Chart of the day: California taxes

By Felix Salmon
December 7, 2010
this comment on my chart of US taxes:

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ARJTurgot2 left this comment on my chart of US taxes:

You are, of course, going to follow up this chart with a second one that comprehensively reflects the changes in State and Local taxes, especially including sales taxes, that have changed since 1950. And that data is going to include things like registration and usage fees, especially gasoline, telecommunications and sin taxes on things like liquor and cigarettes. I understand that is going to vary widely from state to state, so two, perhaps, should be instructive: say New York and California?

If someone wants to point me to a dataset which gives me that information, I’ll happily chart it. But in the meantime, I pulled table D1 (Californian GDP) and table M13 (Californian state tax collection) from the California statistical abstract. That only gives data from 1967 to 2007, unfortunately, and the GDP series changes slightly in 1997. But in any case, here’s the result:


It seems to me that tax revenues have been floating pretty steadily around roughly 5.5% of GDP since the mid-70s, with a brief blip up to a high of 6.8% during the dot-com bubble. I’m sure that the recession has brought the ratio down of late. But what I’m not seeing is any indication that the decline of federal tax revenues is made up for by a concomitant increase in state tax revenues.


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I think that blip during the end of the dot com bubble came from capital gains taxes on people cashing in on IPOs and acquisitions. I know I paid the most taxes in any one year in 2001 for that reason, and I wasn’t alone.

Posted by OnTheTimes | Report as abusive

If there is a correlation between lower Federal taxes and rising taxation at a lower level, it is probably most evident in local taxes. States, like the Federal government, have been in thrall to the low-tax school of economic voodoo. The counties and municipalities end up with all the mandates and no funds. Here’s a link (pdf) to a publication on the rising property taxes which states “Local property tax levies grew by 60 percent from 1995 to 2005, more than twice the rate of infl ation during that period (28 percent). Most of this growth occurred
in the last 5 years – when property tax levies increased by 42 percent, compared to inflation of 13 percent.”

Posted by CharlesD | Report as abusive

One dysfunctional state does not a trend make.

Posted by Curmudgeon | Report as abusive

I am unclear what exactly the post asking but if it is how states have managed to cope without the federal grants received over the past 1-2 years without increased state revenue here are my thoughts.

When looking at california entities to find an example of budgets which rely on state revenue, which received a significant amount of the one time federal grants, I think school districts is an apt example. One time federal grant receipts were only minorly replaced by an increase in state revenues. There were many steps taken to replace the missing funds that were temporarily replaced by federal grants. States lowered requirements of students per classroom to receive state funding allowing teachers to be laid off and schools consolidated, state revenues previously restricted for items such as art classes, mentally disabled, and other items were reclassified as unrestricted so as to be able to be used for general budget purposes as well as many other steps. In the end California has not replaced the revenue, but done a mixture of necessary cost cutting, one time boosts or delays of payments, and shady accounting to pass budgets.

Posted by MikeMcArthur | Report as abusive

Those numbers are clearly the wrong way round – how would it be less democratic if Federal Tax Rates were in the 5% to 6% range, and State taxes were in the range that Federal Taxes now are? It works that way around in Switzerland, whose Constitution is based on the US one from top to bottom, and Switzerland has as a consequence small out of touch Federal Government and more locally involved State/Cantonal Government.

Business would benefit because it would make States more competitive between each other and reduce the power of Washington, which is what I understand a lot of US folk want. But I guess it would also mean fewer toys for the military, fewer pork bellies for the politicians, and fewer easy contracts for one or two military suppliers so I can’t ever see it happening. Shame though, imagine taxes going down and local services improving! That’s how it works in Switzerland.

Posted by FifthDecade | Report as abusive

For a long time California was the reddish state that gave us Reagan, and present tax boundaries locked into California statute are a reflection of this.

As the influence of public unions increased, we moved to our present situation where prison guards in California earn six figures and eye-popping retirement packages are the norm. The result is a rather Greek-like combination of generous public spending and low tax receipts with massive bond sales to make up the difference.

At least California has Google, Apple and wonderful and productive agriculture. Under higher taxes the farms at least would have to stay put.

Posted by DanHess | Report as abusive