A “Third Income Tax” To Fund Public Education?

Austin Hill
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Posted: May 08, 2011 12:01 AM

Unemployment is rising, the federal government is broke, and so are many of the states. Now more than ever America needs its various governments to exercise restraint, and to scale-back on spending.

And in the midst of this environment a stunning proposal has emerged in the nearly insolvent state of California: a third income tax.

The proposal is actually worse than a mere “additional” income tax – and I’ll explain this in a moment. First let’s look at the “other two” income taxes.

For the record, if you’re an American and you work and you earn personal income, your U.S. federal government imposes a tax on that income (most of us are well acquainted with this). And workers in forty-three of our fifty states also have their personal income taxed even further by their state government (the states of Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming do not impose a state income tax on their residents).

But now California, with an average statewide unemployment rate of over 12% (in some regions the rate is over 20%) and a budget deficit of somewhere between $10 and $15 billion, is considering the imposition of a third income tax. The additional income tax rate would vary, according to which region of the state one lives in, and would be imposed directly by school districts and county governments.

Many of California’s public school districts (there are over 1000 of them) are themselves broke, just like the state government. And because of a California law that was brought about by passage of a ballot initiative back in 1978 (it was famously known as “Proposition 13”), California school districts cannot simply do what most public school districts in America do, and continually raise property taxes higher and higher.

So in the absence of additional state tax dollars, and without the option of raising local property taxes, California school districts are searching for additional revenue streams to feed their never-ending spending addictions. In response, the California legislature is contemplating a new law that would literally grant local school districts broad new authorities to tax personal income – a third income tax for California residents – according to the needs of the individual school districts themselves.

Along with the ability to impose a third income tax on residents’ income, this newly proposed power would also grant school districts the authority to impose additional sales taxes on alcohol, cigarettes, oil drilling (believe it or not there is some of this still going on in California), “sugary beverages,” and “medicinal marijuana.” Teachers unions in California are elated with the idea of “all the additional tax revenue” that school districts would theoretically have to spend on unionized teacher contracts, and Governor Jerry Brown, who is indebted to government employee unions, would theoretically stand to gain politically from the idea.

But while Jerry Brown and his government employee union friends are seeing dollar signs, California business owners – already saddled with undue taxes, regulations, healthcare and worker’s compensation insurance requirements – are seeing chaos. In what has been described as “a confusing patchwork of tax rates for both businesses and individuals,” business advocacy groups are reacting to the legislation with horror, realizing the disparity it could create among businesses operated on opposite sides of a school district boundary.

Given that each of California’s 1000-plus school districts would have the authority to set their own rates on the additional income and sales taxes, both businesses and individuals would be faced with the chaos and inequality of paying different income and sales tax rates depending on what public school district they found themselves in. As Gina Rodriquez, vice president of the California Taxpayers Association noted, this would pit “school district against school district.”

In addition to the chaos and confusion that the school district taxes would create, there is the disturbing fact that some people – indeed several people in the California legislature – actually think it is a good idea to levy a third income tax on a citizenry that is already living with double-digit unemployment. This is perhaps the greatest injustice entailed in California’s new scheme.

The very fact that California’s legislators would propose such an idea underscores the perverse, incestuous relationship between government employee unions, and the Democrat Party. Nobody can argue from the standpoint of sound economics that a third income tax will do anything but harm the overall California economy, but that seemingly doesn’t matter to Governor Brown and his fellow Democrats.

As long as Democrat politicians can continue to re-distribute increasing amounts of wealth into the hands of unionized government employees, the unionized government employees will continue to do the grassroots political work to keep Democrat politicians in office. The government employees gratify the politicians, and the politicians gratify the government employees – and the person who works and creates wealth in the private sector pays for it all.

Noble statesmen and women across the country have recently begun to say “no” to this kind of destructive public policy. But the perversion rages on – for now – in California.