Prop 63

Prop 63: Mental Health Services Expansion. Tax on people earning more than $1m per year.

How I voted: For

What it is:
- provides health care services for children, adults, and seniors (why don't they just say "everyone"?)
- helps individuals without health care insurance
- paid for by a 1% tax on individuals earning more than $1m per year

Pros:
- there are a lot of mentally ill people in California who aren't getting treated
- funding is limited because the State and Federal governments don't fully fund the programs as much as the supporters would like
- supports innovative programs that are proven to work
- tax paid for by rich people who have more than enough money

Cons:
- this is a tax on a narrow segment of taxpayers who already pay higher taxes than everyone else. This is beyond debate, we have a progressive tax system... the more money you make, the more taxes as a percentage of your income you pay. The reason why the State of California is in the trouble it is in is because the revenue side of the budget (taxes) already relies too heavily on a small group of taxpayers. This measure continues that tradition.
- this is also a tax on a special interest group, what's next? A tax on Jews or a tax on people from Argentina? The bottom line is that the backers of this proposition picked a group of taxpayers to inflict this on who don't have the voting power to stop it, and aren't likely to generate much sympathy in the media or among the greater public.
- helping the mentally ill is the right thing for any good society to do, but this measure is the wrong way to do it. By relying exclusively on a small segment of taxpayers to fund it the funding itself is subject to wide variations depending on economic shifts. What will the backers tell the mentally ill when funding is cut, "sorry, but Larry Ellison didn't make as much money last year so we have to eliminate a 1,000 spots from our programs"? That's not the kind of mental healthcare system the State should be building.
- rich people are highly mobile with their money, which simply means that those people earning at this level have the means, and now the incentive, to claim residency outside of California and thereby avoid paying all taxes in California.

What I voted FOR this measure:
- California is stuck in a time warp where we can continue to tax an increasingly smaller group of taxpayers for the greater bulk of state funding, and spend like a drunken sailor on shore leave. It's a slow train wreck and until the train fully derails and burns, the citizens of the State will not be forced to come to realize the full reality of how fucked up our fiscal structure is. We far outspend our revenues and borrow from the Street to make up for operational funding requirements, rather than cut spending. Every ballot features new bond measures, and now a voter inflicted tax on a group who can't muster opposition strength. It's cynical and disasterous at the same time. So I figure I should just vote for this measure and do what I can to speed up the train wreck.

UPDATE: Here's another good analysis of this proposition.

Comments

[Brian Yamabe]

I was wondering if you were going for the trainwreck effect. This stuff is scary. People don't seem to understand that everyone making a mil a year will soon be residing in another state.

[jeff]

yeah exactly. Drive up to Lake Tahoe and look at the real estate in Incline Village (Nevada) and all the Californians who claim it as their primary residence.

[PD Quig]

What is it with the rampant maligning of drunken sailors by comparing them to the CA legislators?

1) Drunken sailors spend their own damn money
2) Drunken sailors sober up and work their asses off 95% of the time
3) Drunken sailors wallow in their own puke instead of making everyone else sick and smelly
4) Drunken sailors live with the consequences of their hangovers
5) Drunken sailors generally embarass themselves and do their damage far from home

I'm tired of it. Next you'll be comparing rapists and murderers to legislators.

PDQ

[jeff]

hehe, my apologies to drunken sailors, a group with more integrity and self-discipline than the folks in Sacramento.

[Frank]

Please give some proof that the million dollar plus earners are leaving the state.

The Forbes 400 list just came out a few weeks ago and 96 of the 400 richest people in the world live in California. Think about it, those are the business leaders of the world and they feel ok about the taxes they pay here.

And check out this independant analysis of Prop 63 at:
http://www.cbp.org/2004/0409prop63.pdf
They say that the tax isn't volatile and that the millionares aren't moving out of state.
-Frank

[jeff]

Where you physically reside and where you reside for tax purposes can be very different. The 400 list is a poor example to use because that group has perhaps the most portable wealth of any on the planet (I work for one of them). Besides, that's all academic anyways because you don't pay taxes on what you are worth, you pay taxes on what you earn in any given year, a number that can be highly manipulated as you move up the income ladder.

Here's a specific example: Dave Duffield, the founder and current CEO of Peoplesoft. Where does he claim residency? Incline Village, Nevada.

[Frank]

Did you not read the budget analysis that I posted? Apparently not. It totally disputes what you say, please give me the proof behind your claims.

PS>And if you think that the 400 wealthiest people in the world don't make more than $1 million per year, you are sorely mistaken.

[Frank]

Let me quote the independant budget analysis:

"*Is the personal income tax a volatile revenue source? Critics argue that the personal income tax is unreliable and that the state should not increase its reliance on revenues from this tax source. While revenue did drop significantly earlier in the decade, the personal income tax has historically posted the strongest growth of any of the state's major taxes. Between 1971-72 and 2004-5, the average annual increase in personal income tax revenues was 11.4 percent. In contrast, sales tax revenues for each 1 percent rate increased by 7.4 percent; corporate income tax revenues increased by 9.0 percent; and insurance gross premiums tax collections increased at an average annual rate of 9.2 percent during the same period.

*Are millionares leaving California?" Critics of increasing taxes on high-income individuals frequently argue that it will encourage these individuals to leave California. Tax return data suggests that this is not the case. In 1990, the year prior to the imposition of 10 percent and 11 percent tax rates on high-income individuals, 9,580 personal incoem tax returns reported AGI in excess of $1 million. In 1995, the last year that 10 percent and 11 percent rates were in effect, 11,585 tax returns reported AGI in excess of $1 million. The number of millionaires increased through the 1990's and then fell in 2001 when the national economy entered a recession."

You can read the whole analysis here: http://www.cbp.org/2004/0409prop63.pdf