Friday, April 9, 2010

Who Pays California Income Taxes? (Trouble)

Yesterday I wrote HERE about how 47% of American households pay no US federal income taxes at all, and how those households with incomes in the the top 10% (above $365K) pay 73% of all US federal income taxes.  Today, the Merced Sun-Star newspaper has published a fascinating pie chart that you can view HERE illustrating how in my home state of California those with annual incomes over $200,000 pay 66.4% of all California income taxes, and those making between $100,0000 to $200,000 pay a further 19.0%.  That's over 85% of all California income taxes. This follows a 2008 article in The Economist magazine noting that just 144,000 high income households in California paid over half of all income taxes in the state; a state whose entire population is over 33 million.

These statistics certainly raise important, if subjective, issues about the fairness of income distribution in the United States, and similarly subjective issues about the relative fairness of income tax burdens at the federal and state level in this country. 

But they also raise the specter of a less subjective potential problem for our representative democracy: that a majority of the American population, which pays no income taxes at all, may vote (through its elected representatives) to steadily increase the benefits they are entitled to receive from the government, while paying for those repeated increases by imposing incrementally higher taxes on a small minority of Americans, but not on themselves.  This dynamic creates a series of unintended and unfortunate incentives and disincentives for both the majority and the minority that in the long run may do great harm to the nation, financially and otherwise.


  1. If those making over $100k pay 85% of the taxes in CA, what percentage of the total CA income do they make? And what percentage of total CA assets do they own? Your numbers are meaningless without those facts

  2. California's budget crisis may actually provide a great example of why a flat tax rate doesn't work. Approximately 60% (based off of 2007 figures) earn enough income ($50,000 to $1,000,000) to be placed in the second highest tax bracket (9.3%), which means most Californians effectively pay the same tax rate and that California's progressive tax is not really progressive (especially considering that the tax rate for the highest bracket $1,000,000+ earners is only 1% higher). This means that arguing for a flat tax in California is pretty much a moot point and that there really is an unfair distribution of income.

  3. what does the percentage of total CA income they make matter? If you're unhappy with how much money you're making, work harder instead of spending so much time on the internet.

    what does the percentage of assets owned matter? Did they steal those assets?

    why are the laziest always the greediest?

  4. "Approximately 60% (based off of 2007 figures) earn enough income ($50,000 to $1,000,000)"

    60% of taxpayers - not of the population! learn to interpret figures.

    "This means that arguing for a flat tax in California is pretty much a moot point and that there really is an unfair distribution of income."

    why is it "unfair"? should the indolent and stupid be subsidized by the entrepreneurial? why subsidize failure?