Standard and Poor's

Associated Press
Published: Sunday, Sep. 14, 2014 – 9:01 pm

SACRAMENTO, Calif. — Rising income inequality has led to slowing tax revenue growth in California, but the state has responded by increasing its top marginal tax rate, causing its growth rate to accelerate after 2009, according to a new study released Monday by credit rating agency Standard & Poor’s.

The new S&P report found that California’s average sales tax revenue growth went from nearly 11 percent between 1950 and 1979 to a low of 3.4 percent between 2000 and 2009.

Since 2009, the state has recovered some of its growth to 7.2 percent.

Nationally, as the share of income going to the top 1 percent of earners over the past three decades, the report says the rate of state tax revenue growth has halved, taking a toll on state governments.

Last month, Gov. Jerry Brown suggested that Democratic policies are helping to combat the wealth gap.

“If the consumers are up to their eyeballs in debt, aren’t making a decent salary, how the heck are they going to buy anything?” Brown asked in addressing the California School Employees Association, a school labor group. “And if they don’t buy anything, the economy doesn’t go forward and doesn’t work.”

Brown championed his tax measure and won in November 2012. Proposition 30 raised the statewide sales tax to 7.5 percent for four years and income taxes rates to between 10.3 and 12.3 percent for seven years on income over $250,000 a year. Millionaires pay an additional 1 percent, bringing the top income tax rate to 13.3 percent.

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