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Heard something fishy about the Millionaires Tax? Like how raising an additional $6 billion/year could "blow a hole in the budget"?
Check out our Important Facts: Rhetoric vs. Reality memo.
What is the Millionaires Tax of 2012?
The Millionaires Tax of 2012 is a ballot initiative proposal for the November 2012 election that asks the richest Californians to pay their fair share to help fund public education and vital public services.
What does it do?
The Millionaires Tax of 2012 will ask wealthy Californians who earn $1 million or more to pay an extra 3% in state income tax. Those who earn $2 million or more are asked to pay an extra 5% in state income tax. The funds raised (an estimated $6-$9.5 billion per year) will begin to reverse the decline of California. They will be allocated as follows:
Why do we need it?
Due to the Great Recession, coupled with many years of inadequate tax rates on the rich, the state of California now suffers an annual budget deficit of around $10 billion to $14 billion dollars. Public education, public health, public safety, and road and bridge repair, have all been slashed ($20 billion over the last three years), with terrible impact upon the state’s population. The Millionaires Tax of 2012 will help restore some of the program funding that has been lost.
It is the only progressive tax proposal
With the Millionaires Tax of 2012, no one but millionaires would pay a penny more in taxes. The top 1% of income earners has doubled its share of total state income over the past twenty years (from 12% to nearly 25%), while income growth for the rest of us has stagnated. Meanwhile, the top tier tax rates (state and federal) are lower than they were previously. Twenty years ago the highest tax rate in California was 11% of income; today it is 10.3%. When Congress extended President Bush’s federal tax cuts for the rich in 2010, the top one percent in California received a windfall of $9-$14 billion per year—nearly equal to the entire state budget deficit. The California millionaires that would be affected by this tax can afford to invest more in their state that has provided such remarkable opportunity for them.
How does it compare to other proposed income tax measures?
See a comparison chart by clicking here.
Can it win?
Absolutely. A recent independent poll showed that 70% of likely voters support the Millionaires Tax of 2012. It will only require a bare majority (50% +1) to become law. Numerous measures of public opinion show that the electorate understands the growing economic inequality in California and the country. Most people believe they are already paying their fair share in taxes, while the richest 1% do not and should pay more.
Polling numbers for the Millionaires Tax of 2012 are the strongest by far of any income tax proposal. (See detailed polling memo by Tulchin Reseach here and a slideshow here.) When regressive taxes like sales tax and taxes on lower income brackets are included as part of a plan to increase taxes on the rich, support drops considerably. The Millionaires Tax of 2012 is the best policy to restore public services and reduce economic inequality. It is also the idea that the public likes the most.
Free from meddling by Sacramento
Funding for services provided by the Millionaires Tax of 2012 will be distributed at the county level. The state legislature will not be allowed to re-allocate funding for other purposes.
Accountability
The Millionaires Tax of 2012 includes stringent accountability measures. There will be financial audits, ongoing published reports on fund expenditure, and fines and prison for the misuse of funds.
Does the Millionaires Tax apply to capital gains?
Unlike the federal tax code, California's tax code does not treat capital gains differently than regular income. This means that both capital gains and regular income are taxed at the same rate. Therefore, under the Millionaires Tax, millionaires will pay 3-5% more on both their capital gains and regular income.
How will the Millionaires Tax affect an individual's federal tax obligation?
An individual determines their federal income tax obligation after determining their state income tax obligation because state income taxes are deductible from federal income taxes. Since the Millionaires Tax increases a California millionaire's state income tax rate, that individual will be able to lower his or her federal income tax obligation. In the end, this means more money for California because California pays more money to the federal government than it gets back.
Will the Millionaires Tax cause millionaires to leave California?
No, despite the popularity of this right-wing myth, there is no evidence that wealthy Californians would move out of the state due to the Millionaires Tax. This issue has been studied multiple times, and it is clear that there many more influential factors in determining where a wealthy person lives than state income tax.
Hollywood and Silicon Valley are not going to somehow pick up and move to Nevada, neither will California's gorgeous beaches and Redwoods. This CBS MoneyWatch article has a good summary of the relevant arguments.
If you'd like to take a look at the research first hand, take a look at these studies:
- Tax Flight Is a Myth: Higher State Taxes Bring More Revenue, Not More Migration by the Center on Budget and Policy Priorities,
- Millionaire Migration and State Taxation of Top Incomes: Evidence from a Natural Experiment by researchers from Stanford and Princeton,
- and The Number of High-Income Tax Earners Increased Significantly During a Period of 10% and 11% Tax Rates on High Income Earners by the California Budget Project.
Who is behind the Millionaires Tax of 2012?
Restoring California, a broad coalition of educators, unions and community groups looking to restore critical funding to schools and universities, essential services for seniors, and public safety, as well as start rebuilding the state’s crumbling roads and bridges. A list of organizations supporting the Millionaires Tax of 2012 can be found here.
Where can I see the official ballot measure language?
Click here!