In an interview performance that has been described as “unhinged,” “odd,” “testy,” and “angry,” Gov. Gavin Newsom claimed Texas middle-class families “pay more taxes than middle-class families in California.”
“Look that up,” he said in a virtual meeting with editorial and opinion writers from the McClatchy chain’s California newspapers. “That’s a fact”
But we didn’t have to look it up. We already knew he was wrong. Having just completed a policy brief outlining the exodus of businesses and residents from the state, we were familiar with the heavy tax burden that is laid on all Californians.
Here are the comparisons:
- The rates in the middle of California’s 10 personal income tax brackets are 8% (starting at $92,788 in annual adjusted income for married couples filing jointly) and 9.3% (starting at $117,268 in annual income), says the Tax Foundation. The latter is higher than the top rate in most other states, yet it ensnares more than a few families in California who are considered middle class. Texas has no income tax.
- Fuel taxes, hardest on lower- and middle-income Americans, are punitive in California, where the combined state taxes on gasoline are 67 cents per gallon. That’s more than three times the levy (20 cents per gallon) in Texas.
- Vehicle registrations are $51.75 per vehicle in Texas. In California, the fees are several hundred dollars for a modest car a middle-class family would drive.
- The lower and middle classes are also disproportionately impacted by sales taxes, since they take a larger share of their incomes compared to the wealthy. Here, there’s little difference between the two states. The Tax Foundation figures the combined state and average local sales taxes in California are 8.68%, ninth highest in the nation. Texas is 14th at 8.19%.
- It’s true that property taxes are higher in Texas. Thanks to California’s Proposition 13, the state ranks no worse than 20th. The effective rate is about 1%, when other fees and taxes are figured in. Texas rate is about twice that – 1.9%. But any advantage to Californians is negated by the state’s housing crisis. The median-price home in California was $811,170 in July, according to the California Realtors Association, while the Texas Quarterly Housing Report reports the median-price home there is $300,490.
- Occupational licensing regulations, which impose “unnecessary obstacles along the pathway that families have traditionally used to obtain a middle-class lifestyle,” are in effect a tax. The average fee in California, says the Institute for Justice, is $486, a little less than half of what is required in Texas, $253. The Lone Star state also licenses fewer occupations (37) than does California (76), though the gap could be far greater since the Golden State, whose “tangle” of licensing laws is virtually impenetrable, admits it “has no way of knowing how many occupations it licenses.”
- A host of other fees and taxes that choke California’s middle class include cell phone charges (higher than in Texas), which have increased sharply since 2014, tire fees, even mattress recycling fees.
One would be tempted to think that for all the taxes Californians pay, they would get a fair return. They don’t. Personal finance web site WalletHub has ranked the states on their taxpayer returns on investment and only Hawaii keeps California out of the bottom spot. Texas? In the top 10 at No. 7.
As tough as life is for California’s middle class, it’s likely to become even more unbearable. Newsom failed to mention that “this damn state” he loves so much is constantly looking for ways to raise taxes.
“It’s income tax time across America, but in the California Legislature it is always tax time,” Los Angeles Times columnist George Skelton, never confused as an advocate of small government, wrote in May. “Some Democrats never stop trying to raise taxes.”
One day later, Robert Gutierrez, president and CEO of the California Taxpayers Association, and Allan Zaremberg, retiring California Chamber of Commerce president and CEO, pointed out that proposed tax hikes are neither new nor rare in California. In every session, lawmakers “introduce myriad bills aimed at increasing taxes and fees on individuals, businesses and consumer products.”
Newsom would have fared better had he moved on to another topic during the interview. Instead, apparently desperate to save himself, he blurted out a claim that’s easily debunked. The pressure of the recall campaign must be getting to him.
Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute. Wayne Winegarden is a senior fellow in business and economics at the Pacific Research Institute.