Progressives pushing regressive taxes in California
Why do progressives love regressive taxes?
The news that, as of July 1, several cities in very liberal Alameda County have increased their sales tax rate to a staggering 10.75%, got us thinking about how many of California’s recent tax hikes have been regressive. In fact, despite the claim that progressives like to “tax the rich,” many of the big tax hikes seen in the state — both at the state and local level — fall disproportionately on the working poor and lower middle class.
Here, it is important to define the terms. According to the Tax Foundation, a regressive tax is one where the average tax burden decreases as income increases. Low-income taxpayers pay a disproportionately high portion of their income in taxes, while middle- and high-income taxpayers pay a relatively low one. A progressive tax, on the other hand, is one where the average tax burden increases with income. High-income families pay a disproportionate share of the tax burden, while low- and middle-income taxpayers shoulder a relatively small tax burden.
Sales taxes are particularly regressive.
Matthew Gardner, executive director of the left-leaning Institute of Tax and Economic Policy agrees that sales tax hurts the poor most, noting that they end up taking a bigger chunk of change from people that have smaller sums of money and slower income growth.
A major factor in this is that a higher percentage of spending by the poor is spent on taxable consumer goods.
So here is a question for progressives: If sales taxes disproportionately hurt the poor and working class, why does California have the highest state sales tax rate in America? The base rate of 7.25% is bad enough but when all the local add-ons are included, it’s not just Bay area cities that are well over 10%. So much for looking out for the little guy.
Another example of a highly regressive tax is the gas tax. Not only are most excise taxes regressive, but the gas tax is particularly so in that the poor and middle class are less likely to drive fuel efficient cars — and certainly not Teslas. Moreover, it’s not the wealthy who rely on pickup trucks and commute long distances to job sites, it’s more likely people who work in the construction trades.
Adding insult to injury, California has an even more harmful feature of the gas tax. Because the state’s sales tax is imposed on the total cost of a gallon of gas which includes the gas tax, we not only have a double tax on gas in California, we have a regressive tax imposed on another regressive tax.
The third example of a regressive tax is a creature called “parcel taxes,” an added tax on top of the ad valorem (based on value) property tax that homeowners already pay. Parcel taxes are usually flat-rate taxes imposed on property irrespective of value. Therefore, the retired couple living on a fixed income in a modest bungalow pays the same amount as the owner of a multi-million dollar mansion in Beverly Hills. In short, parcel taxes represent one of the most regressive forms of taxation imaginable.
Returning to the question posed at the top as to why progressives love regressive taxes, the answer is that regressive taxes are more broad-based and stable as opposed to, say, income taxes.
True, California’s income tax is progressive, taxing the very wealthy at the highest rate in the nation — 13.3% — but as those high-wealth taxpayers engage in tax avoidance strategies — such as leaving the state — our progressive political class will increasingly feast on the working poor and middle class with even higher regressive taxes. That is, until they move out too.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.