The Risks of Taxing Exclusively the Rich

[Teflor Lyorian]

http://online.wsj.com/article/SB1000142 ... 84626.html

"Nearly half of California's income taxes before the recession came from the top 1% of earners: households that took in more than $490,000 a year. High earners, it turns out, have especially volatile incomes—their earnings fell by more than twice as much as the rest of the population's during the recession. When they crashed, they took California's finances down with them."

[kiryan]

Wow that is an amazing situation... but the root problem is still the same... government wants to spend more and looks at all new revenue as a way to increase funding or implement a new program.

What they probably need to do is separate the taxes on the wealthy into two buckets. 1 bucket at the normal state income tax rate, and a second bucket at the progressive tax rate. Take the first bucket and dump it into the general fund. Take the second bucklet and funnel a small portion of it into the general fund... say a 15% rate and put the rest into a auto leveling fund. When the "rich" tax revenue drops, draw the fund down to level the revenues out for just this "rich" portion of the revenue.

[Sarvis]

Wow that is an amazing situation... but the root problem is still the same... government wants to spend more and looks at all new revenue as a way to increase funding or implement a new program.

What they probably need to do is separate the taxes on the wealthy into two buckets. 1 bucket at the normal state income tax rate, and a second bucket at the progressive tax rate. Take the first bucket and dump it into the general fund. Take the second bucklet and funnel a small portion of it into the general fund... say a 15% rate and put the rest into a auto leveling fund. When the "rich" tax revenue drops, draw the fund down to level the revenues out for just this "rich" portion of the revenue.

Right, because the tax laws aren't complicated enough... :roll:

Stop worrying about the rich. If they decide they don't like making money any more, then other entrepreneurs will have a better shot at starting up competing businesses.

[kiryan]

This shouldn't affect tax law. Tax rate would stay the same as far as the tax payer is concerned. It would affect how much of the "rich" tax payers the state can spend and how much it must set aside anticipating future swings.

I suppose you could just do it as a flat percentage of the total budget... to anticipate all swings in revenue, but one at least specific to the rich earners seems warranted based on the article. I mean seriously, you might as well just roll a die if your job is to forecast state revenue based on performance of the stock market.