Ben Franklin said, “In this world nothing can be said to be certain, except death and taxes.”
But he didn’t live in California.
When it comes to the current budget debate, taxes are the one thing that is decidedly uncertain.
In taking the state roughly halfway to a balanced budget, Governor Jerry Brown and legislators have already signed off on billions of dollars worth of spending reductions.
But how to close the remainder of the yawning gap between money coming in and going out is the subject of a titanic Sacramento dispute. Which is nothing new, except for this wrinkle:
Brown and his fellow Dems, who have already had to swallow what they consider to be drastic cuts to programs near and dear to some of their constituents, want to extend three taxes due to expire this year.
Republicans, most of whom have signed an anti-tax pledge, are adamantly opposed to even putting the question up for a vote, let alone passing it.
If the state cannot raise new revenue by way of taxes, and does not resort to the accounting “gimmicks” that lawmakers have relied on in the past to help fill budget holes, then the only option will be to enact even more severe cuts, many of which will come out of K-12 schools and higher education.
But amid this debate that is frequently carried on via ideological oratory pegged to familiar themes of Big Government versus Our Money, it may be useful to citizens to determine just how much the taxes in question — the ones that Brown wants to put on the ballot and have been tallied up as $15 billion in the aggregate — are actually costing them, as individuals. After all, people aren’t going to pay the entire $15 billion themselves — everyone contributes a different amount.
So what I mean is, to put it in the most self-interested terms possible: What’s it gonna cost me? What’s my portion of the $15 bil? A few hundred, a few thousand? Less? More?
In trying to figure this out, I turned to KQED’s John Myers. Listen to our conversation, in which he explains what the three taxes and their rates are, below:
Don’t have time to listen? Stay with me. Here it is in a nutshell. (Remember, you’re currently paying these now. If Brown managed to get his package on the ballot and if voters approved it, you’d keep paying them. If that doesn’t happen, they expire.)
3 Tax Extensions Dems Want on the Ballot:
- A surcharge on income tax of .25%. This has already lapsed.
- The retention of a sales tax rate of 6%, currently scheduled to roll back to 5%. (That’s the state’s portion. Municipalities tack on extra amounts, so you may pay as high as 10% total.)
- A vehicle license fee of 1.15% on the value of your car, scheduled for a reduction to .65%
So, how do you figure out what these are costing you now? Or, put another way, how much will you save if they don’t get extended?
1. Income Tax Surcharge
Here’s what Jay Chamberlain of the California Department of Finance told me about estimating the amount that the personal income tax surcharge costs you:
“It is generally true that you can calculate your additional tax by multiplying 0.0025 times your taxable income. For some taxpayers who would be nontaxable without the surcharge, the tax increase would be somewhat less.”
So let’s just say you look at your tax return last year and see that your taxable income, to use a random number, was $50,000.
Multiply that $50,000 by .0025, and you’ll find that this particular tax cost you $125.
If your taxable income is double, $100,000, then your liability, of course, doubles for this tax to $250.
2. Vehicle License Fee
In 2009, when the VLF increased from .65 percent to 1.15 percent, the DMV counseled drivers how to figure out how much more they would pay:
Generally the increase is approximately $5.00 per $1000 in vehicle value. For example, a vehicle valued at $5,000 (when purchased) would see an increase of approximately $25.00.
So reverse that process, and figure that your VLF will decrease by $5 per $1000 in vehicle value if the tax extensions don’t go through.
The DMV provides a VLF calculator to find out your fee. Because the fee is based on the car’s purchase price and depreciated each year according to a pre-set schedule, your VLF goes down as your car gets older.
For an example of the kind of dough the VLF costs, my 1999 New Beetle (hey, I work in public radio, haters) was $41 last year. So personally, the reduction in that particular fee is not something I’m going to join the Tea Party over. But if you own a new, expensive car, the scheduled reduction could be substantial. The fee is listed on your car registration, or again, check out the DMV calculator.
If you’re not familiar with the VLF, well, Gray Davis certainly recalls it — because it recalled Gray Davis. Meaning that an increase in the fee played a big part in the recall of the governor and the election of Arnold Schwarzenegger. Here’s John Myers talking about the political powderkeg the fee turned out to be and Davis’ take on it after he was ousted:
Listen to John Myers on the politically explosive Vehicle Registration Fee
3. Six Percent Sales Tax Extension (instead of 5%)
That’s a hard one to figure. Basically, if the extensions don’t go through, you’ll save that extra 1% at the cash register. So you have to estimate how much you spend, while keeping in mind that not everything in California is taxable. From the Dept. of Finance:
Generally, all tangible goods are taxable, but services and intangibles (e.g. downloaded music or software) are not taxable. As far as tangible goods go, housing, food for home consumption, prescription drugs, and gas (for heating, not the kind you put in your car), electricity and water are exempted from the sales tax. Because of the gas tax swap enacted in 2010, gasoline purchases would be exempt from the 1.0% surcharge as well.
So you could potentially estimate the amount of all your purchases in a single year, excluding the goods that are exempted, then multiply that amount by 1%. And that’s how much more you’d pay if the tax extensions are passed, or save if they don’t.
Or, just figure it this way: Let’s say you buy a TV for $600. The extra 1% tax costs you $6. If you eat out at a restaurant for $40, that’s an extra 40 cents.
Another way to go at it: About how much do you spend a month on goods, minus grocery items and other items not subject to the sales tax? Figure that out, multiply by 12 months, then take 1% of that total — that’s what the additional 1% in sales tax is costing you.
The grand total…
I did a back-of-the-envelope calculation on my own finances and determined that these three taxes now cost me, allowing for a very large margin of error, somewhere between $400 – $800 per year.
Now… am I willing to pay that amount to keep class sizes reduced, college tuition less pricey, public safety grant programs funded, etc.?
After all, I may partake of some of those services myself some day.
But am I willing to pay?
For more on taxes this April 15, check out the following from KQED’s Governing California blog: