Tax facts -- California

Dan Walters, Sacramento Bee columnist, has a piece in today's Orange County Register that debunks arguments concerning California tax revenues made by both liberals on the left and conservatives on the right. Conservatives, including this one, argue that California's taxes are the highest anywhere. Liberals argue that California needs a tax increase both because there's a huge budget deficit and because California's taxes are only average among the states.

Walters explains that liberals have a point. Californians' overall tax burden is not the highest in the nation. Actually, California was only 6th in the nation in 2008, relative to personal income, before the recent tax increases.

But that's a little misleading. As Walters explains, Californians' overall tax burden is more volitile than most states' because of California's tax structure. In better economic times Californians' relative tax burden rises faster than other states. In poor economic times, it drops faster.

The data Walters uses comes from The Tax Foundation, which is critical of California's tax structure. The Foundation argues that California's sales tax would yield more income if the rate were lowered and the application broadened. It argues that California relies too much on revenue from high bracket individuals and businesses, whose income is more volitile than that of lower bracket taxpayers, causing the income yielded from those sources to be more volitile. Finally, the Foundation reports that expenditures from California's general fund increased by 31 percent from 2003 to 2007, a period when inflation increased 12 percent and the population grew just 5 percent.

Clearly, California's budget crises is self-imposed. Raising tax rates isn't the answer; changing the tax structure may be a partial answer. Most clearly of all, California's legislature must stop spending. Spending is out of control.