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Instead of a rising tide, state basic universal income plan sinks mechanics, teachers et al
PERSPECTIVE
tax income

Sacramento is expected to be awash in cash this year.

Thanks to a string of extremely successful initial public offerings of tech companies such as Airbnb and DoorDash the state budget is expected to have a $15.5 billion windfall from one-time capital gain tax collections.

Much of this is being proposed by Gov. Gavin Newsom to plug massive holes the pandemic created in school funding as well as to underwrite COVID-19 economic relief efforts for all Californians who are here legally or otherwise. One aspect of his relief plan is putting $600 into their pockets if they make $30,000 or less a year or qualified in 2020 for a state earned income tax credit.

There is uncertainty about whether sales and other taxes will rebound enough from the pandemic hits on businesses the government ordered shuttered to avoid cuts to education and other ongoing state expenses when July 1, 2022 rolls around.

So what would you expected an Assembly member such as Evan Low from the Silicon Valley to do?

The answer is simple. Make a move to jack up taxes.

Low is an advocate of a California universal basic tax.

It is such an expensive proposal that when he introduced the measure last year that did not end up getting passed, he suggested a 10 percent valued added tax on services and goods to finance it.

When people had a cow over such a heavy tax that would essentially almost double the point of transaction tax on every taxable item in California, such language was red-lined out of his bill.

Naturally when he re-introduced a universal basic income this month he steered clear of dwelling on how to pay for it.

If taxes don’t scare you, this is one that could change your mind. That’s because the value added tax such as Low proposed in 2019 to finance his little scheme taxes a product over and over again as it moves from raw materials to manufacturing to wholesale to retail.

Low’s guaranteed income proposal based is for anyone who is over 18 and has been a resident of California for three years would receive $1,000 a month if they make 200 percent or less of the median per capita income of the county they reside in based on Census data.

In San Joaquin County that translates into $57,838 a year based on 200 percent of the 2019 Census American Community Survey.

If you make that amount or less and lived in Manteca you’d get $12,000 in what are essential wealth transfer taxes courtesy of Sacramento taxaholics.

What isn’t as easy to calculate is what that would cost someone making $57,838 a year who just barely qualifies for Sacramento’s warped Robin Hood scheme that robs from everyone to benefit a select group.

To somewhat compare apples to apples, take the California per capita median income of $39,393 and multiply it by two. That gives you $78,786. The latest per capita sales tax information for California is from 2017. That number is $1,246.

That means someone making $78,787 — a dollar more than 200% of the per capita median — would be out at least another $1,246 under the same taxing conditions. The best part — from a taxaholic’s perspective — is you don’t realize your tax load is being doubled because the value added tax at the point of retail transactions shows up only as a fraction of the actual cost as the rest of the tax is collapsed into the price you pay for the time as illustrated in the graphic with this column.

It gets worse. Since services ranging from haircuts and auto repairs to tax preparers would have a 10 percent value added tax slapped on it so Low can siphon money from the pocket of one Californian to go into the pocket of another it is likely the additional tax would translate into a $2,000 annual hit.

That means the guy getting the extra $12,000 a year who is at the threshold would net $10,000 while someone making a dollar more a year would be out $2,000.

There is no fairness in such a move.

One may argue that there are unfair examples like that with all taxes but that would be completely erroneous.

That’s because Low’s proposal is about as pure of an example of state-imposed wealth transfers you can devise.

The hits one takes moving across tax tables is nowhere nearly as hyper draconian.

If you made several thousand dollars beyond whatever the income threshold is for a particular county you’d be crazy not to work less as a $2,000 drop in income would secure $12,000. After figuring in the extra taxes you’d pay on goods and services while factoring in the $2,000 drop in income that you avoided earning, you’d be ahead of the game $8,000.

How Low’s proposal would have to be financed would make every other tax seem reasonable.

The income transfer scheme will give a number of people a boost but it will come at the expense of a significant number of people.

Those making more than the cap Low envisions for each county will suffer a significant loss of $2,000 a year in income. Can someone making $60,000 a year in Manteca afford to lose an extra $2,000 to taxes?

The goal should be a rising economic tide to raise all ships and not punching holes — massive in nature for those that aren’t hauling in $100,000 or so a year — to lower the standard of living of others to the point they are treading water.

Meanwhile Low is part of the tech caucus and has carried the water for disruptive economic ventures such as Uber and Lyft that nicely ignored rules and regulations and basically shifted the gig economy in gear that has helped widen the gap between the haves and have nots in California.

And nowhere is that gap as obscene and prevalent than in the cradle of the 21st century version of oil, rail, and steel barons — the Silicon Valley.

If Low hasn’t noticed some of the biggest whiners about high tax California are the ones that have benefited the most from its resources — and that includes people not pulling down six figures — the tech millionaires and billionaires.

They’re the ones dissing California as they head out the door to find other states willing to prostitute their tax codes for billionaires.

Perhaps we do need a universal basic income for California as Low suggests.

The problem is he needs a way to make sure those that created the income discrepancy through the state looking the other way when regulations are ignored, using foreign workers on visas that work for less than U.S. workers, or when they stretch the rules to expand traditional work into gig work pay for their fair share.

Why not a 20 percent value added tax on any good or service or sold in California by any firm that makes its money off the Internet or from selling devices such as smartphones?

Given the obscene wealth their products and services command compared to hard costs, they could afford to eat a little profit to keep their devices and such competitive when they are slapped with 20 percent value added taxes.

It would be poetic justice given the number of tech millionaires from the lower to upper end who believe universal basic income is the answer for the loss of better paying jobs that they may have destroyed on their way to being able to retire at age 35.

If we’re going to have real wealth transfers imposed by the government then Low should go after his well-heeled tech pals in the Silicon Valley instead of someone making $60,000 a year in Manteca repairing farm equipment.

 

This column is the opinion of editor, Dennis Wyatt, and does not necessarily represent the opinions of The Bulletin or 209 Multimedia. He can be reached at dwyatt@mantecabulletin.com