California's Gov. Jerry Brown has just signed on to a labor-backed ballot initiative to raise tax income tax rates to as high as 13.3%, and so far the voters seem to approve. A new Los Angeles Times poll puts public support for the plan at 64%. If the measure wins in November, California will hold the prize for the highest income tax rates in the nation.More at the link.
That is, if some other state doesn't jump past it before then.
In recent years, the country has seen something of a tax-the-rich derby among states enacting so-called "millionaires' taxes" on top earners. Hawaii, New Jersey, New York, Oregon and Maryland all raised rates on high earners during in the 2000s. California's rates were high already.
In some cases the taxes were temporary, in others, not. And you didn't always have to be earning a million dollars to feel the bite. As of January 2012, according to data from the Tax Foundation, Hawaii was the top taxer with a rate of 11% on incomes over $200,000 (for single filers). California was close behind with 10.3% on incomes over $1 million. New Jersey has let a 10.75% tax lapse, but its top rate was still a relatively high 8.97%. Oregon's temporary 11% tax was history, but the top rate was still 9.9%. In New York, Gov. Andrew Cuomo resisted pressure to keep a top rate of 8.97% in effect, but the state ended up with a tax only slightly lower — 8.82% — on incomes over $1 million.
If Brown's initiative succeeds in California, taxes will rise to 12.3% for single filers at $500,000 and for joint filers at $680,000. Another 1% — a tax approved voters in 2004 for mental health programs — kicks in at $1 million. The total top rate of 13.3% would put California ahead of New York City, where state and city income taxes top out at just below 12.5%. California also would raise already-high sales tax rates.
What would happen then? In the short term, the state would get some new revenue. In the longer term, the impact gets murkier because a new question arises: What will this tax do to the state's economy?
BONUS: From John Hawins, at Hot Air, "Good news! California’s choo-choo to nowhere will only waste 68 billion instead of 98 billion."