California Gov. Gavin Newsom made several fantastical claims — one could use the word “dishonest” — during the latest stop on his book-tour-cum-exploratory presidential campaign. But none of the outlandish claims he made in Austin this weekend is more false than his claim that Texas is a “higher-tax state” than California.
“We have the most progressive tax rates in America,” Newsom said in answer to a question about income inequality in California. “…Texas taxes poor folks more than we tax our richest. The question for you is, who’s the higher tax state, California or Texas? Who are you for? Are you just for the 1% or are you for the 99%?”
We’ll come back to Newsom’s 1% versus the 99% in a moment, but let’s first examine his claim that California is a lower-tax state than Texas.
On the most basic numbers, Newsom’s claim is absurd. Measured as a share of GDP, California’s state and local governments collect more than double the share of taxes that Texas does, with 6.43% compared to Texas’s 3.19%. More. Than. Double.
Per capita tax collection looks just as bad. According to the Tax Foundation, California collects $10,319 in taxes per person, the second-highest in the country, compared to just $5,469 per person in Texas.
California’s top income tax rate is 13.3%, while its middle-income tax bracket pays 8%. Texas, famously, has no state income tax.
So what is Newsom talking about when he says, “Texas taxes poor folks more than we tax our richest?” According to the Institute on Taxation and Economic Policy, if you consider all state and local taxes, the bottom quintile of Texas residents pay 12.8% of their income in taxes, while California’s top 1% of taxpayers paid 12% of all their income in taxes. That is the narrow reed with which Newsom supports his low-tax California claim.
But that same data also show that California’s middle class, the middle 20% of income earners, paid a higher percentage of their income in taxes than middle-class families in Texas did. Maybe that is why hundreds of thousands of middle-class families flee Newsom’s high-tax California every year.
It is also worth noting that the only reason California’s bottom 20% of income earners do not pay a higher percentage of their income in taxes than Texas’s bottom 20% is because California uses its tax code as a welfare system. While Texas’s bottom 20% pay nothing in income taxes, California’s bottom 20% received 2% of their income from Sacramento in the form of refundable tax credits. If you disregard those payments, California’s bottom 20% pays more of their income in taxes than Texas’s bottom 20%.
Then there is the fact that, thanks to California’s left-wing policies, everything is more expensive in the state. Gasoline, electricity, food, housing, literally everything that people need is far more expensive in California because of excessive environmental and labor regulations that drive prices higher. This is why California not only has the highest population of homeless as a percentage of its population, but also the country’s highest poverty rates.
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The reality is that California’s progressive tax system is bad policy. Efficient and fair tax systems are simple, transparent, neutral, and stable. California’s tax policy is none of these things. It is riddled with loopholes and highly vulnerable to swings in the stock market. Newsom knows this. He is currently fighting with California’s powerful healthcare unions over a proposed billionaire tax, which he says would “damage the economy” and “drive away investment.”
But the same is true of California’s current tax system. All the healthcare unions are doing is taking Newsom’s own, “Are you just for the 1% or are you for the 99%,” rhetoric and following it to its logical conclusion. Government spending has swelled more than 50% since Newsom took office. Have Californians seen a 50% improvement in government services? It does not seem so, given that millions of families are leaving the state every year.
