Dan Walters

By Dan Walters
dwalters@sacbee.com
Published: Sunday, Dec. 18, 2011 – 12:00 am | Page 3A

Call it the half-percent solution.

While they differ – a lot – in details, there is one fairly consistent theme in the competing proposals to raise Californians’ taxes: They assume increases in the range of $6 billion to $10 billion per year.

That’s roughly one-half of 1 percent of Californians’ personal incomes, or 8 percent to 11 percent of the increases in those incomes that state officials project are occurring this year as the economy slowly pulls itself out of the worst recession since the Great Depression.

It’s highly unlikely that a tax increase of those modest dimensions would have any appreciable economic effect, such as retarding recovery.

Indeed, since the money would just continue to circulate in the economy, albeit through state and local government and school spending rather than through private spending or investments, it probably would have no net impact.

That’s not an argument either for or against hiking taxes, but rather the simple fact of the matter.

And it’s important to keep that context in mind, because those who will campaign for tax increases next year will claim some hugely beneficial economic impact, while those who oppose them will contend that enactment would be economic ruination.

What we don’t know, however, is whether raising taxes even by a relatively small amount would have a major negative impact on California’s economic future.

We do know that the state was hit particularly hard by the housing industry meltdown and has been plagued with the nation’s second highest unemployment rate.

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