This month Governor Gavin Newsom signed California’s $262 billion dollar budget into law, a nearly $60 billion dollar increase from the previous fiscal year.
Flush with extra cash, Governor Newsom and the legislature created one of California’s most ambitious budgets in recent years. This year’s budget will deliver a public school version of preschool along with free school lunches, expand state-funded healthcare to undocumented immigrants, massive rent and utility forgiveness, one time $600 dollar stimulus checks for two-thirds of Californians, and numerous other expansions and investments within the state.
This year’s budget total should come as a total surprise to anyone who was looking at the grim financial projections during last year’s pandemic. What was supposed to be a multi-million dollar deficit became one of the state’s largest surpluses, showcasing the power of a progressive taxation system.
California’s progressive tax system is due in part to the state’s 10 income tax brackets that max out at 12.3% for those who make over $600,000 dollars annually. Additionally, California taxes all capital gains as income, unlike the federal government which maintains separate rates for income and capital gains. These provisions, along with a litany of other smaller progressive taxes (like the 1% surtax on incomes over a million dollars) ensure that wealthy Californians foot the majority of the bill.
Yet despite the record surplus and our progressive tax code, our state is still on track to enter a deficit in 2023.
Our robust economy is held up by essential workers whose safety nets and economic livelihoods are threatened by potential looming budget cuts. Cutting programs for middle and low-income Californians is the go-to tactic to address budget shortfalls in California, even though there’s a massive and growing source of potential revenue.
Let’s not forget that California has the 5th largest economy in the world – home to 165 billionaires and counting. That’s over a quarter of America’s billionaires. During the COVID-19 pandemic, the collective wealth of California billionaires surged by nearly $250 billion dollars. Between wealthy folks and countless wealthy corporations, California has more than enough to rebalance the scales of economic justice and make these crucial investments permanent – not just another bargaining chip.
California’s tax code is a great start, but settling it on ‘good enough’ isn’t up to par with the challenges of wealth inequality that are grappling our municipalities and nation. We need to enact strong and stable tax measures like the wealth tax (AB 310/ACA 8) as proposed by Representative Alex Lee. While the income tax is successful at taxing most Californians, it often fails to tax the ultra-wealthy in our state who do not realize their incomes. Some of our wealthiest residents like Mark Zuckerberg and Larry Page can largely avoid the state’s income tax through this loophole.
The volatility of our current system isn’t felt by the ultra wealthy, but to the working Californians that rely on state funded programs, pulling out the rug from under their feet every couple of years when revenue drops leave them worse off than they were before.
In order to fight back against the growing income inequality and wealth gap in California we need to ensure that anti-poverty programs are maintained even when the economy is not doing well. Wealthy individuals can afford to pay more, and they should be asked to pay more to support our state in a time of crisis. We must work together to create a future where the California Dream is accessible to every resident of this great state, not just the wealthy few.
