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Investing in California’s Future: Tax Fairness and the State Budget

Investing in California’s Future: Tax Fairness and the State Budget. February 2011. Economic Downturn. “Great Recession” (Officially, Dec 2007 – June 2009) Financial & housing market collapses main cause of downturn CA unemployment still at 12.5%, U.S. 9.4%

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Investing in California’s Future: Tax Fairness and the State Budget

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  1. Investing in California’s Future:Tax Fairness and the State Budget February 2011

  2. Economic Downturn • “Great Recession” (Officially, Dec 2007 – June 2009) • Financial & housing market collapses main cause of downturn • CA unemployment still at 12.5%, U.S. 9.4% • Economy is expected to grow slowly in 2011 and pick up momentum in 2012

  3. Absent Permanent Solutions,CA State Deficits Will Persist for YearsGeneral Fund (In Billions)

  4. School Funding (2008 Averages) Quality Counts 2011 & www.cde.ca.gov

  5. Proposition 98The Constitutional Guarantee Compared to Actual Funding

  6. Impact of Cuts on Higher Education • Layoffs of faculty and staff • Fewer classes and support services • Increased tuition and fees for student – more than 250% for CSU and UC • Takes longer for students to graduate

  7. Education Spending is Notthe Problem

  8. Who Pays, Who Benefits And Who Decides?

  9. Who Pays Taxes in CA? • Bottom income 20% pay 11.1% of income in taxes • Top 1% pay 7.8% of income in taxes www.cbp.org, California Budget Project, Who Pays Taxes in California? April 2010

  10. California General Fund Revenue Sources: • 53% from personal income tax • 10.2% from corporate income tax • 30.4% from sales & use tax • 6.4% other revenue & loans LAO Estimates 2011-12

  11. Small Business Portion of Taxes • Small business pays a very small share of corporate income tax • The 2% of corporations w/ taxable incomes of $1M or more paid 87% of the 2007 corporate income tax

  12. Cost of Funding State Services has Shifted… Cost of funding state services has shifted from corporate to personal income tax payers

  13. Property Taxes in CA Proposition 13 • Limits property tax rate • Reassessed at sale • Resulted in funding for schools, cities & counties shifting to the state • Business loophole • Unfairly “subsidizes” big corporations who can use complicated ownership changes to avoid reassessment (worth $5B annually) and changes who pays taxes in CA.

  14. Who Benefits? • Taxes are our collective investment in a safe, civilized, and prosperous society. • Public at-large • Public services (police, fire, public education) • Infrastructure (roads, railroad, air traffic) • Safety net programs (social services, health care for poor kids, seniors)

  15. Corporate Profits, Personal Income & Median Wages

  16. Bottom going up faster than top 5% Income in the US: 1947 - 1979 Incomes at the bottom were rising faster than those at the top.

  17. 73% Increase! 10.9 Times Income in the US: 1979 - 2008 Average income of the top 5% of families was 10.9 times as large as the bottom 20% Bottom 20% 4.1% decrease in real income!

  18. Wealth in US • Richest 1% own 33.8% • Richest 10% own 71.5% • Poorest 50% own 2.5% Half of the nation owns less than 3% of the wealth

  19. Tax Fairness Goals: • Adequate Funding for All Schools and Colleges • Stable and Reliable Funding • Equitable State Tax Structure that Promotes Fairness

  20. Who Decides? YOU! www.CTA.org Educate yourself about taxation in California and how to fund schools in the 21st century. And then pass the information along. www.cbp.org California Budget Project www.edsource.org EdSource www.ppic.org Public Policy Institute of CA www.caltaxreform.org CA Tax Reform Assn

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