Make California Great Again

Part 2 | Part 3 | Part 4 | Part 5

As Super Tuesday approaches, I figured I’d try to write a five part series on how we can Make California Great Again™

By PeteBobb — Own work, CC BY-SA 3.0

Part 1 — Lower the state income tax rates

Chance of happening: Snowball’s chance in hell

California has the dubious distinction of having the highest state marginal tax rate in the nation at 13.3% on all income above $1,000,000. Sure, extremes are easy to draw especially when only looking at the millionaire’s tax, so let’s look marginal tax rates affecting the median Californian. The median income in California is $61,489 according to the most recent Census stats. For high cost areas such as San Francisco, that median income rises to $78,378. The marginal tax rate at that level of income is 9.3%, which kicks in on each dollar earned over $51,530. Approximately 58% percent of Californians are affected by this top marginal rate (source).

To put that 9.3% rate in context, there are only two states in the entire United States that have higher tax rates than 9.3% — Minnesota (9.85%) and Oregon (9.9%). And those rates are the top marginal tax rates in those states, affecting each dollar over $258,261 (Minnesota) and $125,000 (Oregon) in income. Therefore, 58% of Californians are paying a marginal tax rate that is nearly equivalent to the 2nd and 3rd highest marginal tax rates in the entire nation. That doesn’t even begin to take into account factors associated with costs of living (done below), such as real estate and sales tax values (Median income source; Cost of living source).

Comparison of costs of living in three metropolitan counties in three of the highest taxed states in the U.S.

Now, I don’t think that supply side economics is real, and with a GDP equivalent of $2.3 trillion dollars, California as a country would be in the global top ten rankings — so we’re doing fine. Lowering the tax rates will likely not lead to more economic output from current residents, but it may lead to a reverse in migrations as residents can afford to stay in California (source). With a few extra hundred dollars a month, perhaps a median priced home in the state becomes within reach to those median earners at $468,330. Although if you’re in a high priced county where the median is more than double that figure (SF County — $1,173,610), you’re going to need a bit more than a cut to your marginal tax rate to convince you to stay (source).

To the five people who read this:

But wait there’s more! Continue to Part 2 of the series.