Dan Walters

Dan Walters

By Dan Walters
Published: Friday, May. 17, 2013 – 12:00 am | Page 3A

When voters passed Proposition 30 last year, they unwittingly accelerated one of the most perilous trends in California governmental finance – an ever-increasing reliance on income taxes from rich people to finance schools and myriad other state and local services.

When Jerry Brown became governor the first time in 1975, the broadly based sales tax was the biggest generator of state revenue.

Over the years, however, the sales tax has faded as consumer habits changed. Californians bought relatively fewer taxable goods – cars, clothes, appliances, etc. – and spent more of their incomes on untaxed services and investments.

Today, sales taxes are less than a quarter of general fund revenue and income taxes are more than half – much more. And the passage of Brown’s Proposition 30, which raised the sales tax a smidgen but hit the richest Californians with a big income tax hike, accelerates that trend.

Income taxes now exceed 60 percent of general revenue and are headed to two-thirds within a few years, according to fine print in Brown’s newly revised budget. The top 1 percent of Californians, in terms of income, now pay well over 40 percent of state income taxes or more than a quarter of general revenue.

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