A tax reform reality check for Californians: It's Not All Bad for the Golden State
Our California's Taxes the highest in the County? We examined it, and here's what we found:
January 2, 2018
Now that the tax reform bill has passed, big-spending California politicians have a problem.
The state's General Fund receives 65 percent of its revenue from personal income tax collections, and 35 percent of the personal income tax revenue collected comes from just 0.4 percent of California households, about 60,000 of them, according to 2014 tax data.
Until this week, California politicians could tell wealthy taxpayers, "It's deductible! Don't even worry about it!"
And they paid, even as the top rate climbed to 13.3 percent. Like padding on the walls, the deductibility of state and local taxes limited the pain of head-banging.
But the padding is gone with the new tax reform bill, which limits the deduction for state and local taxes to $10,000. How many of those 60,000 households already have a U-Haul parked in the driveway?
If not a U-Haul, they could have a WING or a DING, acronyms for a new type of trust that may allow Californians to avoid state taxes without moving. "Incomplete Gift Non-Grantor Trusts" are available in Wyoming, Delaware and Nevada (WING, DING and NING, respectively.)
But if you're not into the wing-ding thing, you can move to any other state and pay less in taxes.
This was verified last spring by Politifact, after Assemblyman Travis Allen, a candidate for governor, said California's taxes are "among the highest in the nation."
"We decided to examine Allen's claims on this topic," sniffed the researchers. Here's what they found.
California's top income tax rate of 13.3 percent is, in fact, the highest in the nation. Maine was second with a top rate of 10.15 percent. Some states, including Texas, Nevada and Florida, have no income tax.
California's state sales tax rate, 7.25 percent, is the highest in the nation (local sales taxes push the rate even higher). Second place went to Indiana, Mississippi, Rhode Island and Tennessee, all at 7 percent. There is no sales tax in Oregon, Montana, New Hampshire or Delaware.
The only California tax Politifact found to be not the highest in the nation was the property tax. New Jersey captured the title of Highest Property Tax Rate, more than 2.1 percent.
California's property tax rate is held in check by Proposition 13, which limits the rate to 1 percent of the assessed value, and which sets the assessed value at the purchase price plus no more than 2 percent per year. When property values go up, Californians are not taxed out of their own homes or businesses by the local assessor's latest estimate of what their property is worth.
Before Proposition 13 was passed by voters in 1978, California's property tax rate averaged around 2.6 percent of the assessed value, which was completely unrestrained and skyrocketed along with the real estate market.
Politifact found that because of Proposition 13, California's average effective property tax rate is among the lowest in the nation, 0.72 percent.
So the claim that California's taxes are "among the highest in the nation," Politifact decided, was "Mostly True."
Since then, the state has raised the gas tax and the car tax. And last week, a new initiative was filed for the November ballot that would begin the process of dismantling Proposition 13, starting with business properties.
It's as if somebody posted the rating of "Mostly True" on a bulletin board for motivation in Sacramento. Don't try to tell them they can't beat New Jersey.
There can't be more than 100 percent of anything – including voters
Do you lock your front door when you go out? Why? Keep that answer in mind while we catch up on the latest news about problems with the voter rolls in California.
Two nonprofit watchdog groups, Judicial Watch and Election Integrity Project California, have just filed a federal lawsuit against Los Angeles County and the state for failing to comply with the National Voter Registration Act of 1993. The law requires states to "conduct a general program that makes a reasonable effort to remove the names of ineligible voters from the official lists of eligible voters."
The law also requires each state to maintain for at least two years, and make available for public inspection, "all records concerning the implementation of programs and activities conducted for the purpose of ensuring the accuracy and currency of official lists of eligible voters."
But some counties in California, especially Los Angeles, are getting a failing grade on that test.
Every two years, the U.S. Election Assistance Commission releases a required report on state voter registration practices. The most recent report came out in June, 2017. Judicial Watch compared the EAC's data to the most recent census data for about 3,000 counties in the United States.
"Eleven of California's 58 counties have voter registration rates exceeding 100 percent of the age-eligible citizenry," the lawsuit states.
In Los Angeles, 112 percent of the people who are eligible to vote are registered to vote. Statewide, the rate is 101 percent.
If this was a movie, it would be "The Producers," the Mel Brooks comedy about an out-of-luck Broadway producer and an accountant who sell investors vastly more than 100 percent of the profits of their next show, then try to produce a sure-fire flop.
Along with being one of the funniest movies ever made,"The Producers" is a helpful math tutorial for elections officials: There can never be more than 100 percent of anything.
When people move to a new address or are no longer with us for any another reason, they may not tell the county Registrar that they've departed. "About 21 percent of all of California's voter registrations, or more than one in five, are designated as inactive," the lawsuit says, the highest rate of inactive registrations of any state in the country.
According to the U.S. Election Assistance Commission, there are 1,515,330 inactive registrations in Los Angeles County.
And it may be double that. According to the lawsuit, a Judicial Watch employee called the L.A. County Registrar-Recorder's office in June to ask whether the website listing of "total registration" included both active and inactive registered voters. The answer: the website lists only active registrations. When asked how many inactive registrations were in Los Angeles County as of June 15, 2017, the county employee reported that there were 3,475,328.
That makes the total voter registration in L.A. County 144 percent of the citizen voting-age population. More than 40 percent of L.A. County's voter registrations are inactive, and we don't know how many of the "active" registrations are people who have moved, which the county would know if it checked its voter file against the National Change of Address database.
Judicial Watch asked the state and county for public records about its process for checking. They didn't even get a copy of the script for "The Producers."
Under new election laws in California, counties will soon be mailing absentee ballots to every registered voter, and there will be unattended drop-boxes where ballots can be returned.
So instead of having a verified communication from a voter to request an absentee ballot (or become a permanent absentee voter), elections officials will just mail ballots out to every name on the voter rolls.
Anybody could mark that ballot and drop it in an unattended ballot-collection box. There's a chance that a forged signature might be picked up by the screening software that's used to process absentee ballots, but under the new law it's easier to give your ballot to someone else to deliver for you, so that door may not be locked very tightly.
Elections can be costly. Nearly every ballot asks voters to approve higher taxes, more debt, and a lot of public officials who will spend the money. Ballot collection can become a sophisticated form of legalized theft.
Do you lock your front door? Judicial Watch and Election Integrity Project California are asking that question of state and local election officials. The people of California deserve an answer.
Susan Shelley is a columnist and member of the Editorial Board for the Southern California News Group. Reach her at [email protected], or follow her on Twitter: @Susan_Shelley.