Dan Walters

By Dan Walters
Published: Friday, Jan. 13, 2012 – 12:00 am | Page 3A

“Soak the rich” has a populist ring that resonates in a period of economic uncertainty, and making the rich pay their “fair share” of taxes has become a rallying cry for those on the political left with no small appeal to those in the middle.

Gov. Jerry Brown hopes to tap into that sentiment with a ballot measure that would increase everyone’s sales taxes a bit while hitting the very affluent with higher income taxes.

If he’s successful, however, there are downside risks, beginning with the possibility that some will move legally, if not physically, to states with lower or even no income taxes, such as Nevada.

And even if there’s no mass migration, the rich can employ tax-avoidance strategies, especially since their incomes tend to come from capital gains rather than salaries.

Finally, even if the rich pay higher taxes, the effect would be to sharply increase the state’s dependence on how a relative handful of Californians are doing with investments – in effect, tying the state budget even more closely to the vagaries of the stock market, rather than the overall economy.

Three-plus decades ago, when Brown was serving his first stint as governor, income taxes accounted for less than a third of state revenues and sales taxes for nearly 40 percent.

Since then, however, changes in consumer spending patterns have depressed taxable sales, relative to personal income, while a progressive income tax has expanded its role in state finance to generate more than half of the general fund revenue stream.

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