Top 1% of Income Earners pay 45% of California's Taxes

[mdorazio]

Of course they do! Just look at the chart here: http://www.sacbee.com/site-services/databases/article9349178... and the referenced franchise tax info.

I am really tired of seeing sensationalist headlines like these. The top 1% of income earners earn an absolutely massive portion of all income in the state, but only pay 45% of taxes. We should be asking if that's enough, not implying that the wealthy are somehow propping up the state's finances when inequality is accelerating every year.

[11thEarlOfMar]

What is missing is that the total income in the state in 2012 was $1.1 Trillion.

So the top 1% earned 28% of the income, but paid 45% of the total taxes:

https://www.ftb.ca.gov/aboutFTB/Tax_Statistics/Reports/2013/...

[entee]

Wow that chart is astonishing, and in the context makes the headline a little misleading.

Having a such a small percent pay such a huge share is toxic. I've heard people who pay high taxes say incredibly entitled things about "paying for" things. It destroys a sense of shared investment and purpose.

Clearly the solution has to be to ensure income is more evenly distributed, though I don't know how to do that exactly. Education and learning skills necessary for high paying industries would certainly help, but every time I hear that it feels like kind of a weak solution. That said, I don't really have a better one.

What are some interesting off the wall ideas for reducing income disequilibrium?

[Thriptic]

Did you read the article? If anything it talks far more than it should about income inequality. Frankly I find the tax disparities astounding: 45% paid by 1%? 90% paid by 20%? That is crazy.

[auntienomen]

What fraction of income do the top 1% of earners actually earn?

[LoSboccacc]

are those numbers including all the tax dodging?

[judah]

>> "but only pay 45% of taxes. We should be asking if that's enough"

How much is enough?

We often hear that the wealthy should "pay their fair share." But we rarely hear a concrete figure.

Look. I work 3 jobs and bring in about $200,000 per year. I work hard and diligently for that money. I use it to provide for my wife and kids and our future.

And I paid nearly $60,000 in taxes in 2015.

I don't want to pay any more. I'm fed up with how much of my hard-earned income disappears by way of taxation.

More taxes subtract from my kids' future. More taxes subtract from dates with my wife. More taxes subtract from my retirement when I am old and unable to provide for myself.

How much tax is enough? What, exactly, is my "fair share"?

Everyone likes to demonize the rich 1%, but few concede the reality that we in technology are all rich. Heck, even the poor in the US are rich by the world's standards.

We "rich" people are not all demons whose money is an infinite fountain waiting to be sapped by those without. No: we work hard for that. And we have families. Some of us hold multiple jobs in order to provide for ourselves and our kids.

So I ask, how much is enough? Give a specific tax percentage you think I, as a husband and dad of 2 children, ought to pay to the federal government, and please tell us compellingly why you feel entitled to take my hard-earned money away from me and my wife and kids.

[devereaux]

Only pay 45% of the taxes? What do you want?? Should they pay 70% of the taxes??? At which point will you be happy precisely???? 90%?????

When the top 1% pays for about 50% of the infrastructure, it is time for them to think about seceding. I mean, the top 50% move together, poof they can have something like half of what is provided by the state, without the 99% bothering them anymore.

[Randgalt]

"earn an absolutely massive portion of all income in the state" - it's not as if the money is just sitting there and 1% are taking most of it. Wealth is _created_. The top 1% _create_ most of the wealth in California. How is it just that they are required to pay so much in taxes? Before I left California, my marginal tax rate (including Federal) was over 52%. Super-high earners in California have marginal rates over 60%. How is that just?

[mikeash]

The HN title continues the proud American tradition of conflating "taxes" with income taxes, ignoring all others. And of course this makes it look like wealthy people bear more of a burden than they really do, since other taxes hit the poor far more.

This happens constantly. I can't remember ever seeing a statement of the form "the top X% pay Y% of taxes" which didn't ignore a substantial set of taxes that hit the poor the most.

I think someone is out there manipulating public opinion on tax policy, and doing an amazing job of it.

[bko]

For those curious about how the percentage of taxes paid in relation to percentage of income earned, these statistics shed some light on the issue:

> According to a projection from the non-partisan Tax Policy Center, the top 1 percent of Americans will pay 45.7 percent of the individual income taxes in 2014—up from 43 percent in 2013 and 40 percent in 2012 (the oldest period available)... In 1979, the top one percenters earned 8.9 percent of pretax income and paid 18 percent of federal income taxes. In 2011, the top 1 percent earned 14.6 percent of income and paid 25.4 percent in 2011 of federal income taxes.

http://www.cnbc.com/2015/04/13/top-1-pay-nearly-half-of-fede...

[evanpw]

New Jersey tax authorities are worried about the drop in revenue from one guy moving to Florida: http://www.bloomberg.com/news/articles/2016-04-05/tepper-s-m....

[nugget]

California officials are aware of these risks also. I give a lot of credit to Gov Brown for constantly reminding the state legislators that the good times won't last forever. The challenge with a tax system that draws so heavily from top earners is that you have greater ups (during boom times, like the current) and greater downs (during recessions, like 2008-2010). Moreover, such a huge amount of California's tax haul is due to one-time events such as stock and real estate sales which are even more amplified during boom times.

[joesmo]

New Jersey is an utterly incompetent state when it comes to fiscal matters, as the last paragraph starts to hint. If this state wasn't propped up by its proximate location to other big cities and states, I imagine it'd be a backwater comparable to Mississippi.

[hyperliner]

That's when you know NJ spends way too much money.

"Hey, look, this rich guy moved in to NJ! Let's hire more bureaucrats!... Oh, now he left! What should we do!?"

[apitaru]

This is grossly misleading. What I'd love to see is a chart that shows tax-paid-per-dollar-earned. I know it won't tell the whole story, but it'll tell a straight story.

[criddell]

Yeah, you really do need more information to decide if that's fair or not.

I don't really see a problem with tax brackets though (I'd rather see a formula though rather than discrete ranges).

I'd argue that a lower income bound and upper taxation rate should be established - say $20,000 and 60%. That means that no person earning less than the lower bound will be taxed and no person will pay more than the upper bound in taxes. Then it's just a matter of describing a curve that satisfies those two constraints.

[lukeschlather]

http://www.itep.org/whopays/states/california.php

[ben_jones]

There's ten people in a room and you are tasked with distributing $1000 among them. The catch is you have to get everyone to vote on the distribution. Seems easy right? Everyone get's $100. But wait somebody has a suggestion. Why don't we give $500 to the two handsomest people in the room? Everybody votes yes. Eight people leave shocked and angry.

Edit: this wasn't intended to be a 1:1 analogy of wealth distribution. It's just something interesting I think of about human nature when the topic is brought up. A lot of people outside the 1% will defend the 1%, there's nothing wrong with that, but I wonder if those people count themselves among the future 1% or even feel some connection to it for one reason or the other. I wonder if this skews our perception of wealth inequality and if wealth inequality is actually a graver threat because of such a shroud.

[mikeash]

There's ten people in a room. Nine of them have $1, one of them has $1,000. You need $10 for some shared project. You take 10 cents from each of the nine, and $9.10 from the last person. He looks at his remaining $990.90 and says, "I'm getting screwed!"

[poke111]

Wealth is not distributed by some wealth fairy. It is created by productive activity. One person's wealth does not come at the expense of another's.

[Randgalt]

The better analogy is you have 10 people in a room and only a few of them are producing anything yet they are forced to give a portion of their production to everyone else in the room.

[poke111]

One of the interesting explanations I've seen for income inequality is that globalization has massively increased the size of the market. So the top end for incomes has massively expanded along with it. But on the bottom end, the floor of 0 never changes. So an increase in income inequality is a natural consequence of globalization.

[undersuit]

It's always been a problem with the floor. You can only be so poor, so hungry, or so cold. You can never be too rich, too sated, or too comfortable.

[fedups]

Having society dependent so heavily on such a tiny fraction of the population makes it particularly vulnerable to events that affect that tiny slice.

Especially for governments that are bad at long term planning for tougher times.

[lintiness]

if we had government that spent as a function of some trailing average of tax receipts (it could be a greater than 1 multiplier), we'd have built in responsibility with a counter-cyclical kicker. makes way too much sense for politicians who want control.

[rdl]

A lot of that is because in California capital gains are taxed as income; the set of people who have meaningful capital gains in a given year is small (a core of people in that set every year, and another set who are in it some years due to infrequent sales of assets like houses, businesses, major equity stakes from stock grants or options, etc.)

[jcoffland]

This is ridiculous. Of course the top income earners pay the most taxes. When you are uber rich the trick is convert all your income to capital gains to avoid the taxes. There are a lot of tricks to further reduce your capital taxes to a fraction of what you would pay were it income.

[elsewhen]

California taxes capital gains at the same rate that they tax income as you can see in the table on the following page: http://taxfoundation.org/article/high-burden-state-and-feder...

[fiatmoney]

California taxes capital gains and dividends heavily.

[lukeschlather]

The headline is inaccurate. The headline should read "Top 1% of Income-Earners pay 45% of California's Income Taxes."

The rest of the data don't really give a meaningful view either since they ignore California's 10% sales tax. According to IETP, California's tax system is proportional or even slightly regressive. (Higher-income earners pay a smaller share of their income as tax.)

http://www.itep.org/whopays/states/california.php

[TheCoelacanth]

The title is inaccurate. The article says that the top 1% of earners pay 45% of income taxes. It says nothing about what percent of total taxes that they pay. Since income tax is 68% of California's taxes, they could pay anywhere from 30% to 62% of the taxes.

[brainbug_alpha]

Equal is unfair. http://www.amazon.com/Equal-Is-Unfair-Misguided-Inequality/d...

[brosky117]

I'm not very up to date with tax policy or politics but it sounds reasonable to me that everyone pay a fixed percentage. That or just have a consumption tax. Are there good reasons not to do it that way??

[blazespin]

This stat be based on the marginal utility. Tax paid on 100k is much more painful for a family than tax paid on 1 million.

[mchahn]

As a die-hard liberal I think the top 1% should pay 99% of the taxes. The numbers add up (to 100%).

[awqrre]

This is the top 1% that doesn't use loopholes?

[mtgx]

And how much is their income compared to the total? 80%?

What matters if the percentage, not the total amount. Of course someone who earns $1 million a year would pay "more" in taxes than someone who earns $100,000 (at least I would hope they do).

[dustcoin]

Using the numbers in this article[1], 1% of the taxpayers make only about 24% of the total income in CA, not 80%.

[1] http://www.sacbee.com/site-services/databases/article9349178...

[cynoclast]

And what, 80% of the income?

Nationally they have like 80% of the wealth: https://www.youtube.com/watch?v=QPKKQnijnsM

[elsewhen]

the top 1% earned 28% of the income and paid 45% of the taxes: https://www.ftb.ca.gov/aboutFTB/Tax_Statistics/Reports/2013/...