Taxes Are What We Pay for a Civilized Society

Taxes are what we pay for a civilized society — Former Supreme Court Justice Oliver Wendell Holmes

Taxes are the collective price we pay for public goods and services. State and local taxes support our public schools, streets and highways, public hospitals that form the backbone of the state’s trauma care system, parks and beaches, the public health infrastructure that ensures that our food is safe to eat and our water is safe to drink (and that delivers water to homes across California), as well as a range of other services. While the primary purpose of a tax system is to raise the money needed to support public services, tax policy can also serve as an end in itself, providing incentives for taxpayers to engage in desired activities or providing cash assistance to certain individuals.

April 15 – the deadline for filing income tax returns – is a day when Americans, and particularly the media, reflect on what we pay and, hopefully, what we get in return for tax dollars. Unfortunately, a lot of that reflection is informed by misinformation, distorted information, and urban legends that just plain aren’t true.  We’ve blogged on this before, but in honor of “tax day,” here’s a run down of the facts:

  • Low-, not high-, income Californians pay the largest share of their income in state and local taxes. Here’s an updated analysis of data we’ve blogged about before that takes into account the temporary tax increase included as part of the February budget agreement.
  • California is a moderate, not high, tax state when all state and local taxes and fees are taken into account.  This results from the fact that California has moderately high state taxes, but low local property taxes due to the impact of Proposition 13 on local property tax collections.
  • High-income Californians aren’t leaving the state due to higher taxes. In fact, the number of millionaire taxpayers is growing at a rate that far exceeds the increase in the number of personal income taxpayers as a whole.
  • Over the past 15 years, lawmakers have enacted tax cuts that will cost the state nearly $12 billion in 2008-09. That’s a larger loss than the $11.0 billion 2009-10 temporary increase in state tax revenues included in the February budget agreement.
  • Moreover, while the tax increases included in the budget are all temporary, regardless of the outcome of the May election, the September 2008 and February 2009 budget agreements included massive corporate tax cuts that are permanent and that will reduce state revenues by approximately $2.5 billion per year when fully implemented.

And finally, our friends at the Oregon Center for Public Policy (OCPP) offer an interesting history lesson for the organizers of the tax day “tea parties” around the country. The OCPP notes that, “Misunderstood by many, the real Boston Tea Party of 1773 was a protest not against taxation but against a tax cut for a multinational corporation of the day…The Boston Tea Party, in which American colonists dumped British tea into Boston Harbor, was an act of defiance against the Tea Act of 1773, which gave a tax break to the British East India Company. As noted by the Boston Tea Party Historical Society, the tax break was an effort by the British Crown to help the East India Company establish a tea monopoly in the American colonies.”

Don’t forget to file your taxes. And while you are at it, don’t forget to add the “use tax” you owe on your out-of-state Internet purchases!

— Jean Ross

6 Responses to Taxes Are What We Pay for a Civilized Society

  1. Bobbi Murray says:

    Thanks to CBP for a such a pithy piece of analysis about California taxation–timely but with a much longer shelf-life than April 15. And the info about the Boston Tea Party is a total win, too.

  2. Soren says:

    Very informative – thank you!

  3. Lillian says:

    As usual, I agree. I agree. Thanks for saying it out loud.

    I love the tidbit about the Boston Tea Party.

  4. Bill says:

    It’s really cool you put the original link to the Tea Act

  5. Steinkamp says:

    very nice and informative site. I really had a great time reading some of you post.. keep it up and looking forward to read more soon.

  6. […] all of the cuts that we have made, it wouldn’t have avoided everything. Back on April 15, the CA Budget Project’s blog took a look at why we are in the mess we are […]