California Tax Debate

Michael Hiltzik of the L.A. Times takes California Governor Arnold Schwarzenegger's budget to task for not raising income taxes on the most affluent (A Lesson in Political Math From the Governor).

Marc Danziger (the Armed Liberal), in turn, takes Hiltzik to task on WindsofChange.net:

The problem with doing this is that California is already highly dependent on high-income filers, and their income is variable. In 2003 (the last year that the FTB has an Annual Report), the top 5% of filers paid 58.8% of the personal income tax. Since the personal income tax represented $33.7B of the $73.6B in revenues in the 03 budget, high income filers represented 58.8% of 45.8% of the budget, or 26.9% of the annual budget. Since this represents 680,000 returns of the 13.6 million filed, it's fair to say that half a million households provide about a quarter of the revenue to the state. I think this is an amazingly bad idea. I don't think that this is a bad idea because it's unfair to the half-million rich households. I think it's a bad idea because it builds insane levels of volatility into the state revenue stream.