It is understandable why most people enjoy coming to California. California has weather for almost everyone’s taste. In the same day, you can do skiing, hiking and take a sun bath at one of our beaches.
California is the eight largest economy in the world containing diverse populations and economy requiring diverse demands in the areas of education, health care and infrastructure (Ingenito, O’Malley, Taylor, & Vasche, 2007). The state of California relies on its taxes to fund its public services.
This blog will evaluate the tax system in California (Taylor, 2012) and will utilize the five common tax criteria to analyze it:
- Growth—does revenue raised by the tax grow along with the economy or the program responsibilities it is expected to fund?
- In California much of the grown depends on new construction and property sales
- Stability—is the revenue raised by the tax relatively stable over time?
- In California its stability has help our government plan more efficiently for future needs.
- Simplicity—is the tax simple and inexpensive for taxpayers to pay and for government to collect?
- As a Californian, I agree that our tax system is simple to understand and we understand the need to comply
- Neutrality—does the tax have little or no impact on people’s decisions about how much to buy, sell, and invest?
- Tax has an impact on people’s decisions particularly homeowners and the locations interested to invest because the higher the tax, the greater the responsibility
- Equity—do taxpayers with similar incomes pay similar amounts and to tax liabilities rise with income?
- There is the vertical and horizontal equity. Vertical equity is when wealthier taxpayers pay more in taxes than less wealthy. Horizontal equity is when taxpayers with similar incomes pay the same amount in taxes.
According to Brimley, Verstegen, and Garfield (2012) California’s tax burden to a person is 10.5% of their total income (Brimley et al, 2012, p. 117). In California there are state taxes which pay for most of the state’s public services. Within the state taxes the breakdowns are from the following sources: personal income tax (accounting for over ½ of all general fund revenues), the sales and use tax, the corporation tax and local taxes. The property tax which is part of the personal income tax ranks the highest because it is the foundation for public school systems. California’s local taxes include property taxes, sales tax, business license tax and utility users’ tax and they rank the lowest.
Proposition 13 from 1978 resulted in a dramatic reduction in property taxes and altered state-local fiscal relations. The box below describes the differences between constitutional provisions (Ingenito et al., 2007):
|Selected Major California Tax Law Changes Since Proposition 13|
|1982—Proposition 6 (eliminated inheritance tax; adopted “pickup” tax).|
|1982—Proposition 7 (indexed Personal Income T tax brackets for inflation).|
|1987—Federal conformity (adopted, for example, net operating loss deductions, Subchapter S option, and alternative minimum tax [AMT]).|
|1988—Proposition 99 (imposed 25 cent per-pack surtax on cigarettes and other tobacco products for health programs).|
|1991—Double-weighting of sales factor (amended corporate income tax apportionment formula).|
|1991—Temporary high-income tax rates (imposed Personal Income Tax rates of 10 percent and 11 percent, which lapsed in 1996).|
|1992—Proposition 163 (repealed the “snack tax”).|
|1992—Proposition 172 (imposed half-cent Sales and Use Tax rate and dedicated revenues to local public safety programs).|
|1996—Corporation Tax reduction (franchise rate to 8.84 percent from 9.3 percent; AMT rate from 7 percent to 6.65 percent).|
|1996—Proposition 218 (limited local fiscal authority; required majority vote to approve general tax increases).|
|1998—Proposition 10 (imposed a 50 cent per-pack excise tax on cigarettes and other tobacco products for health programs).|
|2001—VLF reduced to 0.65 percent (from its historical 2 percent level).|
|2002—Proposition 42 (redirected gasoline sales taxes to transportation).|
|2004—Proposition 1A (restricted state’s ability to reduce or reallocate local tax revenues).|
|2004—Proposition 63 (imposed additional high-income Personal Income Tax rate to fund mental health services).|
The best tax for education is the one that will best fund adequately school districts according to their students’ needs. Each district has different needs according to the communities they are serving. With the Local Control Funding Formula, California is making progress toward meeting this goal.
Brimley et al, V. (2012). Financing education in a climate of change (11th ed.). Boston: Pearson.
Ingenito, R., O’Malley, M., Taylor, C., & Vasche, D. (2007). Calfornia’s Tax System: A premier (fiscal and policy information). Legislative Analyst’s Office (LAO). Retrieved from http://www.lao.ca.gov/2007/tax_primer/tax_primer_040907.aspx
Taylor, M. (2012). Understanding California’s Property Taxes. Legislative Analyst’s Office (LAO). Retrieved from http://www.lao.ca.gov
Williams v California Background
I have been an educator for almost a decade and I was not aware about the impact this settlement had and still holds for our schools. Because of the courage of Eliezer Williams, his parents’ courage, and the courage of other student and parent plaintiffs, he left the California K-12 public school system better off than he found it.
On May 17, 2000 the ACLU—American Civil Liberties Union, Public Advocates, MALDEF—the Mexican American Legal Defense and Educational Fund, and other civil rights organizations along with Morrison & Foester LLP, filed a class-action lawsuit
They file the lawsuit on behalf of public schools students claiming the State and its agencies were denying thousands of students their fundamental right to an education under the California constitution. It was argue that schools failed to give them the basic tools necessary for their education.
On August 13, 2004, the parties reached a settlement agreement and six weeks later, Governor Arnold Schwarzenegger signed into law five bills implementing the legislative proposals. The Williams Settlement Legislation became effective on September 29, 2004.
There were resources provided by the settlement. The Williams Settlement Legislation also revoked the June 30, 2006, sunset of the Instructional Materials Program and its contingent funding status.
Williams Legislative Requirements
It requires that all students who are attending California’s schools are provided with three things:
• Instructional materials
o “Districts should be accountable for providing standards-aligned instructional materials for every student.” (May 14, 2004 letter from Peter Siggins, page 2 point 2)
o There should be sufficient textbook or instructional materials to use in class and to take home
• Functional schools
o There should be a system in place to inspect facilities to ensure that they are in good repair “consistent with local health standards applicable to restaurants, rental housing and other similar facilities.” (Health & Safety Code Section 16500)
• Qualified teachers under the federal No Child Left Behind Act (NCLB)
o “With respect to instruction and teaching, instructional programs and practices, as well as teacher training and development, should be pedagogical sound, focused on subject matter….with priority given to providing fully credentialed teachers where most needed.” (May 14, 2004 letter from Peter Siggins, page 2 point 3)
• The legislation also enhanced accountability systems such as district textbook hearings and School Accountability Report Cards and created others such as annual county superintendent reviews of decile 1-3 schools and enforcement powers for parents, students and teachers through the new Uniform Complaint Process to ensure the sufficient standard is met by all schools.
Thanks to this legislation, tens of thousands of students have new books and materials, school facilities are being inspected and repaired, and districts are having highly qualified teachers.