to this link, we rank 10th in the U.S.> But percentages are always the better gauge. Sure Californians pay more tax dollars than most other states. Salaries are also higher in CA than in, say, North Dakota or most other states. Cost of living is also higher. Percentages are always a better gauge when looking at these things than sheer dollar amounts. <Face it people, California is bankrupt because our spending is out of control. It's not because we're taxed too lightly.> Spending could undoubtedly but cut some. But as SPP has pointed out, you could fire every public employee in CA and you'd STILL have a budget shortfall. There's no getting around that.
Originally Posted By EighthDwarf <<Salaries are also higher in CA than in, say, North Dakota or most other states.>> You're right, but property values in California are disproportionately higher in California. Take N Dakota (your example) - their average salary is 19% less than California's. And yet they pay 42% less property tax dollars on average. <<But as SPP has pointed out, you could fire every public employee in CA and you'd STILL have a budget shortfall. There's no getting around that.>> Just because SPP said it, doesn't make it right. In fact it's absurd. The forecasted revenues for California in 2009-2010 are $98 Billion. The state budget in 2005-2006 was $91 Billion. Are you saying that we had no state employees in 2006?? If we got back down to 2006 spending levels, we would balance the budget. Why is that so hard to understand? Here's the historical state budget data for your reference. <a href="http://www.dof.ca.gov/budgeting/budget_faqs/information/documents/Chart-A.pdf" target="_blank">http://www.dof.ca.gov/budgetin...rt-A.pdf</a>
Originally Posted By Dabob2 <<Salaries are also higher in CA than in, say, North Dakota or most other states.>> <You're right, but property values in California are disproportionately higher in California. Take N Dakota (your example) - their average salary is 19% less than California's. And yet they pay 42% less property tax dollars on average.> My point was about percentage vs. total dollars. Of course North Dakotans pay less property tax - there just aren't that many homes there worth that much money. You were trying to say that CA was 10th in property tax dollars. But that's misleading; CA is only 17th as a percentage, which is pretty close to middle of the pack. <<But as SPP has pointed out, you could fire every public employee in CA and you'd STILL have a budget shortfall. There's no getting around that.>> <Just because SPP said it, doesn't make it right. In fact it's absurd. The forecasted revenues for California in 2009-2010 are $98 Billion. The state budget in 2005-2006 was $91 Billion. Are you saying that we had no state employees in 2006??> No, and I'm not sure how those two paragraphs go together. You're not being clear. <If we got back down to 2006 spending levels, we would balance the budget. Why is that so hard to understand? Here's the historical state budget data for your reference. <a href="http://www.dof.ca.gov/budgetin...rt-A.pdf>" target="_blank">http://www.dof.ca.gov/budgetin....pdf></a> I'm not sure this shows what you think it shows. It shows 91B for 2005-2006, and $92B for 2008-2009. I don't live in CA so I'm not hearing these numbers every day. Haven't people been talking about a budget gap of 11 figures?? Something isn't adding up. SPP?
Originally Posted By SingleParkPassholder "Just because SPP said it, doesn't make it right. In fact it's absurd. The forecasted revenues for California in 2009-2010 are $98 Billion. The state budget in 2005-2006 was $91 Billion." Of course it isn't absurd. They had to close a gap of $42 billion. There's roughly 239,000 state employees. Each one of them would have to average $176,000K in salary to equal that $42B. They don't. California's yearly employee payroll is about $18-20B. Hence, fire them all, and you're still short about $20B.
Originally Posted By EighthDwarf <<Of course it isn't absurd. They had to close a gap of $42 billion. There's roughly 239,000 state employees. Each one of them would have to average $176,000K in salary to equal that $42B. They don't. California's yearly employee payroll is about $18-20B. Hence, fire them all, and you're still short about $20B.>> It is absurd. Your numbers are way off. There are 310,000 teachers in California alone. The 239k figure you mention includes only state government, state university and judicial council employees. A nd the $42 Billion covers 2 fiscal years' worth of shortfalls - the current one and the 2009-2010 year. The shortfall is measured based on projected spending growth, not revenues per se. For example, the budget for 2008-2009 was $107 Billion (up from $105 B the year before) but they only collected $92 Billion in revenues, hence the $15 Billion current year shortfall. In 2009-2010, the budget was supposed to grow to $110 Billion but they were projecting to collect roughly $83 Billion. Hence a shortfall of $27 Billion. Add 15 + 27 and you get 42. But notice they are not real shortfalls - they are deficits based on projected spending growth. The cuts, to a large degree, are reductions in projected spending growth, not real cuts. For example, the peak spending was in 2007-2008 where we spent $103 Billion. In 2009-2010 we are planning to spend $96 Billion. That's an overall reduction of only $7 Billion in spending and an increase over 2008-2009 which was only at $92 Billion. If we continued to spend at 2004-2005 levels, we'd have a surplus in our budget right now. Instead, spending grew 28% between 2004-2005 and 2007-2008. If we turn the clock back on spending a few years, we'd be fine. But nobody wants to hear that apparently.
