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Monday, September 24, 2018

The California Treasury Depends on Rich People

California has a highly progressive tax system. At The Los Angeles Times, Melanie Mason reports:
While Democrat Gavin Newsom and Republican John Cox campaign on their visions for the state’s next chapter, it’s the financial success of residents in Palo Alto’s 94301 and a handful of other affluent ZIP Codes that will determine whether promises to build more houses, overhaul healthcare or invest in schools can actually be kept.
The state scooped up just under $1 billion from nearly 9,000 tax returns filed in 94301 in 2016 — more revenue than from any other ZIP Code in California.
Much is made of the widening gap between California’s very rich and very poor. But just as significant is how the fate of the latter depends heavily on the former.
We are very dependent on millionaires,” said Mike Genest, former budget director for Gov. Arnold Schwarzenegger. “If the millionaires get a cold, we all die of the flu.”
 The vulnerability stems from the state’s lopsided reliance on personal income tax — including taxes on capital gains — to fund its budget. Nearly 70% of California’s revenue comes from personal income tax, according to the Legislative Analyst’s Office. That share has steadily risen since the 1950s, while other sources of revenue, such as sales and use tax and corporate tax, have declined in significance. And personal income tax revenue is especially concentrated among the state’s top earners. In 2016, the top 1% of filers paid out nearly 46% of income tax revenue.